<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ____________, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------
PACKAGED ICE, INC.
(and certain subsidiaries identified in footnote (*) below)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TEXAS 2097 76-0316492
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
8572 Katy Freeway, Suite 101 James F. Stuart
Houston, Texas 77024 Chief Executive Officer
(713) 464-9384 8572 Katy Freeway, Suite 101
Houston, Texas 77024
(Address, including zip code, and (713) 464-9384
telephone number including area code
of registrants' principal executive (Name, address, including zip code, and telephone number,
offices) including area code of agent for service)
</TABLE>
Copies to:
Alan Schoenbaum, P.C.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
(210) 270-0853
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable following the effectiveness of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER UNIT (1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
12% Senior Notes due $50,000,000 100% $50,000,000 $15,152
2004
Guarantees (2) ___ ___ ___ ___
</TABLE>
<PAGE> 2
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Guarantees by subsidiaries of the Registrant of the payment of the
principal and interest on the 12% Senior Notes due 2004. Pursuant to Rule
457(n), no additional fee is required.
------------------------------
(*) The following subsidiaries of Packaged Ice, Inc. are co-registrants and are
incorporated in the states and have the I.R.S. Employer Identification
Numbers indicated: (i) Packaged Ice Leasing, Inc., a Nevada corporation
(88-0300560); (ii) Southco Ice, Inc., a Texas corporation (76-0452649);
(iii) Mission Party Ice, Inc., a Texas corporation (76- 0533333); (iv)
Southwestern Ice, Inc., a Texas corporation (76-0533332); and (v) Southwest
Texas Packaged Ice, Inc., a Texas corporation (76-0533335).
------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
------------------------------
<PAGE> 3
PACKAGED ICE, INC.
CROSS REFERENCE SHEET
BETWEEN ITEMS IN PART I OF THE REGISTRATION STATEMENT
(FORM S-4) AND PROSPECTUS PURSUANT TO ITEM 501(B)
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION IN PROSPECTUS
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front over Page of Prospectus . . . . . . . . . . Facing Page of the Registration Statement; Cross Reference
Sheet; Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus. . . . . . . . . . . . . . . . . . . . Inside Front Cover Page of Prospectus; Available
Information; Outside Back Cover Page of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information . . . . . . . . . . Summary Historical and Pro Forma Combined Financial Data;
Prospectus Summary; Risk Factors
4. Terms of the Transaction. . . . . . . . . . . . . Outside Front Cover Page of Prospectus; Prospectus Summary;
Risk Factors; The Private Placement; Use of Proceeds; The
Exchange Offer; Description of Notes; Transfer Restrictions
of Old Notes; Plan of Distribution
5. Pro Forma Financial Information . . . . . . . . . Unaudited Pro Forma Combined Condensed Financial Statements;
Selected Historical and Unaudited Pro Forma Combined
Financial Data
6. Material Contracts with the Company Being
Acquired . . . . . . . . . . . . . . . . . . . . *
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be
Underwriters. . . . . . . . . . . . . . . . . . . *
8. Interest of Named Experts and Counsel . . . . . . Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities. . *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants . . . *
11. Incorporation of Certain Information by . . . . . *
Reference
12. Information with Respect to S-2 or S-3 . . . . . *
Registrants
13. Incorporation of Certain Information by . . . . . *
Reference
14. Information with Respect to Registrants Other than Outside Front Cover Page; Available Information; Prospectus
S-2 or S-3 Registrants. . . . . . . . . . . . . . Summary; Risk Factors; Private Placement; Use of Proceeds;
Capitalization; Unaudited Pro Forma Combined Condensed
Financial Statements; Selected Historical and Unaudited
Pro Forma Combined Financial Data; Management's
Discussion and Analysis of Financial Condition and Results of
Operation; Business; Financial Statements.
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3 Companies. . . . . *
16. Information with Respect to S-2 or S-3 Companies. *
17. Information with Respect to Companies other than
S-2 or S-3 Companies . . . . . . . . . . . *
18. Information if Proxies, Consents or Authorizations
are to be Solicited. . . . . . . . . . . . *
19. Information if Proxies, Consents or Authorizations
are not to be Solicited in an Exchange Offer. . . Management; Principal Shareholders; Certain Relationships
and Related Transactions; Description of Capital Stock and
Warrants
</TABLE>
- --------------------
* Not applicable
<PAGE> 5
********************************************************************************
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
********************************************************************************
SUBJECT TO COMPLETION, DATED ______________, 1997
PROSPECTUS
PACKAGED ICE, INC.
OFFER TO EXCHANGE
12% SENIOR NOTES DUE 2004, SERIES B
FOR ALL OUTSTANDING 12% SENIOR NOTES DUE 2004, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON ________________ , 1997, UNLESS EXTENDED
------------------------------
Packaged Ice, Inc., a Texas corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 principal amount of its 12% Senior Notes due 2004, Series B
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
(as defined herein) of which this Prospectus constitutes a part, for each
$1,000 principal amount of its outstanding 12% Senior Notes due 2004, Series A
(the "Old Notes"), of which $50,000,000 principal amount is outstanding. The
form and terms of the Exchange Notes are identical in all material respects to
the form and terms of the Old Notes except for certain transfer restrictions
and registration rights relating to the Old Notes. The Exchange Notes will
evidence the same debt as the Old Notes and will be issued under and be
entitled to the benefits of the Indenture (as defined herein). The Exchange
Notes and the Old Notes are collectively referred to herein as the "Notes."
(Cover continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is _________, 1997
<PAGE> 6
The Notes will be senior unsecured obligations of the Company, ranking
pari passu in right of payment with all senior Indebtedness (as defined) of the
Company and senior to all future Subordinated Indebtedness (as defined) of the
Company. The Notes will be unconditionally and fully guaranteed (the
"Subsidiary Guarantees") on a senior unsecured basis by the Company's principal
operating subsidiaries (the "Subsidiary Guarantors"), and the Subsidiary
Guarantees will rank pari passu in right of payment with all senior
Indebtedness of the Subsidiary Guarantors and senior to all future Subordinated
Indebtedness of the Subsidiary Guarantors. The Subsidiary Guarantees may be
released under certain circumstances. The Notes and Subsidiary Guarantees will
be effectively subordinated to secured Indebtedness of the Company and the
Subsidiary Guarantors, respectively, to the extent of any security interest in
assets of the Company and Subsidiary Guarantors, including any Indebtedness
under the Senior Credit Facility (as defined), which is secured by liens on
substantially all of the assets of the Company and the Subsidiary Guarantors.
At March 31, 1997, giving pro forma effect to the Acquisitions (as defined) and
the related financings, the Notes and the Subsidiary Guarantees would have been
effectively subordinated to no secured Indebtedness of the Company and the
Subsidiary Guarantors. The indenture governing the Notes (the "Indenture") will
permit the Company and its subsidiaries to incur additional Indebtedness in the
future, subject to certain limitations.
The Company will accept for exchange any and all Old Notes that are
validly tendered on or prior to 5:00 p.m., New York City time, on the date the
Exchange Offer expires, which will be __________, 1997, unless the Exchange
Offer is extended. See "The Exchange Offer -- Expiration Date; Extensions;
Amendment." Tenders of Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the business day prior to the Expiration Date (as
defined herein), unless previously accepted for exchange. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain conditions
which may be waived by the Company and to the terms and provisions of the
Registration Rights Agreement (as defined herein). Old Notes may be tendered
only in denominations of $1,000 principal amount and integral multiples
thereof. The Company has agreed to pay the expenses of the Exchange Offer. See
"The Exchange Offer."
The Exchange Notes will bear interest at the rate of 12% per annum,
payable semi-annually on April 15 and October 15 of each year, commencing
October 15, 1997. Holders of Exchange Notes of record on October 1, 1997 will
receive interest on October 15, 1997 from the date of issuance of the Exchange
Notes, plus an amount equal to the accrued interest on the Old Notes from the
date of issuance of the Old Notes, April 17, 1997, to the date of exchange
thereof. Interest on the Old Notes accepted for exchange will cease to accrue
upon issuance of the Exchange Notes.
The Old Notes were sold by the Company on April 17, 1997 to the
Initial Purchaser (as defined herein) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchaser only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and to a limited number of institutional "accredited investors" (as
defined in Rule 501(a)(1),(2),(3) or (7) under the Securities Act), each of
whom agreed to comply with certain transfer restrictions and other conditions.
Accordingly, the Old Notes may not be offered, resold or otherwise transferred
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The
Exchange Notes are being offered hereunder in order to satisfy the obligations
of the Company under the Registration Rights Agreement entered into with the
Initial Purchaser in connection with the offering of the Old Notes. See "The
Exchange Offer," "Description of Notes," and "Registration Rights; Additional
Interest."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission" or "SEC") to third parties, including
Exxon Capital Holdings Corporation, SEC No-Action Letter (available April 13,
1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991)
(the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-Action
Letter (available June 5, 1991), the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by the respective holders thereof (other than a
"Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an affiliate of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder is not participating in, and has no arrangement with any person
to participate in, the distribution (within the meaning of the Securities Act)
of such Exchange Notes. Eligible holders wishing to accept the Exchange Offer
must represent to the Company that such conditions have been met. Holders who
tender Old Notes in the Exchange Offer with the intention to participate in a
distribution of the Exchange Notes may not rely upon the Morgan Stanley Letter
or similar no-action letters. See "The Exchange Offer-General." Each
broker-dealer that receives Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. A broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations). This Prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that it will
make this Prospectus and any amendment or supplement to this Prospectus
available to any broker-dealer for use in connection with any such resale for a
period of up to
2
<PAGE> 7
180 days after consummation of the Exchange Offer. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity
of any markets that may develop for the Exchange Notes or as to the ability of
or price at which the holders of Exchange Notes would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including, among others, prevailing interest rates, the Company's
operating results and the market for similar securities. The Company does not
intend to apply for listing of the Exchange Notes on any securities exchange.
Jefferies & Company, Inc. (the "Initial Purchaser") has informed the Company
that it currently intends to make a market for the Exchange Notes. However, it
is not so obligated, and any such market making may be discontinued at any time
without notice. Accordingly, no assurance can be given that an active public or
other market will develop for the Exchange Notes or as to the liquidity of or
the trading market for the Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
3
<PAGE> 8
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement
on Form S-4 (which term shall encompass any amendment thereto) under the
Securities Act, for the registration of the Exchange Notes offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement,
certain items of which are contained in the financial statement schedules and
exhibits to the Registration Statement as permitted by the rules and
regulations of the Commission. For further information, reference is made to
the Registration Statement, including the financial statement schedules and
exhibits filed as a part thereof. Statements made in this Prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed with the Commission as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved and each such statement shall
be deemed qualified in its entirety by such reference. The Registration
Statement and the exhibits thereto filed by the Company with the Commission may
be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition the Commission maintains a site on the World
Wide Web that contains reports, proxy and information statements and other
information filed electronically by the Company with the Commission which can
be accessed over the Internet at http://www.sec.gov.
As a result of this Exchange Offer the Company will be subject to
the periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As long as the Company
is subject to such periodic reporting and informational requirements, it will
furnish all reports and other information required thereby to the Commission
and pursuant to the Indenture will furnish copies of such reports and other
information to the Trustee.
The Company has agreed that, whether or not it is required to do so
by the rules and regulations of the Commission (and within 15 days of the date
that is or would be prescribed thereby), for so long as any of the Notes remain
outstanding, it will furnish to the Holders of Notes (excluding exhibits, which
will be available upon request) and file with the Commission (unless the
Commission will not accept such a filing) (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants, and (ii) all
reports that would be required to be filed with the SEC on Form 8-K if the
Company were required to file such reports. In addition, for so long as any of
the Notes remain outstanding, the Company has agreed to make available, upon
request, to any prospective purchaser of the Notes and beneficial owner of the
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act. Information may be obtained from the
Company at 8572 Katy Freeway, Suite 101, Houston, Texas 77024 (telephone
number: (713) 464-9384), Attention: Corporate Secretary.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
4
<PAGE> 9
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to,
and should be read in conjunction with, the more detailed information and
financial statements of the Company, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, references in this
Prospectus to a fiscal year shall mean the fiscal year ending December 31 of
such year. As used herein, unless the context otherwise requires, the terms
the "Company" and "Packaged Ice" refers to Packaged Ice, Inc. and its
consolidated subsidiaries. Investors are urged to read this Prospectus in its
entirety, including, without limitation, the information set forth under "Risk
Factors."
THE COMPANY
The Company is a leading manufacturer and distributor of packaged
ice and has developed a proprietary ice machine which produces, packages and
stores ice through an automated, self-contained process (the "Packaged Ice
System"). Currently operating in Arizona, California, Florida, Louisiana,
Nevada, New Mexico, Oklahoma, Tennessee and Texas, the Company is pursuing a
consolidation strategy within the highly fragmented packaged ice industry. On
April 17, 1997, the Company completed acquisitions of Mission Party Ice, Inc.
("Mission"), Southwest Texas Packaged Ice, Inc. ("STPI") and Southwestern Ice,
Inc. ("SWI"). The Company has grown significantly, primarily through these
strategic acquisitions and the placement of Packaged Ice Systems. The Packaged
Ice System, which is typically installed in supermarkets, provides the Company
with several competitive advantages, including substantially higher margins,
reduced production and distribution costs and superior product quality. The
Company has fourteen traditional ice manufacturing facilities serving over
11,000 customer locations and, at December 31, 1996, had an installed base of
730 Packaged Ice Systems located primarily in Albertsons, Kroger, HEB Pantry,
Wal-Mart Supercenters, Super K-Mart stores, and supermarkets affiliated with
Fleming Companies. Management believes that the Company is the second largest
packaged ice company in the United States with pro forma revenues and earnings
before interest, income taxes, depreciation and amortization ("EBITDA") for
fiscal 1996 of $26.2 million and $4.6 million, respectively. See "Unaudited
Pro Forma Combined Condensed Financial Statements," and "Selected Historical
and Unaudited Pro Forma Combined Financial Data."
THE INDUSTRY
Management estimates that the packaged ice industry has grown by
approximately 3% per annum during the past ten years to over $2.4 billion in
wholesale revenues in 1996. The packaged ice industry is highly seasonal, but
on a year-to-year basis remains stable, generally only affected by excessive
mild weather or rain within a region. The industry has historically been
characterized as highly fragmented with over 3,000 companies, consisting
primarily of "mom and pop" packaged ice companies, many of which are
undercapitalized. Management believes that the six largest ice manufacturers
in the southern and western U.S. account for approximately 6% of wholesale
revenues with the Company's largest competitor accounting for less than 3% of
the market. Traditional ice manufacturers produce and package ice at
centrally-located facilities and distribute to a limited market radius of
approximately 100 miles, mainly due to high shipping and product distribution
costs. Efficient distribution and customer concentration are important, as
transportation is a high cost component in the price of manufactured ice within
a traditional ice delivery system. It is difficult to ensure prompt and
reliable delivery during peak seasonal months in large markets with traditional
ice delivery systems. As a result, the ice business is primarily a regional
service business. Management believes that significant acquisition
opportunities exist for those service-oriented companies with superior ice
delivery systems and significant capital resources.
PACKAGED ICE SYSTEM
In 1994, the Company completed the development of its proprietary
system that utilizes state-of-the-art technology to produce, package and store
ice directly at customer locations. The Packaged Ice System consists of
standard Hoshizaki America, Inc. ("Hoshizaki") ice cubers, an ice merchandiser
built to the Company's specifications by Beverage Air Corporation ("Beverage
Air") and a bagging machine, the heart of the Packaged Ice System, manufactured
by Lancer Corporation ("Lancer"), a shareholder of the Company, under an
exclusive equipment manufacturing agreement. Lancer is an engineering and
manufacturing company that is a primary vendor of fountain soft drink
dispensing machines for CocaCola, Inc. The majority of bags used in the
Packaged Ice System are manufactured to the Company's specifications by Arrow
Industries, Inc. ("Arrow"), a subsidiary of ConAgra Corporation. The Packaged
Ice System is capable of producing up to 40,000 bags of ice per year and is
most frequently used in large supermarkets. The latest generation of the
Packaged Ice System is equipped with remote communication capability which
allows the Company's national service center to track production, monitor the
systems, and diagnose and correct system errors through the use of a central
processing unit. The Packaged Ice Systems are serviced by trained
representatives and are designed to provide a high degree of reliability and
serviceability through the use of interchangeable parts and a durable,
stainless steel cabinet. To guard against product contamination and satisfy
consumer demand for high quality, sanitary ice, the Packaged Ice System was
engineered to meet all specifications delineated by the National Sanitation
Foundation ("NSF") for ice production and contains a patented automatic
sanitizing system. In addition, the Packaged Ice System is U.L. approved. The
Company began development of the Packaged Ice System in 1990, and experienced
cumulative losses from continuing operations of $1.4 million during the first
four years, which were devoted
5
<PAGE> 10
primarily to research and development. In addition, management estimates that
the Company's strategic partners, Hoshizaki, Lancer and Beverage Air, funded an
aggregate of over $3.5 million of the development of the Packaged Ice System.
The Packaged Ice System, when combined with traditional delivery
methods, provides the Company with significant advantages, including (i) higher
operating margins, due to significantly reduced production and distribution
costs, (ii) a delivery system designed to supply high volume locations and
capable of cost-effectively servicing a market in excess of 100 miles from its
traditional ice manufacturing facilities, and (iii) the ability to redistribute
production from its traditional ice facilities to additional customers as well
as satisfy seasonal peak demand at stores with Packaged Ice Systems. In
addition, the Packaged Ice System provides numerous advantages to the retailer
including (i) providing a continuous supply of ice, and thus reducing the
frequency of product shortages typical of traditional ice delivery, (ii)
significantly reducing costs associated with delivery and storage at the retail
location, (iii) satisfying consumer demand for a higher quality and more
sanitary ice than typically found with traditional ice delivery, (iv)
effectively managing inventory through computerized production tracking and
dedicated technical support, and (v) increasing safety by reducing "slip and
fall" accidents. Management believes the Packaged Ice System can significantly
lower the price of a fully costed bag of ice to a supermarket as compared to
traditional ice delivery. Management believes that the higher margins and
quality of the Packaged Ice System has enabled it to quickly gain market
acceptance. At March 31, 1997, the Company had an installed base of 776
Packaged Ice Systems, over 90% of which were placed in supermarkets where the
Company was not previously the primary source of packaged ice. Management
believes that the technology utilized in the Packaged Ice System is unique with
five existing and one pending patents covering the bagging device, and that
there are significant barriers to entry for new and existing competitors with
respect to the development of a competitive and reliable machine that performs
the same functions as the Packaged Ice System. See "Risk Factors --
Competition."
BUSINESS STRATEGY
The Company's strategy is to become a leading consolidator in the
packaged ice industry and to maximize its revenues and cash flows by (i)
expanding its market presence by leveraging its proprietary ice machine
technology, (ii) entering new markets by making strategic acquisitions in the
highly fragmented traditional packaged ice industry, and (iii) reducing costs
and exploiting economies of scale.
Expand Market Presence Through Packaged Ice System. Through
selective placement of its proprietary Packaged Ice Systems, the Company will
continue to reduce transportation, storage and service costs, thereby
overcoming traditional geographical constraints inherent to traditional ice
delivery. This strategy not only provides significant cost savings to the
Company but (i) allows for expansion of its delivery radius beyond that of
traditional ice manufacturers, (ii) maximizes sales in existing markets by
converting existing traditional ice customers to the Packaged Ice System,
thereby freeing-up manufacturing capacity for new customers in the market area,
and (iii) optimizes traditional production capacity utilization by reducing ice
shortages during peak demand seasons. The Company has expanded its geographic
scope by selling ice to major national and regional supermarket chains
including Albertsons, Kroger, HEB Pantry and supermarkets affiliated with
Fleming Companies, many of whom the Company has successfully convinced to
switch from traditional delivery to higher margin Packaged Ice Systems.
Acquire Traditional Ice Manufacturing Companies in Highly Fragmented
Industry. The Company believes that the highly fragmented packaged ice industry
contains numerous acquisition opportunities. The Company's acquisition
strategy is to target well-managed, traditional ice producers with favorable
demographics and significant customer bases in both new and current market
areas. This acquisition strategy is designed to allow the Company to gain
market share quickly and efficiently, provide for additional distribution
channels through which to place Packaged Ice Systems, and achieve greater
economies of scale. In determining which businesses may be suitable
acquisition candidates, management conducts demographic and competitive
analyses and performs comprehensive due diligence on the target's facilities,
management, existing customer base, and growth opportunities.
Reduce Costs and Exploit Economies of Scale. The Company will
continue to seek reductions in operating costs and working capital requirements
in its existing operations, as well as in its future acquisitions, by (i)
closing or combining less efficient or redundant manufacturing and distribution
facilities, (ii) managing vendor relationships to ensure a high level of
responsiveness and favorable pricing, (iii) increasing market concentration of
Packaged Ice Systems to improve merchandising and servicing efficiencies, and
(iv) consolidating certain administrative and selling functions to eliminate
redundancies and excess costs. Since the Company is focusing its acquisition
efforts on related businesses, it anticipates that the customer base of any
acquired business will be similar to its own and therefore administrative areas
such as management information systems, accounting systems and customer support
may be consolidated.
The Company believes that it is well-positioned to execute its
business strategy given the depth, experience and ability of its management
team. The Company's executive officers are led by James F. Stuart, Chairman
and Chief Executive Officer, who founded Packaged Ice in 1990, and who has
twelve years of industry experience. Mr. Stuart is chiefly responsible for the
development of the Packaged Ice System. Other key management personnel are
A.J. Lewis III, President and Chief Operating Officer, and Steven P.
Rosenberg, Vice Chairman. Management (including shares attributable to
6
<PAGE> 11
directors serving at the direction of certain investors) holds a 48% fully
diluted equity interest in the Company. The Company's shareholder group also
includes Norwest Equity Partners V ("Norwest"), a partnership managed by
Norwest Venture Capital Management, Inc., a venture capital firm with over $1
billion under management. Norwest is the Company's largest shareholder and
maintains board representation.
7
<PAGE> 12
THE ACQUISITIONS
On April 17, 1997, Packaged Ice acquired SWI, Mission, and STPI
(collectively, the "Acquisitions"). SWI serves over 5,100 customer locations
in Arizona, California, New Mexico, Tennessee and Texas. STPI and Mission
(previously under common ownership) serve over 5,400 customer locations in
South Texas. The aggregate consideration paid by Packaged Ice for the
Acquisitions was approximately $29.2 million, consisting of approximately $6.9
million payable in cash, $13.1 million in repayment of sellers' debt, and $9.6
million payable in shares of Common Stock.
THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Company on April 17, 1997 to the
Initial Purchaser and were thereupon offered and sold by the Initial Purchaser
only to certain qualified buyers. The $48 million net proceeds received by the
Company in connection with the sale of the Old Notes and warrants (the
"Warrants") to purchase an aggregate of 511,885 shares of the Company's $.01
per value common stock ("Common Stock") were used to finance the cash portion
of the purchase price for the Acquisitions and certain related expenses, to
repay outstanding indebtedness, make capital expenditures and provide working
capital for the Company. The Warrants have an exercise price of $.01 per
share, and are exercisable at any time prior to the maturity date of the Notes.
The Warrants are not being registered in the Exchange Offer, but are subject to
a registration rights agreement. See "Private Placement," "Capitalization" and
"Description of Capital Stock and Warrants."
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $50,000,000
principal amount of Exchange Notes for up to $50,000,000 principal amount of
Old Notes. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Old Notes except that the
Exchange Notes have been registered under the Securities Act and will not
contain certain transfer restrictions and hence are not entitled to
registration rights with respect to the Exchange Notes. The Exchange Notes
will evidence the same debt as the Old Notes and will be issued under and be
entitled to the benefits of the Indenture governing the Old Notes. See
"Description of Notes."
The Exchange Offer Pursuant to a registration rights agreement (the
"Registration Rights Agreement") by and among the
Company, the Subsidiary Guarantors and the
Initial Purchaser, the Company agreed to (i) file
a registration statement with the Commission (the
"Exchange Offer Registration Statement") with
respect to an offer to exchange the Notes (the
"Exchange Offer") for senior debt securities of
the Company with terms substantially identical to
the Notes (the "Exchange Notes") (except that the
Exchange Notes generally will not contain terms
with respect to transfer restrictions) within 60
days after the date of original issuance of the
Notes and (ii) use its best efforts to cause such
registration statement to become effective under
the Securities Act within 120 days after such
issue date. The Registration Statement of which
this Prospectus is a part constitutes such
Exchange Offer Registration Statement. In the
event that applicable law or interpretations of
the staff of the Commission do not permit the
Company to effect the Exchange Offer, or if
certain holders of the Notes notify the Company
that they are not permitted to participate in, or
would not receive freely tradeable Notes pursuant
to, the Exchange Offer, the Company will use its
best efforts to cause to become effective a
registration statement (the "Shelf Registration
Statement") with respect to the resale of the
Notes and to keep the Shelf Registration
Statement effective until three years after the
date of original issuance of the Notes. The
interest rate on the Old Notes is subject to
increase under certain circumstances if the
Company is not in compliance with its obligations
under the Registration Rights Agreement. See
"Registration Rights; Additional Interest."
Each $1,000 principal amount of Exchange Notes
will be issued in exchange for each $1,000
principal amount of outstanding Old Notes. As of
the date hereof, $50,000,000 principal amount of
Old Notes are issued and outstanding. The Company
will issue the Exchange Notes to tendering
holders of Old Notes on or promptly after the
Expiration Date.
Resale The Company believes that the Exchange Notes
issued pursuant to the Exchange Offer generally
will be freely transferable by the holders
thereof without registration or any prospectus
delivery requirement under the Securities Act.
See "The Exchange Offer -- General" and "Plan of
Distribution."
The Old Notes were not registered under the
Securities Act and unless so registered may not
be offered or sold except pursuant to an
exemption from, or in a transaction not subject
to, the registration requirements of the
Securities Act. See "Transfer Restrictions on the
Old Notes".
8
<PAGE> 13
Expiration Date 5:00 p.m., New York City time, on _______, 1997,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date to which the Exchange Offer is extended. See
"The Exchange Offer -- Expiration Date;
Extensions; Amendments."
Procedures for Tendering
Old Notes Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the Old Notes to be exchanged and
any other required documentation to the Exchange
Agent at the address set forth herein and therein
or effect a tender of Old Notes pursuant to the
procedures for book-entry transfer as provided
for herein. See "The Exchange Offer -- Procedures
for Tendering."
Special Procedures for
Beneficial Holders Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender in the Exchange Offer
should contact such registered holder promptly
and instruct such registered holder to tender on
beneficial holder's behalf. If such beneficial
holder wishes to tender directly, such beneficial
holder must, prior to completing and executing
the Letter of Transmittal and delivering the Old
Notes, either make appropriate arrangements to
register ownership of the Old Notes in such
holder's name or obtain a properly completed bond
power from the registered holder. The transfer
of record ownership may take considerable time.
See "The Exchange Offer -- Procedures for
Tendering."
Guaranteed Delivery
Procedures Holders of Old Notes who wish to tender
their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their
Old Notes and a properly completed Letter of
Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date, or who cannot
complete the procedure for book-entry transfer on
a timely basis, must tender their Old Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The
Exchange Offer -- Withdrawal of Tenders."
Termination of the
Exchange Offer The Company may terminate the Exchange Offer if
it determines that the Exchange Offer violates
any applicable law or interpretation of the staff
of the SEC. Holders of Old Notes will have
certain rights against the Company under the
Registration Rights Agreement should the Company
fail to consummate the Exchange Offer. See "The
Exchange Offer -- Termination" and "Registration
Rights; Additional Interest."
Acceptance of Old Notes and
Delivery of Exchange Notes Subject to certain conditions (as summarized
above in "Termination of the Exchange Offer" and
described more fully in "The Exchange Offer --
Termination"), the Company will accept for
exchange any and all Old Notes which are properly
tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date.
The Exchange Notes issued pursuant to the
Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer -- General."
Exchange Agent U.S. Trust Company of Texas, N.A. is serving as
exchange agent (the "Exchange Agent") in
connection with the Exchange Offer. The mailing
and hand delivery address of the Exchange Agent
is: U.S. Trust Company of Texas, N.A., Attention:
Corporate Trust Department, 2001 Ross Avenue,
27th Floor, Dallas TX 75201. For information
with respect to the Exchange Offer, the telephone
number for the Exchange Agent is (214) 754-1303
and the facsimile number for the Exchange Agent
is (214) 754-1255. See "The Exchange Offer --
Exchange Agent."
Use of Proceeds There will be no cash proceeds payable to the
Company from the issuance of the Exchange Notes
pursuant to the Exchange Offer. See "Use of
Proceeds." For a discussion of the use of the
9
<PAGE> 14
net proceeds received by the Company from the
sale of the Old Notes, see "Private Placement."
TERMS OF THE NOTES
Notes Outstanding $50 million principal amount of 12% Senior Notes
due 2004.
Maturity Date April 15, 2004.
Interest Rate and
Payment Dates The Notes will bear interest at the rate of 12%
per annum. Interest will accrue from the Issue
Date and will be payable semi-annually on April
15 and October 15 of each year, commencing on
October 15, 1997.
Holders of Exchange Notes of record on October 1,
1997 will receive interest on October 15, 1997
from the date of issuance of the Exchange Notes,
plus an amount equal to the accrued interest on
the Old Notes from the date of issuance of the
Old Notes, April 17, 1997, to the date of
exchange thereof. Consequently, assuming the
Exchange Offer is consummated prior to the record
date in respect of the October 15, 1997 interest
payment for the Old Notes, holders who exchange
their Old Notes for Exchange Notes will receive
the same interest payment on October 15, 1997
that they would have received had they not
accepted the Exchange Offer. Interest on the Old
Notes accepted for exchange will cease to accrue
upon issuance of the Exchange Notes. See "The
Exchange Offer -- Interest on the Exchange
Notes."
Optional Redemption The Notes will be redeemable, in whole or in
part, at the option of the Company at any time on
or after April 15, 2001 at the redemption prices
set forth herein, plus accrued and unpaid
interest thereon, if any, to the redemption date.
In addition, prior to April 15, 2000, up to an
aggregate of $17.5 million in principal amount of
the Notes are redeemable at the option of the
Company, in whole or in part, from time to time,
at 112% of the principal amount thereof, plus
accrued and unpaid interest thereon to the
redemption date, with the net proceeds of a
Public Equity Offering provided that at least
$32.5 million in aggregate principal amount of
Notes remains outstanding immediately after such
redemption. See "Description of Notes --
Optional Redemption."
Change of Control In the event of a Change of Control, the Company
will be required, subject to certain conditions,
to make an offer to purchase all of the Notes at
101% of the principal amount thereof, plus
accrued and unpaid interest thereon to the date
of purchase. See "Description of Notes -- Change
of Control."
Ranking and Guarantees The Notes will be senior unsecured obligations of
the Company that will rank senior in right of
payment to all Subordinated Indebtedness (as
defined) of the Company. The Notes will rank
pari passu in right of payment to all existing
and future senior Indebtedness (as defined) of
the Company. The Notes will be unconditionally
guaranteed on a senior basis by each of the
Company's Subsidiary Guarantors. The guarantee
of each such Subsidiary Guarantor will rank pari
passu in right of payment to all existing and
future senior Indebtedness of such Subsidiary
Guarantor. The Notes are unsecured, and holders
of secured Indebtedness of the Company, including
the Senior Credit Facility, will effectively rank
prior to Holders of the Notes with respect to the
assets securing such Indebtedness. The Indenture
will permit the Company and its subsidiaries to
incur additional indebtedness under certain
circumstances. See "Description of Notes --
Ranking and Guarantees" and "Description of
Senior Credit Facility."
Certain Covenants The Indenture will contain certain covenants
that, among other things, limit the ability of
the Company and its Subsidiaries to pay dividends
or make distributions with respect to the
Company's capital stock or make certain other
restricted payments, to incur Indebtedness, to
create liens, to issue preferred or other capital
stock of subsidiaries, to sell assets, to permit
restrictions on dividends and other payments by
subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its
assets, to engage in transactions with
affiliates, or to engage in certain businesses.
See "Description of Notes -- Certain Covenants."
Original Issue Discount The Notes will be issued with original issue
discount for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
For additional information regarding the Notes, see "Description of Notes."
10
<PAGE> 15
RISK FACTORS
An investment in the Units involves certain risks that should be
considered by a potential investor. See "Risk Factors."
11
<PAGE> 16
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(in thousands, except per share, ratio and percentage data)
The following sets forth the summary historical financial data
derived from the audited financial statements of Packaged Ice as of and for the
three years ended December 31, 1996 and contains summary historical financial
data derived from the unaudited financial statements of Packaged Ice for the
three months ended March 31, 1996 and 1997. The unaudited financial statements
of Packaged Ice as of and for the three months ended March 31, 1996 and 1997
reflect all adjustments necessary in the opinion of management (consisting only
of normal recurring adjustments), for a fair presentation of such data. The
unaudited pro forma combined financial data for the year ended December 31,
1996 and as of and for the three months ended March 31, 1997 reflects operating
and other financial data as if (i) the Acquisitions and (ii) the issuance of
the Old Notes and Warrants and the application of the proceeds therefrom, had
occurred at January 1, 1996 and 1997, respectively; and reflects balance sheet
data as if the transactions in (i) and (ii) had occurred at March 31, 1997. The
unaudited pro forma financial data should not be considered indicative of
actual results that would have been achieved had the Acquisitions been
consummated on the dates or for the periods indicated and do not purport to
indicate results of operations as of any future date or any future period. The
following information should be read in conjunction with the Consolidated
Financial Statements of Packaged Ice, including the Notes thereto, "Unaudited
Pro Forma Combined Condensed Financial Statements" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------------------------- -------------------------------------
UNAUDITED
UNAUDITED PRO FORMA
PRO FORMA COMBINED
COMBINED MARCH 31 MARCH 31 MARCH 31
1994 1995 1996 1996(4) 1996 1997 1997(4)
---------- ---------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $ 784 $ 2,830 $ 4,427 $ 26,182 $ 650 $ 846 $ 4,051
Cost of goods sold 352 1,251 2,035 15,892 325 460 3,049
Gross profit 432 1,579 2,392 10,290 325 386 1,002
Operating expenses(1) 974 1,515 1,981 5,792 410 575 1,485
Depreciation and amortization 224 751 1,456 4,517 350 479 1,272
Interest expense 25 76 130 7,534 10 85 1,807
Other income 69 75 185 103 17 161 187
Loss from continuing
operations (722) (688) (990) (7,450) (428) (592) (3,375)
OTHER FINANCIAL DATA:
EBIT(2) $ (697) $ (612) $ (860) $ 84 (418) (507) (1,568)
EBITDA(2) (473) 139 596 4,601 (68) (28) (296)
Capital expenditures 2,999 2,717 5,745 8,006 711 1,354 1,639
Revenue growth 405.8% 261.0% 56.4% -- -- -- --
Gross margin 55.1% 55.8% 54.0% 39.3% 50.0% 45.6% 24.7%
EBIT margin (88.9%) (21.6%) (19.4%) 0.3% (64.3)% (59.9)% (38.7)%
EBITDA margin (60.3%) 4.9% 13.5% 17.6% (10.5)% (3.3)% (7.3)%
Ratio of earnings to fixed
charges(3) N/A N/A N/A 0.01x N/A N/A N/A
SUPPLEMENTAL DATA:
Loss per share of
common stock $ (0.28) $ (0.26) $ (0.35) $ (2.15) $ (0.15) $ (0.21) $ (0.97)
Weighted average
shares outstanding 2,614,681 2,682,261 2,826,371 3,466,228 2,826,371 2,828,085 3,467,942
BALANCE SHEET DATA:
Cash and equivalents $ 812 $ 1,033 $ 170 $ 279 $ 21,971
Working capital (deficiency) 639 696 (1,228) (2,610) 20,917
Total assets 5,513 8,050 11,523 12,922 77,005
Total long-term debt 566 211 3,582 3,075 50,000
Total shareholders' equity 4,427 7,051 6,065 6,244 22,529
</TABLE>
(1) Excludes depreciation and amortization.
(2) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBIT represents earnings before interest and income taxes.
The Company has included EBITDA and EBIT data (which are not measures of
financial performance under generally accepted accounting principles)
because it understands such data are used by certain investors to
determine a company's historical ability to service its indebtedness.
EBITDA and EBIT should not be considered by an investor as alternatives to
net income, as indicators of the Company's operating performance or as
alternatives to cash flow as measures of liquidity.
(3) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings from continuing operations before income
taxes and fixed charges. Fixed charges consist of interest expense.
Earnings were not sufficient during each fiscal year, quarter and pro forma
period presented to cover
12
<PAGE> 17
fixed charges. The deficiencies were $722,000 in 1994, $688,000 in 1995,
$990,000 in 1996, $7,450,000 for pro forma combined 1996, $428,000 and
$592,000 for the three months ended March 31, 1996 and 1997, respectively,
and $3,375,000 for the pro forma combined three months ended March 31,
1997.
(4) Pro forma to reflect the Acquisitions as if they had each occurred at
January 1, 1996 and 1997, respectively, for the operating data and at March
31, 1997 for the balance sheet data. See "Unaudited Pro Forma Combined
Condensed Financial Statements."
13
<PAGE> 18
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") which represent the
Company's expectations and beliefs concerning future events that involve risks
and uncertainties, including those associated with the effects of national and
regional economic conditions. Investors are cautioned that all forward-looking
statements involve risks and uncertainty. Discussions containing such
forward-looking statements may be found in the material set forth under
"Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations --Liquidity and Capital Resources,"
"Unaudited Pro Forma Combined Condensed Financial Statements," "Business" and
"Description of Notes," as well as elsewhere herein. Actual results may differ
materially from those projected in the forward-looking statements. Although
the Company believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements included in this Prospectus will prove to be accurate. Important
factors that could cause actual results to differ materially from the Company's
expectations are disclosed in this Prospectus. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will
be achieved. The reader should note that initial public offerings are excluded
from Section 27A of the Securities Act and Section 21E of the Exchange Act.
RISK FACTORS
The Securities offered hereby involve a high degree of risk.
Prospective purchasers should carefully consider the following factors,
together with other information contained herein, before purchasing the
Securities offered hereby.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company is highly leveraged, with substantial debt service in
addition to operating expenses and planned capital expenditures. At March 31,
1997, after giving pro forma effect to the Acquisitions and the sale of the
Notes, the total non-subordinated Indebtedness of the Company would have been
approximately $50.0 million, excluding unamortized debt issue costs. The
Indenture will permit the Company to incur up to $15.0 million of additional
Indebtedness, or a greater amount depending on the Company's Consolidated Fixed
Charge Coverage Ratio (as defined), up to $37.5 million of which may be
secured. See "-- Senior Credit Facility; Effective Subordination,"
"Description of Senior Credit Facility," and "Description of Notes -- Certain
Covenants."
The Company has historically operated at substantially lower levels of
debt than will be outstanding after giving effect to the foregoing
transactions. The Company's level of indebtedness will have several important
effects on its future operations, including, without limitation, (i) a
substantial portion of the Company's cash flow from operations must be
dedicated to the payment of interest and principal on its indebtedness, (ii)
covenants contained in the Company's Indenture or the Senior Credit Facility
will require the Company to meet certain financial tests, and other
restrictions will limit its ability to borrow additional funds or to dispose of
assets, and may affect the Company's flexibility in planning for, and reacting
to, changes in its business, including possible acquisition activities, (iii)
the Company's leveraged position will substantially increase its vulnerability
to adverse changes in general economic, industry and competitive conditions,
and (iv) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions, general corporate and other
purposes may be limited. The Company's ability to meet its debt service
obligations and to reduce its total indebtedness will be dependent upon the
Company's future performance, which will be subject to general economic,
industry and competitive conditions. There can be no assurance that the
Company's business will continue to generate cash flow at or above current
levels. If the Company is unable to generate sufficient cash flow from
operations in the future to service its debt, it may be required, among other
things, to seek additional financing in the debt or equity markets, to
refinance or restructure all or a portion of its indebtedness, including the
Notes, to sell selected assets, or to reduce or delay planned capital
expenditures. There can be no assurance that any such measures would be
sufficient to enable the Company to service its debt, or that any of these
measures could be effected on satisfactory terms, if at all.
SENIOR CREDIT FACILITY; EFFECTIVE SUBORDINATION
The Company anticipates entering into a Senior Credit Facility to
provide additional liquidity. The Company has received a binding commitment
from Frost National Bank, San Antonio, Texas and Zion National Bank, Salt Lake
City for a senior credit facility of up to $20 million. If the Company is
unable to obtain the Senior Credit Facility, it may be required to postpone
and/or change significant elements of its business strategy. The terms of the
Senior Credit Facility will require a pledge of substantially all of the assets
of the Company and the Subsidiary Guarantors. Accordingly, the Notes and
Subsidiary Guarantees will be effectively subordinated to the extent of the
collateral used to secure such bank indebtedness. In the event of a default on
the Notes, or a bankruptcy, liquidation or reorganization of the Company, such
assets will be available to satisfy obligations with respect to the
indebtedness secured thereby before any payment therefrom could be made on the
Notes. See
14
<PAGE> 19
"Description of Senior Credit Facility."
COMPETITION
The packaged ice business is highly competitive. The Company faces a
number of competitors in the packaged ice business, including other ice
manufacturers, convenience and grocery retailers that operate captive
commercial ice plants, and retailers that manufacture and package ice at store
locations. Competition exists primarily on a regional basis, with service,
price and quality as the principal competitive factors. Certain of the
Company's competitors have greater financial resources than the Company, which
may enable them to compete more effectively on the basis of price and to better
withstand industry downturns. A significant increase in the utilization of
captive commercial ice plants, on-site manufacturing and packaging by operators
of large retail chains served by the Company, or the successful introduction by
a competitor of a machine which duplicates the function of the Packaged Ice
System could have a material adverse effect on the Company's operations. See
"Business -- Packaged Ice System" and "Business -- Competition."
RISKS ASSOCIATED WITH THE ACQUISITIONS
The Acquisitions will require the Company to integrate and manage
businesses that are related to, but substantially different from, Packaged
Ice's traditional business of marketing and servicing Packaged Ice Systems.
While the Company has retained key members of management from each of SWI and
Mission, no assurance can be given that the Company will be successful in
managing and incorporating such businesses into its existing operations or that
such activities will not require a disproportionate amount of management's
attention. The Company's failure to successfully incorporate the acquired
businesses into its existing operations, or the occurrence of unexpected costs
or liabilities in the acquired businesses, could have a material adverse effect
on the Company. See "The Acquisitions."
SUBSTANTIAL NET OPERATING LOSSES
Packaged Ice has incurred substantial net operating losses since its
inception. At December 31, 1996, Packaged Ice had an accumulated deficit since
inception of $3,096,643. Such deficits reflect the cost of developmental and
other start-up activities, including the industrial design, development and
marketing of the Packaged Ice Systems. The Company also anticipates that it
will incur net operating losses during 1997, primarily as a result of the
increased interest expense associated with the Notes. While management
believes that it has developed a plan of operations that when combined with the
Acquisitions, if successfully implemented, should permit the Company to achieve
and sustain profitable operations, no assurance can be given that the Company's
operations will be profitable in the future.
DEPENDENCE ON MANUFACTURERS
The Company's proprietary bagging device is manufactured by Lancer
under an exclusive original equipment manufacturing agreement ("OEM
Agreement"). The bagging device is highly technical in nature and there can be
no assurance that the Company would be able to locate, on a timely basis or at
all, alternative sources of supply for the bagging device if Lancer was unable
to meet its obligations under the OEM Agreement. The inability to locate such
alternative sources of supply would likely have a material adverse effect on
the Company's business and financial condition.
EFFECTS OF INFLATION; RAW MATERIALS
Inflation has not had a significant effect on the operations of the
Company. However, in the event of increases in inflation or commodity prices
from recent levels, the Company could experience sudden and significant
increases in the cost of plastic bags, fuel, or utilities such as water and
electricity. The Company may be unable to pass these increases on to its
customers. The Company uses large quantities of plastic bags. Historically,
market prices for plastic bags have fluctuated in response to a number of
factors, including changes in polyethylene prices. The Company historically
has not attempted to pass through changes in the price of plastic bags,
therefore a large, abrupt change in the price of plastic bags could have a
material adverse effect on the Company's operating margins, although such
adverse effects historically have been temporary. There can be no assurance
that significant changes in plastic bag, electricity, fuel or other commodity
prices would not have a material adverse effect on the Company's business,
results of operations and debt service capabilities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RISK OF PRODUCT LIABILITY
The Company is subject to the inherent business risk of product
liability claims and adverse publicity in the event that any of its products
are alleged to have resulted in adverse effects to a user of such products.
The Company presently carries product liability insurance that management
believes is adequate under the Company's current circumstances, although there
can be no assurance that such circumstances will not change and that such
insurance will remain available at reasonable costs, if at all. In the event
of an inadequately insured product liability claim, the Company's business and
financial condition could be materially adversely affected.
15
<PAGE> 20
LIMITED PATENT PROTECTION
Other than patents which it owns or licenses on its bagging device,
the Company currently does not have patents relating to its products. While
the Company views the patents relating to the bagging device as important to
the value of the Packaged Ice System as a whole, there can be no assurance that
any issued patent will provide the Company with a meaningful competitive
advantage, that competitors will not design alternatives to reduce or eliminate
the benefits of any issued patent, or that challenges will not be instituted
against the validity or enforceability of these patents. Other companies may
obtain patents claiming products or processes that are necessary for, or useful
to, the development of the Company's products, in which event the Company may
be required to obtain licenses for patents or for proprietary technology in
order to develop, manufacture or market its products. There can be no
assurance that the Company would be able to obtain such licenses on
commercially reasonable terms, if at all.
It is the Company's practice to protect certain of its proprietary
materials and processes by relying on trade secret laws and non-disclosure and
confidentiality agreements. There can be no assurance that confidentiality or
trade secrets will be maintained or that others will not independently develop
or obtain access to such materials or processes.
POSSIBLE CONFLICTS OF INTEREST; RELATED TRANSACTIONS
The Company and certain of its officers and directors are parties to
certain transactions with the Company and have a number of potential conflicts
of interest concerning the Acquisitions, the Company's facilities, and other
matters relating to their respective businesses. In particular, the Company's
President and Chief Operating Officer and shareholder, A. J. Lewis III, will
lease real property and improvements to the Company and is the owner of one of
the Company's primary vendors, Southwest Texas Equipment Distributors, Inc.,
which supplies ice cubers to the Company. In addition, a director of the
Company, Robert G. Miller, leases real property and improvements to SWI. See
"Certain Relationships and Related Transactions."
POTENTIAL LIMITATIONS ON EXPANSION, CAPITAL CONSTRAINTS
The Company's strategy is to continue to expand its ice manufacturing
and distribution business primarily through placement of Packaged Ice Systems
in suitable locations, acquisitions of strong regional operators in new
markets, and consolidating or making acquisitions in its existing markets. The
Company will evaluate specific acquisition opportunities based on market
conditions and economic factors existing at the time and intends to pursue
favorable opportunities as they arise. The Company may encounter increased
competition for acquisitions in the future, which could result in acquisition
prices or terms that the Company does not consider acceptable. There can be no
assurance that the Company will find suitable acquisition candidates at
acceptable prices and terms or succeed in integrating any acquired business
into the Company's existing business or in retaining key customers of acquired
businesses. There can also be no assurance that the Company will have
sufficient available capital resources to realize its acquisition and growth
strategy. See "-- Substantial Leverage and Ability to Service Debt,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Business Strategy."
SEASONALITY OF ICE BUSINESS
The Company's ice business is seasonal, with its highest sales
occurring during the second and third calendar quarters. In 1996, the Company
recorded an average of approximately 66% of its annual net sales of ice during
these two quarters. Because the Company's operating results depend
significantly on sales during its peak season, adverse weather during this
season (such as an unusually mild or rainy period) could have a
disproportionate impact on the Company's operating results for the full year.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General Economic Trends and Seasonality."
DEPENDENCE ON KEY PERSONNEL
The future success of the Company's business operations is dependent
in part on the efforts and skills of certain key members of management,
including James F. Stuart, Chairman and Chief Executive Officer, A. J. Lewis
III, President and Chief Operating Officer and Steven P. Rosenberg, Vice
Chairman. The loss of any of its key members of management could have an
adverse effect on the Company. The Company maintains $2.0 million of key-man
life insurance on James F. Stuart. The success of the Company will also depend
in part upon the Company's ability to find, hire and retain additional key
management personnel, including senior management, who are also being sought by
other businesses. See "Management."
RESTRICTIONS IMPOSED BY LENDERS
Each of the Indenture and Senior Credit Facility will contain a number
of covenants that will restrict the ability of the Company to dispose of
assets, merge or consolidate with another entity, incur additional
indebtedness, create liens, make
16
<PAGE> 21
capital expenditures or other investments or acquisitions and otherwise
restrict corporate activities. The ability of the Company to comply with such
provisions may be affected by events that are beyond the Company's control.
The breach of any of these covenants could result in a default under the
Indenture or the Senior Credit Facility, and the terms of the Company's
Indebtedness would permit the holders of the Notes and/or the lenders under the
Senior Credit Facility, as the case may be, to declare all amounts borrowed
thereunder to be due and payable, together with accrued and unpaid interest.
If the Company were unable to repay its indebtedness to its lender under the
Senior Credit Facility, such lender could proceed against any and all
collateral securing such indebtedness. In addition, as a result of these
covenants, the ability of the Company to respond to changing business and
economic conditions and to secure additional financing, if needed, may be
significantly restricted, and the Company may be prevented from engaging in
transactions that might otherwise be considered beneficial to the Company. See
"Description of Notes" and "Description of Senior Credit Facility."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Various fraudulent conveyance laws enacted for the protection of
creditors may apply to the Subsidiary Guarantors' issuance of the Subsidiary
Guarantees. To the extent that a court were to find that (x) a Subsidiary
Guarantee was incurred by a Subsidiary Guarantor with intent to hinder, delay
or defraud any present or future creditor or the Subsidiary Guarantor
contemplated insolvency with a design to prefer one or more creditors to the
exclusion in whole or in part of others or (y) a Subsidiary Guarantor did not
receive fair consideration or reasonably equivalent value for issuing its
Subsidiary Guarantee and such Subsidiary Guarantor (i) was insolvent, (ii) was
rendered insolvent by reason of the issuance of such Subsidiary Guarantee,
(iii) was engaged or about to engage in a business or transaction for which the
remaining assets of such Subsidiary Guarantor constituted unreasonably small
capital to carry on its business, or (iv) intended to incur, or believed that
it would incur, debts beyond its ability to pay such debts as they matured, the
court could avoid or subordinate such Subsidiary Guarantee in favor of the
Subsidiary Guarantor's creditors. Among other things, a legal challenge of a
Subsidiary Guarantee on fraudulent conveyance grounds may focus on the
benefits, if any, realized by the Subsidiary Guarantor as a result of the
Company's issuance of the Notes. The Indenture will contain a savings clause,
which generally will limit the obligations of each Subsidiary Guarantor under
its Subsidiary Guarantee to the maximum amount as will, after giving effect to
all of the liabilities of such Subsidiary Guarantor, result in such obligations
not constituting a fraudulent conveyance. To the extent a Subsidiary Guarantee
of any Subsidiary Guarantor was avoided or limited as a fraudulent conveyance
or held unenforceable for any other reason, holders of the Notes would cease to
have any claim against such Subsidiary Guarantor and would be creditors solely
of the Company and any Subsidiary Guarantor whose Subsidiary Guarantee was not
avoided or held unenforceable. In such event, the claims of the holders of the
Notes against the issuer of an invalid Subsidiary Guarantee would be subject to
the prior payment of all liabilities (including trade payables) of such
Subsidiary Guarantor. There can be no assurance that, after providing for all
prior claims, there would be sufficient assets to satisfy the claims of the
holders of the Notes relating to any avoided portions of any of the Subsidiary
Guarantees.
The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any such proceeding. Generally,
however, a Subsidiary Guarantor may be considered insolvent either (i) if the
sum of its debts, including contingent liabilities, was greater than the fair
market value or fair saleable value of all of its assets at a fair valuation or
if the present fair market value or fair saleable value of its assets was less
than the amount that would be required to pay its total outstanding debts and
liabilities including its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature, or (ii) if it is
incurring debts beyond its ability to pay as such debts mature. Based upon
financial and other information, the Company and the Subsidiary Guarantors
believe that the Subsidiary Guarantees are being incurred for proper purposes
and in good faith and that the Company and each Subsidiary Guarantor is solvent
and will continue to be solvent after issuing its Subsidiary Guarantee, will
have sufficient capital for carrying on its business after such issuance and
will be able to pay its debts as they mature. There can be no assurance,
however, that a court passing on such standards would agree with the Company.
See "Description of Notes -- Ranking and Guarantees."
PREFERENTIAL TRANSFER
The Indenture will require the Restricted Subsidiaries created or
acquired after the issue date of the Notes to guarantee the Notes. If
bankruptcy or insolvency proceedings were initiated by or against the Company
or any Subsidiary Guarantor within 90 days (or, in certain cases, one year)
after any such guarantee, or if any such guarantee were made in contemplation
of insolvency, such guarantee would be vulnerable to avoidance as a
preferential transfer. In addition, a court could require holders of the Notes
to return any payments made during the 90-day (or one-year) period.
ENVIRONMENTAL MATTERS
The Company's ice manufacturing and ice storage operations are subject
to federal, state and local environmental laws and regulations. As a result,
the Company has the potential to be involved from time to time in
administrative or legal proceedings relating to environmental matters. There
can be no assurance that the aggregate amount of any environmental liabilities
that might be asserted in any such proceeding will not be material. The
Company cannot predict the types of environmental laws or regulations that may
from time to time be enacted in the future by federal, state or local
governments, how existing or future laws or regulations will be interpreted or
enforced or what types of environmental conditions may be
17
<PAGE> 22
found to exist at its facilities. The enactment of more stringent laws or
regulations or a more strict interpretation of existing laws and regulations
may require additional expenditures by the Company, some of which could be
material.
The Company generates and handles certain hazardous substances in
connection with the manufacture and storage of packaged ice. The handling and
disposal of these substances and wastes is subject to federal, state and local
regulations, and site contamination originating from the release or disposal of
such substances or wastes can lead to significant liabilities. In addition,
certain of the Company's current and former facilities are located in
industrial areas and have been in operation for many years. As a consequence,
it is possible that historical activities on property currently or formerly
owned by the Company or that current or historical activities on neighboring
properties have affected properties currently or formerly owned by the Company
and that, as a result, additional environmental issues may arise in the future,
the precise nature of which the Company cannot now predict. Therefore, the
Company may become liable for site contamination at properties currently or
formerly owned by the Company. Although such liability has not had a material
adverse affect on the financial condition or operating results of the Company
in the past, and the Company has no knowledge of claims that could be expected
to have a material adverse affect on its financial condition or operations,
there can be no assurance that the Company will not incur significant costs in
connection with historical handling or disposal of such substances and wastes.
GOVERNMENT REGULATION
The packaged ice industry is subject to various federal, state and
local laws and regulations, which require the Company, among other things, to
obtain licenses for its manufacturing plants and machines, to pay annual
license and inspection fees, to comply with certain detailed design and quality
standards regarding its plants and its Packaged Ice Systems and to continuously
control the quality and quantity of its ice. See "Business -- Government
Regulation."
LACK OF PUBLIC MARKET FOR THE NOTES; POSSIBLE VOLATILITY OF NOTE PRICE
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to apply for listing
of the Exchange Notes on any securities exchange or to seek approval for
quotation through any automated quotation system.
There can be no assurance as to the development or liquidity of any
market for the Exchange Notes. If an active market does not develop, the
market price and liquidity of the Exchange Notes will be adversely affected.
If such a market were to develop, the Notes could trade at prices that may be
higher or lower than their initial offering price depending upon many factors,
including prevailing interest rates, the Company's operating results and the
markets for similar securities. Although the Initial Purchaser has informed
the Company that it currently intends to make a market in the Exchange Notes,
the Initial Purchaser is not obligated to do so and any such market-making
activity may be discontinued at any time without notice. Historically, the
market for non-investment grade debt has been subject to disruptions that have
caused substantial volatility in the prices of securities similar to the Notes.
In addition, such market-making activity will be subject to the limits imposed
by the Securities Act and the Exchange Act and may be limited during the
Exchange Offer and the pendency of the Shelf Registration Statement. See
"Registration Rights; Additional Interest."
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Old Notes not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain subject to the existing restrictions upon transfer
of such Old Notes. See "Transfer Restrictions on Old Notes." Because the
Company anticipates that most holders of Old Notes will elect to exchange such
Old Notes for Exchange Notes due to the general lack of restrictions on the
resale of Exchange Notes under the Securities Act, the Company anticipates that
the liquidity of the market for any Old Notes remaining after the consummation
of the Exchange Offer may be substantially limited. Additionally, holders
(other than Restricted Holders) of any Old Notes not tendered in the Exchange
Offer prior to the Expiration Date will not be entitled to require the Company
to file the Shelf Registration Statement and the stated interest rate on such
Old Notes will remain at its initial level of 12%.
CHANGE OF CONTROL
In the event of a Change of Control (as defined in the Indenture), the
Company may be required to repurchase all of the outstanding Notes at 101% of
the principal amount, as the case may be, of the Notes plus any accrued and
unpaid interest thereon, and Additional Interest, if any, to the date of
repurchase. The exercise by the holders of the Notes of their rights to
require the Company to offer to purchase Notes upon a Change of Control could
also cause a default under other indebtedness of the Company, even if the
Change of Control itself does not, because of the financial effect of such
repurchase on the Company. The Company's ability to pay cash to any of the
holders of Notes upon a repurchase may be limited by the Company's then
existing capital resources. There can be no assurance that in the event of a
Change of Control, the Company will have, or will have access to, sufficient
funds, or will be contractually permitted under the terms of outstanding
indebtedness, to pay the required purchase price for any Notes. See
"Description of Notes."
18
<PAGE> 23
ORIGINAL ISSUE DISCOUNT; POSSIBLE TAX AND OTHER LEGAL CONSEQUENCES FOR HOLDERS
OF NOTES AND THE COMPANY
The Notes will be issued at a substantial discount from their
principal amount at maturity. However, an original issue discount (i.e., the
difference between the "stated redemption price at maturity" of the Notes and
the "issue price" of the Notes) will accrue from the issue date of the Notes
and will be included as interest income periodically in a holder's gross income
for federal income tax purposes in advance of receipts of the cash payments to
which the income is attributable. See "Certain Federal Income Tax
Considerations -- Taxation of the Notes -- to the applicable high-yield
discount obligation rules, in which case the Company would not be able to
deduct the original issue discount attributable to the Notes until paid in cash
or property or, in certain circumstances, at all.
If a bankruptcy case were commenced by or against the Company under
the United States Bankruptcy Code after the issuance of the Notes, the claim of
a holder of the Notes with respect to the principal amount thereof may be
limited to an amount equal to the sum of (i) the initial offering price and
(ii) that portion of the original issue discount that is not deemed to
constitute "unmatured interest" for purposes of the United States Bankruptcy
Code. Any original issue discount that had not amortized as of the date of any
such bankruptcy filing would constitute "unmatured interest" for purposes of
the United States Bankruptcy Code.
19
<PAGE> 24
THE ACQUISITIONS
THE SWI ACQUISITION
On April 17, 1997, Packaged Ice consummated an agreement with SWI to
merge SWI into a wholly-owned subsidiary of Packaged Ice (the "SWI
Acquisition"). The total consideration for the SWI Acquisition was $18.8
million, consisting of $3.5 million in cash, $9.3 million in repayment of
seller debt and $6.0 million in shares of the Company's Common Stock (valued at
$10.00 per share) payable to the SWI shareholders.
SWI operates ice manufacturing facilities in Phoenix, Arizona, Tucson,
Arizona, Albuquerque, New Mexico, El Centro, California, Harlingen, Texas,
McAllen, Texas, and Memphis, Tennessee, which can produce approximately 995 tons
per day, serving approximately 5,100 customer locations. At September 6, 1996,
SWI and Packaged Ice entered into a master lease agreement for Packaged Ice
Systems, and, at December 31, 1996, had placed 92 Packaged Ice Systems in
supermarkets in Arizona and New Mexico. Management anticipates closing the El
Centro, California and Albuquerque, New Mexico facilities as part of a strategic
plan to achieve greater operating efficiencies.
THE MISSION ACQUISITION
On April 17, 1997, Packaged Ice entered into agreements with Mission
and STPI, both of which are controlled by A.J. Lewis III, the Company's
President and Chief Operating Officer and a shareholder, to merge Mission and
STPI, respectively, into two wholly-owned subsidiaries of Packaged Ice (the
"Mission Acquisition"). The total consideration for the Mission Acquisition is
$10.4 million, consisting of $3.4 million in cash, $3.4 million in repayment of
seller debt and $3.6 million in shares of the Company's Common Stock (valued at
$10.00 per share) payable to shareholders of Mission and STPI.
Mission operates ice manufacturing facilities in San Antonio, Texas,
Corpus Christi, Texas and Gonzales, Texas which can produce approximately 275
tons per day, serving approximately 5,400 customer locations. In addition,
STPI owned 83 Packaged Ice Systems and leased five Ice Factory Systems at
December 31, 1996, which are strategically located in supermarkets in Mission's
trade area. Mission was the first company to combine the Packaged Ice System
with traditional ice operations. Management expects to model its future
operations on the operations of Mission and STPI.
GENERAL TERMS
Each of the SWI Acquisition and the Mission Acquisition was structured
as a "tax-free" forward subsidiary merger. The merger agreements contain
customary representations and warranties, including representations and
warranties as to financial statements, liabilities, the absence of material
changes in its business, compliance with laws, title to property, contracts,
litigation, employee benefit matters, taxes and environmental matters. Five
percent of the purchase price paid to shareholders will be held in escrow for
one year to protect against breach of the agreements. The merger agreements
also require the companies to operate their respective businesses in the
ordinary course pending the closing.
PRIVATE PLACEMENT
On April 17, 1997, the Company completed the private sale to the
Initial Purchaser of $50,000,000 principal amount of the Old Notes at a price
of 96% of the principal amount thereof in a transaction not registered under
the Securities Act in reliance upon Section 4(2) of the Securities Act. The
Initial Purchasers thereupon offered and resold the Old Notes only to qualified
institutional buyers and a limited number of institutional accredited investors
at an initial price to such purchasers of 100% of the principal amount thereof.
The $48 million net proceeds received by the Company in connection with the
sale of the Old Notes were used to finance the cash portion of the purchase
price for the Acquisitions and certain related expenses, repay outstanding
indebtedness, make capital expenditures and provide working capital for the
Company.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of
the Exchange Notes offered hereby. In consideration for issuing the Exchange
Notes as contemplated in this Prospectus, the Company will receive in exchange
a like principal amount of Old Notes, the terms of which are identical in all
material respects to the Exchange Notes. The Old Notes surrendered in exchange
for the Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any change in
capitalization of the Company.
20
<PAGE> 25
DIVIDEND POLICY
The Company has never paid or declared cash dividends on its Common
Stock or other securities. The Company currently anticipates that it will
retain all of its future earnings, if any, for use in the expansion and
operation of its business and does not anticipate paying any cash dividends in
the foreseeable future. The Indenture will restrict the Company's ability to
pay dividends to the holders of Common Stock. See "Description of Notes."
21
<PAGE> 26
CAPITALIZATION
The following table sets forth at March 31, 1997 the actual cash,
short-term debt and capitalization of Packaged Ice and the cash, short-term
debt and capitalization of the Company as adjusted to give effect to (i) the
Acquisitions, (ii) the sale of the Old Notes and Warrants and the application
of the net proceeds therefrom (assumed to be $46 million), and (iii) the
issuance of $9.6 million of Common Stock in connection with the Acquisitions as
if they had each occurred at March 31, 1997. This table should be read in
conjunction with the "Unaudited Pro Forma Combined Condensed Financial
Statements", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Packaged Ice's Consolidated Financial Statements,
including the notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
-----------------------------
ACTUAL AS ADJUSTED(1)
------------ --------------
($ IN THOUSANDS)
<S> <C> <C>
Cash and equivalents $ 279 $ 21,971
============ ============
Current maturities of long-term debt $ 1,308 $ 0
============ ============
LONG-TERM DEBT:
Existing bank indebtedness $ 3,075 $ 0
Senior Credit Facility 0 0
Senior Notes due 2004 0 50,000
------------ ------------
Total long-term debt 3,075 50,000
------------ ------------
SHAREHOLDERS' EQUITY:
Series A Convertible Preferred Stock, $.01 par
value; 5,000,000 shares authorized; 450,000
shares outstanding (historical and as adjusted) 5 5
Series B Convertible Preferred Stock, $.01 par
value; 200,000 shares authorized; 124,831
shares outstanding 1 1
Common Stock, $.01 par value; 50,000,000 shares authorized; 2,832,371
shares outstanding (historical) and 3,787,371 shares outstanding
(as adjusted) 28 38
Additional paid-in capital(1) 9,899 26,174
Retained earnings (deficit) (3,689) (3,689)
------------ ------------
Total shareholders' equity 6,244 22,529
------------ ------------
Total capitalization $ 9,319 $ 72,529
============ ============
</TABLE>
(1) Includes an increase to additional paid-in capital of $6,735,000 related
to the estimated fair value ascribed to all warrants issued in connection
with the offering of the Old Notes.
22
<PAGE> 27
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial
statements are derived from the historical financial statements of Packaged
Ice, SWI, Mission and STPI included elsewhere herein, and certain assumptions
deemed appropriate by the Company. The Unaudited Pro Forma Combined Statement
of Operations for the year ended December 31, 1996 and the three months ended
March 31, 1997 reflects (i) the Acquisitions, including the issuance of 955,000
shares of Common Stock and (ii) the issuance of the Notes and Warrants and the
application of the net proceeds therefrom, as if such transactions had occurred
on January 1, 1996 and 1997, respectively. The Unaudited Pro Forma Combined
Balance Sheet at March 31, 1997 reflects the transactions in (i) and (ii) as if
they had occurred at March 31, 1997. Such unaudited pro forma combined
condensed financial statements combine (i) the audited operating results for
Packaged Ice for the year ended December 31, 1996 and unaudited operating
results and balance sheet data for Packaged Ice for the three months ended and
at March 31, 1997, (ii) the audited operating results for SWI for the year
ended December 31, 1996 and unaudited operating results and balance sheet data
for SWI for the three months ended and at March 31, 1997, and (iii) the audited
combined operating results for Mission and STPI for the year ended December 31,
1996 and unaudited operating results and combined balance sheet data for
Mission and STPI for the three months ended and at March 31, 1997. The
Unaudited Pro Forma Combined Condensed Financial Statements should be read in
conjunction with the notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the historical financial
statements of Packaged Ice, SWI, and the combined Mission and STPI, including
the notes thereto, included elsewhere herein.
The pro forma adjustments to give effect to the various events
described above are based upon currently available information and upon certain
assumptions that management believes are reasonable. The Acquisitions are
accounted for by the Company under the purchase method of accounting and the
assets and liabilities of SWI, Mission and STPI are recorded at their estimated
fair market values at the date of acquisition. The adjustments included in the
Unaudited Pro Forma Combined Condensed Financial Statements reflect the
Company's preliminary assumptions and estimates based upon available
information. There can be no assurance that the actual adjustments will not
vary significantly from the estimated adjustments reflected in the Unaudited
Pro Forma Combined Condensed Financial Statements.
The Unaudited Pro Forma Combined Condensed Financial Statements do not
purport to be indicative of the financial position or results of operations
that would actually have occurred or that may be obtained in the future if the
transactions described had occurred as presented in such statements. In
addition, future results may vary significantly from the results reflected in
such statements due to general economic conditions, utility prices, labor
costs, competition, the Company's ability to successfully integrate the
operations of SWI, Mission and STPI with its current business, and several
other factors, many of which are beyond the Company's control. See "Risk
Factors."
23
<PAGE> 28
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------------------------------ ----------------------------
PACKAGED ICE MISSION STPI SWI ADJUSTMENTS COMBINED
------------ ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 278,571 $ 12,175 $ 33,919 $ 82,595 $28,442,992 (d) $21,970,810(k)
(6,879,442)(e)
Accounts receivable:
Trade 361,250 433,472 87,323 1,379,319 (125,000)(a) 2,136,364
Affiliates 223,535 514,551 (1,031) (230,477)(a) 506,578
Inventories 98,550 125,256 17,450 427,362 668,618
Prepaid expenses 29,877 24,673 0 55,664 110,214
----------- ---------- ---------- ----------- ----------- -----------
Total current assets 991,783 1,110,127 137,661 1,944,940 21,208,073 25,392,584
Property, net 10,762,789 3,495,231 1,023,186 10,047,796 (471,543)(e) 24,857,459
Other assets, net 1,167,104 160,140 109,494 170,202 (36,000)(e) 1,570,940
Unamortized debt issue costs 10,735,335 (c) 10,735,335
Net assets from
discontinued
operations 374,282 (61,288) (312,994)(e) 0
Goodwill 14,448,617 (e) 14,448,617
----------- ---------- ---------- ----------- ----------- -----------
Total assets $12,921,676 $5,139,780 $1,209,053 $12,162,938 $45,571,488 $77,004,935
=========== ========== ========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt $ 1,005,484 $1,566,268 $ 340,365 $ 1,643,137 $(4,555,254)(d) $ 0
Accounts payable 439,057 419,457 77,114 1,168,779 (125,000)(a) 1,979,407
Payables to affiliates 1,641,791 0 230,477 (230,477)(a) 1,641,791
Accrued wages 94,952 94,952
Accrued expenses 118,855 97,829 20,950 521,669 759,303
Notes payable 302,080 40,000 122,436 0 (464,516)(d) 0
----------- ---------- ---------- ----------- ----------- -----------
Total current
liabilities 3,602,219 2,123,554 791,342 3,333,585 (5,375,247) 4,475,453
Long-term debt, net 3,075,310 1,191,009 513,369 7,757,550 50,000,000 (d) 50,000,000
(12,537,238)(d)
Shareholders' equity:
Common Stock 28,324 10 1,250 1,110 (2,370)(e) 37,874
9,550 (e)
Preferred Stock,
Series A 4,500 4,500
Preferred Stock,
Series B 1,248 1,248
Additional paid-in
capital 9,898,897 1,514,513 23,513 (1,538,026)(e) 26,174,682
9,540,450 (e)
6,735,335 (f)
Retained earnings
(deficit) (3,688,822) 310,694 (110,421) 1,070,693 (1,270,966)(e) (3,688,822)
Treasury stock (10,000) 10,000 (e) 0
----------- ---------- ---------- ----------- ----------- -----------
Total shareholders'
equity 6,244,147 1,825,217 (95,658) 1,071,803 13,483,973 22,529,482
----------- ---------- ---------- ----------- ----------- -----------
Total liabilities
and shareholders'
equity $12,921,676 $5,139,780 $1,209,053 $12,162,938 $45,571,488 $77,004,935
=========== ========== ========== =========== =========== ===========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
24
<PAGE> 29
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
HISTORICAL PRO FORMA
------------------------------------------------------------ ----------------------------
PACKAGED ICE MISSION STPI SWI ADJUSTMENTS COMBINED
------------ ---------- --------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $4,426,860 $6,853,645 $ 850,869 $ 14,050,305 $26,181,679
Cost of goods sold 2,034,828 4,327,267 356,040 9,174,084 15,892,219
---------- ---------- --------- ------------ ----------- -----------
Gross profit 2,392,032 2,526,378 494,829 4,876,221 10,289,460
Operating expenses(j) 1,981,278 1,387,837 110,785 2,612,786 $ (165,741)(a) 5,791,945
(135,000)(g)
Depreciation and
amortization 1,455,693 698,136 275,576 1,124,380 963,241 (b) 4,517,026
Interest expense (income) 130,475 182,179 93,932 920,136 6,206,897 (c) 7,533,619
Other income(expense) 184,982 68,448 560 14,682 (165,741)(a) 102,931
---------- ---------- --------- ------------ ----------- -----------
Income(loss) before
income taxes (990,432) 326,674 15,096 233,601 (7,035,138) (7,450,199)
Income taxes 0 0 0 0 0 (i) 0
---------- ---------- --------- ------------ ----------- -----------
Income (loss) from
continuing operations $ (990,432) $ 326,674 $ 15,096 $ 233,601 $(7,035,138) $(7,450,199)
========== ========== ========= ============ =========== ===========
Net loss per share $ (0.35) $ (2.15)
========== ===========
Weighted average number
of common shares
outstanding 2,826,371 639,857 3,466,228
========== =========== ===========
SUPPLEMENTARY INFORMATION:
EBITDA(h) $ 595,736 $1,206,989 $ 384,604 $ 2,278,117 $ 135,000 $ 4,600,446
========== ========== ========= ============ =========== ===========
FOR THE THREE MONTHS ENDED MARCH 31, 1997
Revenues $ 845,732 $ 880,409 $ 118,293 $ 2,206,840 $ 4,051,274
Cost of goods sold 459,780 757,169 56,496 1,775,321 3,048,766
---------- ---------- --------- ------------ ----------- -----------
Gross profit 385,952 123,240 61,797 431,519 1,002,508
Operating expenses(1) 574,638 370,067 48,661 680,413 $ (155,186)(a) 1,484,843
(33,750)(g)
Depreciation and
amortization 478,836 180,934 73,204 298,856 240,810 (b) 1,272,640
Interest expense(income) 85,302 61,967 27,767 226,730 1,405,253 (c) 1,807,019
Other income(expense) 160,645 9,489 103 172,086 (155,186)(a) 187,137
---------- ---------- --------- ------------ ----------- -----------
Income(loss) before
income taxes (592,179) (480,239) (87,732) (602,394) (1,612,313) (3,374,857)
Income taxes 0 0 0 0 0 (i) 0
---------- ---------- --------- ------------ ----------- -----------
Income (loss) from
continuing operations $ (592,179) $ (480,239) $ (87,732) $ (602,394) $(1,612,313) $(3,374,857)
========== ========== ========= ============ =========== ===========
Net loss per share $ (0.21) $ (0.97)
========== ===========
Weighted average number
of common shares
outstanding 2,828,085 639,857 3,467,942
========== =========== ===========
SUPPLEMENTARY INFORMATION:
EBITDA(h) $ (28,041) $ (237,338) $ 13,239 $ (76,808) $ 33,750 $ (295,198)
========== ========== ========= ============ =========== ===========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
25
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(a) Elimination of intercompany revenues/expenses and related intercompany
accounts receivable/payable with respect to equipment leasing and service
agreements between Packaged Ice and SWI and/or STPI. Intercompany transactions
during the year ended December 31, 1996 and the three months ended March 31,
1997 totaled $165,741 and $155,186, respectively. The related intercompany
receivable/payable at December 31, 1996 and March 31, 1997 was $62,000 and
$125,000, respectively. Additionally, a $230,477 intercompany
receivable/payable between Mission and STPI is eliminated for pro forma
purposes.
(b) Amortization of goodwill is calculated using the following assumptions:
<TABLE>
<S> <C>
Total goodwill(e) $14,448,617
15-year estimated life 15
-----------
Calculated annual amortization $ 963,241
===========
Calculated quarterly amortization $ 240,810
===========
</TABLE>
(c) Interest expense adjustments are as follows:
<TABLE>
<CAPTION>
Year Ended Three Months Ended
12/31/96 3/31/97
----------- ------------------
<S> <C> <C>
Offering debt(d) $50,000,000
Interest rate on Offering debt 12.00%
-----------
Adjustment to 1996 interest expense 6,000,000 $1,500,000
Less: Historical interest expense for debt to be
retired with Offering debt(d) (1,326,722) (401,765)
Add: Additional interest on amortization of debt
issuance costs:
Total debt issue costs(1) $10,735,335
Calculated amortization, 7-year life 1,533,619 383,405
----------- ----------
Net adjustment to interest expense $ 6,206,897 $1,481,640
=========== ==========
</TABLE>
(1) Debt issue costs include (i) $4,000,000, of direct cash
expenditures, (ii) $5,388,268 of estimated fair value of the
Warrants offered hereby to purchase 511,885 shares of Common
Stock, and (iii) $1,347,067 of estimated fair value of the
warrants to purchase 127,972 shares of Common Stock issued
to the Initial Purchaser as partial consideration for services
performed.
(d) Net proceeds from the Offering are calculated using the following
assumptions:
<TABLE>
<S> <C> <C>
Proceeds from the Offering $50,000,000
Less cash used for:
Debt issue costs(c) 4,000,000
Historical debt assumed to be retired:
Current portion of long-term debt $ 4,555,254
Long-term debt, net 12,537,238
Notes payable 464,516
-----------
Total debt retired 17,557,008
-----------
Net proceeds $28,442,992
===========
</TABLE>
Proceeds from the debt are based on the Offering of $50,000,000 12%
Senior Notes due 2004. The retired debt assumes all historical interest bearing
debt is retired effective on the date of acquisition.
(e) The excess of total purchase price over the allocation of fair value to the
net assets will be recorded as goodwill, which is calculated and based on the
following assumptions:
<TABLE>
<S> <C> <C>
Value of Common Stock consideration $ 9,550,000
Cash consideration 6,879,442
-----------
Total purchase price $16,429,442
Historical net asset value of
acquired companies(1)(2) $2,801,362
Less net assets of the Acquisitions that will
not be acquired:
Net assets of discontinued operations
of Mission $ (312,994)
Certain other assets of Mission (36,000)
Certain net assets of SWI (471,543)
Net assets acquired 1,980,825
-----------
Goodwill $14,448,617(3)
===========
</TABLE>
(1) In recording the purchase price allocation, all historical equity balances
of the acquired companies are eliminated.
(2) The Company has not completed an assessment of the fair value of the net
assets to be acquired for purposes of allocating the purchase price.
Accordingly, the excess of the purchase price over the net asset value of
the acquired companies has been allocated entirely to goodwill. To the
extent that such assessments indicate the fair value of fixed assets is in
excess of net book value, this excess would be allocated to fixed assets
and reduce the goodwill calculated above. Assuming a weighted average
depreciable life for fixed assets of five years, every $500,000 allocated
to fixed assets, rather than goodwill, would increase pro forma 1996
depreciation and amortization expense by $67,000.
(f) Adjustment to additional paid-in capital of $6,735,335 includes the
$5,388,268 of total estimated fair value of the Warrants offered hereby, and
$1,347,067 of total estimated fair value of the warrants issued to the Initial
Purchaser as partial consideration for services performed.
(g) Elimination of compensation in 1996 and for the three months ended March
31, 1997 relating to an officer and shareholder of SWI who will not be retained
after the Acquisitions.
(h) EBITDA represents income from continuing operations before interest
expense, income taxes, depreciation and amortization. EBITDA is frequently used
by securities analysts and is presented here to provide additional information
about the Company's operations. EBITDA is not a measurement presented in
accordance with generally accepted accounting principles and should not be
considered as an alternative to net income as a measure of operating results or
as an alternative to cash flows as a better measure of liquidity.
(i) The pro forma income tax provision (benefit) has been calculated as if each
acquired company had been included in Packaged Ice's consolidated income tax
return and, therefore, was subject to corporate income taxation. The pro forma
combined statement of operations reflects a loss before income taxes, however,
no income tax benefit is reflected due to the uncertainty of the Company's
ability to utilize such losses in future periods to reduce income taxes.
(j) Excludes depreciation and amortization.
(k) Included in cash and equivalents for SWI are $50,000 of short-term
investments with original maturities of 180 days.
26
<PAGE> 31
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(in thousands, except per share, ratio and percentage data)
The following table sets forth the selected historical financial data
derived from the audited financial statements of Packaged Ice as of and for the
five years ended December 31, 1996 and contains selected financial data derived
from the unaudited financial statements of Packaged Ice for the three months
ended March 31, 1996 and 1997. The unaudited financial statements of Packaged
Ice as of and for the three months ended March 31, 1996 and 1997 reflect all
adjustments necessary in the opinion of management (consisting only of normal
recurring adjustments) for a fair presentation of such data. The unaudited pro
forma combined selected financial data for the year ended December 31, 1996 and
as of and for the three months ended March 31, 1997 reflects operating and other
financial data as if (i) the Acquisitions and (ii) the issuance of the Old Notes
and Warrants and the application of the net proceeds therefrom had occurred at
January 1, 1996 and 1997, respectively; and reflects balance sheet data as
if the transactions in (i) and (ii) had occurred at March 31, 1997. The
unaudited pro forma financial data should not be considered indicative of
actual results that would have been achieved had the Acquisitions been
consummated on the dates or for the periods indicated and do not purport to
indicate results of operations as of any future date or for any future
period. The following information should be read in conjunction with the
Consolidated Financial Statements of Packaged Ice, including the notes
thereto, "Unaudited Pro Forma Combined Condensed Financial Statements"
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------- ---------------------------------
UNAUDITED UNAUDITED
PRO FORMA PRO FORMA
COMBINED COMBINED
1992 1993 1994 1995 1996 1996(4) 1996 1997 1997(4)
------ ------ -------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $ 29 $ 155 $ 784 $ 2,830 $ 4,427 $ 26,182 $ 650 $ 846 4,051
Cost of goods sold 10 56 352 1,251 2,035 15,892 325 460 3,049
Gross profit 19 99 432 1,579 2,392 10,290 325 386 1,002
Operating expenses(1) 178 431 974 1,515 1,981 5,792 410 575 1,485
Depreciation and
amortization 10 48 224 751 1,456 4,517 350 479 1,272
Interest expense 1 11 25 76 130 7,534 10 85 1,807
Other income 4 -- 69 75 185 103 17 161 187
Loss from continuing
operations (166) (391) (722) (688) (990) (7,450) (428) (592) (3,375)
OTHER FINANCIAL DATA:
EBIT(2) $ (165) $ (380) $ (697) $ (612) $ (860) $ 84 (418) (507) (1,568)
EBITDA(2) (155) (332) (473) 139 596 4,601 (68) (28) (296)
Capital expenditures 185 252 2,999 2,717 5,745 8,006 711 1,354 1,639
Revenue growth -- 434.5% 405.8% 261.0% 56.4% -- -- -- --
Gross margin 65.5% 63.9% 55.1% 55.8% 54.0% 39.3% 50.0% 45.6% 24.7%
EBIT margin (569.0%) (245.2%) (88.9%) (21.6%) (19.4%) 0.3% (64.3%) (59.9%) (38.7%)
EBITDA margin (534.5%) (214.2%) (60.3%) 4.9% 13.5% 17.6% (10.5%) (3.3%) (7.3%)
Ratio of earnings to
fixed charges(3) N/A N/A N/A N/A N/A .01x N/A N/A N/A
SUPPLEMENTAL DATA:
Loss per share of common
stock $ (0.11) $ (0.25) $ (0.28) $ (0.26) $ (0.35) $ (2.15) $ (0.15) $ (0.21) $ (0.97)
Weighted average shares
outstanding 1,491,000 1,538,435 2,614,681 2,682,261 2,826,371 3,466,228 2,826,371 2,828,085 3,467,942
BALANCE SHEET DATA:
Cash and equivalents $ 147 $ 58 $ 812 $ 1,033 $ 170 279 21,971
Working capital
(deficiency) 75 (137) 639 696 (1,228) (2,610) 20,917
Total assets 435 618 5,513 8,050 11,523 12,922 77,005
Total long-term debt -- 125 566 211 3,582 3,075 50,000
Total shareholders'
equity 339 247 4,427 7,051 6,065 6,244 22,529
</TABLE>
(1) Excludes depreciation and amortization.
(2) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBIT represents earnings before interest and income taxes.
The Company has included EBITDA and EBIT data (which are not measures of
financial performance under generally accepted accounting principles)
because it understands such data are used by certain investors to
determine a Company's historical ability to service its indebtedness.
EBITDA and EBIT should not be considered by an investor as alternatives to
net income, as indicators of the Company's operating performance or as
alternatives to cash flow as measures of liquidity.
(3) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings from continuing operations before income
taxes and fixed charges. Fixed charges consist of interest expense.
Earnings were not sufficient during the fiscal years ended December 31,
1992 through 1996 and pro forma combined 1996 to cover fixed charges. The
deficiencies were $166,000 in 1992, $391,000 in 1993, $722,000 in 1994,
$688,000 in 1995, $990,000 in 1996, $7,450,000 in pro forma combined 1996,
$428,000 and $592,000 for the three months ended March 31, 1996 and 1997,
respectively, and $3,375,000 for the pro forma combined three months ended
March 31, 1997.
(4) Pro forma to reflect the Offering and the Acquisitions as if they had each
occurred at January 1, 1996 and 1997, respectively, for the operating
data and at March 31, 1996 for the balance sheet data. See "Unaudited Pro
Forma Combined Condensed Financial Statements."
27
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
"Unaudited Pro Forma Combined Condensed Financial Statements," the "Selected
Historical and Unaudited Pro Forma Combined Financial Data," and the Company's
Consolidated Financial Statements, and the notes thereto, included elsewhere
herein.
OVERVIEW
The Company derives its revenues from the sale of packaged ice through
the Packaged Ice System, which manufactures, packages and stores ice at the
retail location, and through traditional delivery methods, whereby ice is
manufactured, packaged and stored at a central facility and transported to the
retail location when needed. Packaged Ice has historically sold ice primarily
through Packaged Ice Systems, but upon acquiring SWI, Mission and STPI
(collectively, "Mission/STPI"), all of which sell ice through both Packaged Ice
Systems and traditional ice delivery methods, now sells ice through both
distribution methods. Such combination is expected to provide the Company with
(i) higher operating margins, due to reduced production and distribution costs,
(ii) a delivery system designed to supply high volume locations and capable of
cost-effectively servicing a market in excess of 100 miles from its traditional
ice manufacturing facilities, and (iii) an ability to redistribute production
from its traditional ice facilities to additional customers and satisfy
seasonal peak demands at customer locations with Packaged Ice Systems.
The Company manufactures its ice in crushed, cubed, half-moon and
cylindrical forms and packages its ice primarily in eight to 40 pound bags for
eventual sale to retail customers and sells block ice in 10 and 300 pound sizes
primarily to commercial and industrial users. Eight pound bags are the most
commonly purchased size in the industry and accounted for $19.2 million, or
73.3%, of the Company's pro forma 1996 revenues. Packaged ice sold in 20 pound
and 40 pound bags is typically purchased by restaurants and other commercial
users, and accounted for $3.6 million, or 13.7%, of the Company's pro forma
1996 revenues. Block ice in 10 pound and 300 pound units is typically sold to
customers in the commercial and agricultural sectors and accounted for $0.9
million, or 3.4%, and $1.3 million, or 5.0%, of the Company's pro forma 1996
revenues, respectively. The Company also provides other services including cold
storage rental which accounted for $1.2 million, or 4.6%, of pro forma 1996
revenues.
Prices for packaged ice are generally stable with some price variation
between markets based on geography and customer base. Pro forma for the
Acquisitions, management believes that it services more states (eight) than any
other ice manufacturer. Texas is the Company's largest market and accounted for
$12.5 million, or 47.7%, of pro forma 1996 revenues; Arizona accounted for
$11.1 million, or 42.4%, of pro forma 1996 revenues. Other markets include
Tennessee, California, Louisiana, Nevada, New Mexico and Florida. The Company
is currently expanding into Oklahoma and Colorado. Pro forma for the
Acquisitions, no single customer represented more than 9.0% of pro forma 1996
revenues. The Company, as the primary supplier to several national or regional
supermarket chains, and many national or regional convenience and pharmacy
chains, services over 11,000 customer locations at March 31, 1997. Following
the Acquisitions, the Company will service the significant segments of the ice
industry, from supermarket and convenience store retailers, to restaurants,
commercial users and the agricultural sector. Management believes that this
market diversity helps insulate the Company from both price and demand
fluctuations caused by geography, customer base and product segment.
The Company's costs of goods sold include costs associated with both
traditional ice delivery and the Packaged Ice Systems. In the traditional ice
business, plant occupancy, plastic bags, delivery, labor and utility-related
expenses account for the largest costs. Costs vary significantly by region and
fluctuate based upon, among other things, freezer capacity and local utility
rates. With the Packaged Ice System, ice storage and general operating utility
costs are eliminated. The Company's costs of goods sold also include the cost
of plastic bags which are incurred by both the traditional ice manufacturer
plants and the Packaged Ice Systems. The cost of the bag used in the Packaged
Ice System is substantially higher than that used in traditional delivery due
to special components and greater thickness. Costs of goods sold also includes
labor costs associated with manufacturing, delivery and maintenance. These
costs accounted for approximately 30.0% and 32.0% of historical 1996 revenues
at SWI and Mission, respectively, and have historically grown with inflation.
The Packaged Ice System eliminates certain costs related to production and
distribution but does require in-store customer service representatives and
machine technicians. In the aggregate, labor costs associated with the Packaged
Ice System are substantially lower than labor costs associated with traditional
ice manufacturing. As a result, total production and distribution labor costs
for traditional manufacturing operations at SWI and Mission represented
approximately 30.5% of historical 1996 revenues while corresponding labor costs
at Packaged Ice represented 21.3% of historical 1996 revenues.
The Company's operating expenses include costs associated with
selling, general and administrative functions. These costs include executive
officers' compensation, office and administrative salaries and costs associated
with leasing office space. Selling, general and administrative functions are
similar at both the traditional facilities and at Packaged Ice. These operating
expenses are typically higher when the Company enters new markets, in which it
intends to place Packaged Ice Systems, as new marketing, systems and office
facilities must be established.
28
<PAGE> 33
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, on a historical
basis for Packaged Ice and on a pro forma basis for the Company, selected
operating data and supplemental data expressed as a percentage of total revenue
and the number of ice systems operating at the end of each period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------- ---------------------------
HISTORICAL PRO FORMA PRO FORMA
------------------------ COMBINED COMBINED
1994 1995 1996 1996(3) 1996 1997 1997(3)
----- ----- ----- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of goods sold 44.9 44.2 46.0 60.7 50.0 54.4 75.3
Gross profit 55.1 55.8 54.0 39.3 50.0 45.6 24.7
Operating expenses(1) 124.2 53.5 44.7 22.1 63.1 68.0 45.7
Depreciation and amortization 28.6 26.5 32.9 17.3 53.8 56.6 31.4
Interest expense 3.2 2.7 2.9 28.8 1.5 10.0 44.6
Other income 8.8 2.7 4.2 0.4 2.6 19.0 4.6
SUPPLEMENTAL DATA:
EBIT(2) (88.9%) (21.6%) (19.4%) 0.3% (64.3%) (59.9%) (38.7%)
EBITDA(2) (60.3) 4.9 13.5 17.6 (10.5) (3.3) (7.3)
</TABLE>
(1) Excludes depreciation and amortization.
(2) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBIT represents earnings before interest and income taxes.
The Company has included EBITDA and EBIT data (which are not measures of
financial performance under generally accepted accounting principles)
because it understands such data are used by certain investors to
determine a company's historical ability to service its indebtedness.
EBITDA and EBIT should not be considered by an investor as alternatives to
net income, as indicators of the Company's operating performance or as
alternatives to cash flow as measures of liquidity.
(3) Pro forma combined operating data for the year ended December 31, 1996
and the three months ended March 31, 1997 reflect the Offering and the
Acquisitions as if they had each occurred at January 1, 1996 and 1997,
respectively. See "Unaudited Pro Forma Combined Condensed Financial
Statements" included elsewhere herein.
PRO FORMA RESULTS OF OPERATIONS
Pro forma results of operations are not necessarily indicative of what the
Company's results of operations would have been had the Company actually made
the Acquisitions reflected in the Unaudited Pro Forma Combined Condensed
Financial Statements on the dates indicated, nor do they purport to project
future results of operations. Any significant acquisitions and/or new
placements of Packaged Ice Systems in future periods could materially impact
the mix of revenues, costs of sales and the Company's operating margins.
For the Three Months Ended March 31, 1997 (Pro forma as compared to historical)
Revenues. The Company's pro forma revenues for the three month period ended
March 31, 1997 were $4.1 million. Pro forma for the Acquisitions, Company's
revenues include sales of eight pound bags through Packaged Ice Systems and
sales of packaged and block ice sold through the traditional ice facilities of
SWI and Mission. Pro forma for the Acquisitions, the Company's diversified sales
base expanded to nine states with the assumed commencement of operations in
Oklahoma.
Gross Profit. Gross profit represented 24.7% of pro forma total revenues
for the first quarter of 1997 as compared to 45.6% of historical total revenues
for the same period in 1996. This decrease reflects the lower gross margins of
traditional ice operations at SWI and Mission which are accentuated during the
low volume first quarter of each year. Such gross margins were 19.6% at SWI and
14.0% at Mission during such period. Packaged Ice's historical gross margins
reflect the lower costs of on-site manufacturing and delivery associated with
the Packaged Ice Systems. The lower overall pro forma gross margin percentage
reflects the higher costs experienced by traditional ice companies.
Operating Expenses. Operating expenses represented 45.7% of pro forma
total revenues for the three month period ended March 31, 1997 as compared to
68.0% of Packaged Ice's historical total revenues for the same period. This
decrease was due primarily to lower operating expenses at SWI and Mission/STPI.
The lower expenses for selling, general and administrative overhead experienced
by the traditional operations reflect the greater efficiencies experienced in
established market positions. Packaged Ice's historical operating expense
margins reflect the high selling, general and administrative expenses
associated with new market penetration which has required new facilities,
management and reporting centers. The Company anticipates that its existing and
acquired production facilities, accounting and administrative departments will
permit operating expenses as a percentage of revenues to decrease as it expands
in those markets.
Depreciation and Amortization. Depreciation and amortization represented
31.4% of pro forma total revenues as compared to 56.6% of historical total
revenues for the same period. This decrease was due primarily to the lower
historical depreciation and amortization margins of 13.5% and 20.6% at the
traditional operations of SWI and Mission, respectively, for the period ended
March 31, 1997. These margins reflect the longer estimated useful lives of
traditional ice plant and equipment as compared to Packaged Ice Systems. This
decrease more than offset the increase related to the amortization of goodwill
on a pro forma basis.
Interest Expense. Interest expense represented 44.6% of pro forma revenues
for the first quarter of fiscal 1997 as compared to 10.0% of historical
revenues for the same period as a result of the pro forma issuance of the
Old Notes.
Other Income. Other income represented 4.6% of pro forma total revenues
for the three months ended March 31, 1997, as compared to 19.0% of historical
total revenues for the same period. This decrease was due primarily to the pro
forma elimination of royalties, lease income and management fees paid by SWI
and Mission/STPI to Packaged Ice.
EBITDA. EBITDA was a negative 7.3% of pro forma total revenues as compared
to a negative 3.3% of historical total revenues for the same period. This
decrease was due primarily to higher cost of goods sold margins at the
traditional ice companies.
For the Year Ended December 31, 1996 (Pro forma as compared to historical)
Revenues. The Company's pro forma 1996 revenues were $26.2 million.
Following the Acquisitions, the Company's revenues include not only sales from
eight pound bags through Packaged Ice Systems but sales of various bag sizes
and block ice sold through the traditional ice facilities of SWI and Mission.
Pro forma for the Acquisitions, the Company derives its revenues from the sale
of packaged ice in eight states to a diversified base of over 11,000 customer
locations.
Gross Profit. Gross profit represented 39.3% of pro forma total revenues
as compared to 54.0% of historical total revenues for the same period. This
decrease was primarily due to lower gross margins at SWI and Mission, both
traditional ice companies. Packaged Ice's historical gross margins reflect the
lower costs of on-site manufacturing and delivery associated with the Packaged
Ice Systems, however, such gross margin was only 23% of the pro forma combined
gross margin. The lower pro forma gross margin percentage reflects the higher
costs experienced by traditional ice companies.
Operating Expenses. Operating expenses represented 22.1% of pro forma
total revenues as compared to 44.7% of Packaged Ice's historical total revenues
for the same period. This decrease was due primarily to lower operating
expenses at SWI and Mission/STPI. These traditional ice companies have operated
in their respective markets for an extended period and require less selling,
general and administrative overhead than Packaged Ice to generate sales.
Packaged Ice's historical operating expense
29
<PAGE> 34
margins reflect the high selling, general and administrative expenses
associated with expanding into new markets which has required new facilities,
management and reporting centers. In the future, the Company expects to
capitalize on its existing and acquired production facilities, accounting and
administrative departments as it continues its expansion and placement of
machines in the market areas of these acquired companies and expects operating
expenses as a percentage of revenues to decrease.
Depreciation and Amortization. Depreciation and amortization represented
17.5% of pro forma total revenues as compared to 32.9% of historical total
revenues for the same period. This decrease was due primarily to the acquired
companies having a combined historical depreciation and amortization margin of
9.6%, which is reflective of longer estimated useful lives of traditional ice
plant and equipment as compared to Packaged Ice Systems. This decrease more
than offset the increase related to the amortization of goodwill on a pro forma
basis.
Interest Expense. Interest expense represented 27.6% of pro forma 1996
revenues as compared to 2.9% of historical revenues for the same period as a
result of the pro forma issuance of the Notes.
Other Income. Other income represented 0.4% of pro forma total revenues as
compared to 4.2% of historical total revenues for the same period. This
decrease was due primarily to the pro forma elimination of royalties, lease
income and management fees paid by SWI and Mission/STPI to Packaged Ice.
EBITDA. EBITDA represented 17.6% of pro forma total revenues as compared
to 13.5% of historical total revenues for the same period. This increase was
due primarily to lower operating expense margins at the traditional ice
companies which more than offset lower cost of goods sold margins at Packaged
Ice.
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HISTORICAL RESULTS OF OPERATIONS
Quarter Ended March 31, 1997 Compared to Quarter Ended March 31, 1996
Revenues. Revenues increased $.2 million, or 30.2%, from $.6 million for
the quarter ended March 31, 1996 to $.8 million for the quarter ended March 31,
1997. Revenues increased due to Packaged Ice's continued success in obtaining
additional machine locations and expansion of its Arizona market under the
terms of its master lease arrangement with SWI. In the first quarter of 1997,
Packaged Ice placed 38 Packaged Ice Systems, 14 of which were placed in
Arizona, and benefited from an entire quarter of revenues from an installed
machine base of 658 machines at December 31, 1996.
Gross Profit. Gross profit increased $0.06 million, or 18.8%, from $0.33
million for the quarter ended March 31, 1996 to $0.39 million for the quarter
ended March 31, 1997. As a percentage of revenues, gross profit decreased 4.4
percentage points from 50.0% in fiscal 1996 to 45.6% in fiscal 1997. Gross
margins decreased in part as a result of increases in subcontract costs,
service technician costs, equipment maintenance and utility hookups related to
the retrofitting of the Company's existing machines with new technology,
including its remote monitoring systems. As a percentage of total revenues such
utility and service costs increased 1.5 percentage points from .4% in the first
quarter of 1996 to 1.9% in the first quarter of 1997. An expected benefit of
such activity is reduced service costs in future periods. Additionally,
purchases of outside ice as a percentage of total revenues increased 1.07
percentage points from 0.05% in fiscal 1996 to 1.12% in the first quarter of
1997 due to supplementary ice required during storm related power failures.
Increased employee benefits, resulting from a greater number of employees
eligible for vacation pay, also contributed to the decrease in gross profit.
Operating Expenses. Operating expenses increased $0.2 million, or 40.2%,
from $.4 million for the quarter ended March 31, 1996 to $.6 million for the
quarter ended March 31, 1997. As a percentage of revenues, operating expenses
increased 4.9 percentage points from 63.1% in the first quarter of 1996 to
68.0% in the first quarter of 1997. This increase was due first to marketing
related salaries which, as a percentage of revenues, increased 3.2 percentage
points from 3.6% in the first quarter 1996 to 6.8% in the same quarter 1997.
Increased legal costs, combined with a change in the fiscal quarter in which
certain license fees were incurred, increased the cost of these items by 7.3
percentage points from 0.6% in the first quarter of 1996 to 7.9% in the first
quarter of 1997. Other operating expenses decreased 2.9 percentage points from
the first quarter of 1996 to the first quarter of 1997. This decrease reflected
greater efficiencies realized by Packaged Ice associated with salary related
expenses.
Depreciation and Amortization. Depreciation and amortization increased
$0.13 million, or 36.9%, from $0.35 million for the quarter ended March 31,
1996 to $.48 million for the quarter ended March 31, 1997. This increase was
due primarily to the increase in capital expenditures from $2.7 million in
fiscal 1995 to $5.7 in fiscal 1996 and the increase in such expenditures from
$0.7 million in the first quarter of 1996 to $1.4 million in the first quarter
of 1997.
Interest Expense. Interest expense increased $0.08 million, from $0.01
million for the quarter ended March 31, 1996 to $0.09 million for the quarter
ended March 31, 1997. This increase was a result of higher levels of debt
associated with Packaged Ice borrowing $4.0 million from its credit facility
with Bank One, Texas, N.A. to finance equipment placements in fiscal 1996 and
the first quarter of fiscal 1997.
Other Income. Other income increased $0.14 million, from $0.02 million for
the quarter ended March 31, 1996 to $0.16 million for the quarter ended March
31, 1997. As a percentage of revenues, other income increased 16.4 percentage
points from 2.6% in the first quarter of fiscal 1996 to 19.0% in the first
quarter of fiscal 1997. The increase was due primarily to increased lease and
management income derived from Packaged Ice's master lease agreement with SWI.
EBITDA. As a result of the foregoing, EBITDA increased $0.04 million, or
57.9%, from a negative $0.07 million for the quarter ended March 31, 1996 to a
negative $0.03 million for the quarter ended March 31, 1997. As a percentage of
revenues, EBITDA increased 7.2 percentage points from a negative 10.6% in the
first quarter of fiscal 1996 to a negative 3.3% in the first quarter of fiscal
1997. This increase was due primarily to increased sales from new Packaged Ice
System installations and additional other income from the master lease
arrangement with SWI offset partly by increased cost of goods sold margins
for the new systems and increased operating expense margins associated with
legal, licensing and marketing costs.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Revenues increased $1.6 million, or 56.4%, from $2.8 million for
the year ended December 31, 1995 to $4.4 million for the year ended December
31, 1996. Revenues increased due to Packaged Ice's continued success in
penetrating existing markets and its entry into the Arizona market under the
terms of its master lease arrangement with SWI. In fiscal 1996, Packaged Ice
placed 241 Packaged Ice Systems, 92 of which were placed in Arizona, and
benefitted from an entire year of revenues from an installed machine base of
417 machines at December 31, 1995.
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Gross Profit. Gross profit increased $0.8 million, or 51.5%, from $1.6
million for the year ended December 31, 1995 to $2.4 million for the year ended
December 31, 1996. As a percentage of revenues, gross profit decreased 1.8
percentage points from 55.8% in fiscal 1995 to 54.0% in fiscal 1996. Gross
margins decreased primarily as a result of purchases of manufactured ice needed
to supplement the Company's Packaged Ice Systems. This increase in demand was
due to unseasonably hot weather in Packaged Ice's primary markets. Purchases as
a percentage of total revenues increased 1.3 percentage points from 0.6% in
fiscal 1995 to 1.9% in fiscal 1996. As an expected benefit from the
Acquisitions, demand exceeding the capacity of in-store Packaged Ice Systems
will be satisfied, where it is economically feasible, by Packaged Ice's
traditional ice production facilities, thereby reducing such costs in the
future.
Operating Expenses. Operating expenses increased $0.5 million, or 30.8%,
from $1.5 million for the year ended December 31, 1995 to $2.0 million for the
year ended December 31, 1996. As a percentage of revenues, operating expenses
decreased 8.8 percentage points from 53.5% in fiscal 1995 to 44.7% in fiscal
1996. This decrease was due primarily to salary-related expenses which, as a
percentage of revenues, decreased 4.4 percentage points from 25.4% in fiscal
1995 to 21.0% in fiscal 1996. This decrease reflected greater efficiencies
realized by Packaged Ice as it continued to consolidate its sales force in its
primary markets.
Depreciation and Amortization. Depreciation and amortization increased
$0.7 million, or 93.9%, from $0.8 million for the year ended December 31, 1995
to $1.5 million for the year ended December 31, 1996. This increase was due
primarily to an increase in capital expenditures from $2.7 million in fiscal
1995 to $5.7 in fiscal 1996.
Interest Expense. Interest expense increased $0.05 million, or 71.1%,
from $0.08 million for the year ended December 31, 1995 to $0.13 million for the
year ended December 31, 1996. This increase was a result of higher levels of
indebtedness associated with Packaged Ice borrowing $3.5 million from its credit
facility with Bank One, Texas, N.A. and $0.8 million of convertible notes from
its shareholders to finance equipment placements in fiscal 1996. The convertible
notes were converted into Series B Convertible Preferred Stock in January 1997.
Other Income. Other income increased $0.1 million, or 146.7%, from $0.1
million for the year ended December 31, 1995 to $0.2 million for the year ended
December 31, 1996. As a percentage of revenues, other income increased 1.5
percentage points from 2.7% in fiscal 1995 to 4.2% in fiscal 1996. The increase
was due primarily to increased lease and management income derived from
Packaged Ice's master lease agreement with SWI.
EBITDA. As a result of the foregoing, EBITDA increased $0.5 million, or
328.8%, from $0.1 million for the year ended December 31, 1995 to $0.6 million
for the year ended December 31, 1996. As a percentage of revenues, EBITDA
increased 8.6 percentage points from 4.9% in fiscal 1995 to 13.5% in fiscal
1996. This increase was due primarily to increased sales from new Packaged Ice
System installations, relatively constant cost of goods sold margins for the
new systems, and reduced operating expense margins.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues. Revenues increased $2.0 million, or 261.0%, from $0.8 million
for the year ended December 31, 1994 to $2.8 million for the year ended
December 31, 1995. This increase was due primarily to the placement of 146
Packaged Ice Systems during fiscal 1995 and from a full year of revenues
generated from Packaged Ice's installed base of 271 machines at December 31,
1994.
Gross Profit. Gross profit increased $1.2 million, or 265.5%, from $0.4
million for the year ended December 31, 1994 to $1.6 million for the year ended
December 31, 1995. As a percentage of revenues, gross profit increased 0.7
percentage points from 55.1% in fiscal 1994 to 55.8% in fiscal 1995. Although
gross margins increased at Dallas and Houston, where the increase in the number
of locations serviced provided greater efficiencies in service routing, these
increases were offset by lower gross margins from new operations in Nevada and
California. In new markets, costs per store are typically higher until service
route densities increase. Management believes that in any market area, the
greater the density of customers, the lower the cost per store as more stores
can be serviced per day by service representatives.
Operating Expenses. Operating expenses increased $0.5 million, or 55.5%,
from $1.0 million for the year ended December 31, 1994 to $1.5 million for the
year ended December 31, 1995. As a percentage of revenues, operating expenses
decreased 70.7 percentage points from 124.2% in fiscal 1994 to 53.5% in fiscal
1995. This decrease was due primarily to the absorption of office personnel
costs over a larger revenue base which caused a 46.6 percentage point decrease
in salary-related expense margins. In addition, other operating expense margins
decreased 24.1 percentage points as general overhead costs were absorbed over a
larger revenue base.
Depreciation and Amortization. Depreciation and amortization increased
$0.6 million, or 235.3%, from $0.2 million for the year ended December 31, 1994
to $0.8 million for the year ended December 31, 1995. The increase is primarily
the result of the full year depreciation impact of 1994 capital additions of
$3.0 million and the partial year impact of $2.7 million of 1995 capital
additions.
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Interest Expense. Interest expense increased $0.05 million, or 204.0%,
from $0.03 million for the year ended December 31, 1994 to $0.08 million for
the year ended December 31, 1995. This modest increase was primarily a result
of acquisition-related debt incurred in 1994.
Other Income. Other income remained constant between fiscal 1995 and
fiscal 1996. As a percentage of revenues, other income decreased 6.1 percentage
points from 8.8% in fiscal 1995 to 2.7% in fiscal 1996. This decrease reflected
the growth of Packaged Ice's primary revenue sources while other income sources
remained constant.
EBITDA. As a result of the foregoing, EBITDA increased $0.6 million from a
negative $0.5 million for the year ended December 31, 1994 to a positive $0.1
million for the year ended December 31, 1995. As a percentage of revenues,
EBITDA increased 65.2 percentage points from a negative 60.3% in fiscal 1994 to
a positive 4.9% in fiscal 1995. This increase was due primarily to constant
gross margins and substantial decreases in operating expense margins from
fiscal 1994 to fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
For the fiscal year ended December 31, 1996, Packaged Ice had net cash
provided by operating activities of $1.1 million; net cash used in investing
activities of $5.9 million, consisting primarily of $5.7 million used to
purchase Packaged Ice Systems; and net cash provided by financing activities of
$4.0 million, consisting of $3.2 million of additional net debt and $0.8
million from the issuance of convertible demand notes, resulting in a net
decrease in cash and cash equivalents of $0.9 million.
To date, the Company has financed its operations and expansion through
cash provided by operating activities, bank loans and proceeds from the
issuance of common and preferred stock. The Company expects to meet its
short-term liquidity requirements through net cash provided by operations and
from the proceeds of the sale of the Notes and borrowings under the Senior
Credit Facility. Management believes that these sources of cash will be
sufficient to meet the Company's operating needs for at least the next 12
months.
Concurrent with the Acquisitions, Packaged Ice utilized $24.5 million of
the net proceeds from the sale of the Old Notes, which totaled $46.0 million
after estimated costs of $4.0 million, to pay $6.9 million of the purchase price
of the Acquisitions, to repay $13.1 million of long term debt and notes payable
of the Acquisitions, to repay $4.4 million of existing debt of the Company and
to pay $.1 million of accrued interest. Following the closing of the
Acquisitions, the Company completed the first of its anticipated 1997
acquisitions for a cash purchase price of $0.5 million
At April 30, 1997 the Company had cash on hand of $21.1 million to meet its
short-term liquidity requirements. Subsequently the Company has received and
accepted a formal commitment letter issued jointly by Zion Bank N.A. and Frost
National Bank for its Senior Credit Facility in the amount of $20.0 million. The
Senior Credit Facility will bear interest at a variable maximum rate of prime
plus 1% and as low as prime dependent upon certain ratios of the Company's
EBITDA to total debt service coverage requirements. The Company, at its option,
may fix any portion of the loan at a margin above LIBOR rates, again dependent
upon the same ratios, at any time. Borrowings under the Senior Credit Facility
will be repayable interest only for a period of two years. Thereafter,
principal payments equal to $250,000 per month plus accrued interest on
outstanding balances will be due until six years from original date when any
outstanding principal balance together with accrued interest will be due and
payable. The terms of the Senior Credit Facility will require a pledge of
substantially all of the assets of the Company and the Subsidiary Guarantors.
Accordingly, the Notes and Subsidiary Guarantees will be effectively
subordinated to the extent of the collateral used to secure such bank
indebtedness. In the event of a default on the Notes, or a bankruptcy,
liquidation or reorganization of the Company, such assets will be available to
satisfy obligations with respect to the indebtedness secured thereby before any
payment therefrom could be made on the Notes.
The Company expects to finance the placement of Packaged Ice Systems, the
acquisition of additional traditional ice manufacturing companies, and capital
expenditures to maintain existing operations with cash provided by operations,
the proceeds of the sale of the Notes, borrowings under the Senior Credit
Facility, and the issuance of Common Stock. See "Risk Factors -- Senior Credit
Facility; Effective Subordination" and "Risk Factors -- Potential Limitations
on Expansion, Capital Constraints."
The Company's Packaged Ice Systems are expected to range in cost from
$11,500 to $18,500 per installation and capital expenditures are expected to be
approximately $9.3 million in fiscal 1997 and $11.6 million per annum
thereafter. During the next two years, the Company expects to continue acquiring
traditional ice companies using a combination of cash and Common Stock, and has
budgeted approximately $16.5 million of acquisitions in fiscal 1997 and $15.0
million in fiscal 1998. See "Unaudited Pro Forma Combined Condensed Financial
Statements." There can be no assurance that acquisitions based upon the
Company's criteria can be obtained or that funds will be available in sufficient
amounts to finance such acquisitions. Capital expenditures at traditional ice
facilities are expected to be approximately $1.1 million in fiscal 1997 and $1.9
million in fiscal 1998.
The Company may also seek additional debt or equity capital through
private or public offerings of securities. The availability of such capital
will depend upon prevailing market conditions and other factors over which the
Company has no control, as well as the Company's financial condition and
results of operations. There can be no assurance that sufficient funds will be
available to finance intended acquisitions or capital expenditures for the
placement of Packaged Ice Systems to sustain the Company's recent rate of
growth.
The Company intends to satisfy its obligations under the Notes, as well as
its future capital expenditures and working capital requirements, primarily
with cash flow from operations. Management believes that cash flow from
operations and funds
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available under the Senior Credit Facility will provide sufficient liquidity to
enable it to meet its current working capital and capital expenditure
requirements.
GENERAL ECONOMIC TRENDS AND SEASONALITY
The Company's results of operations are generally affected by economic
trends in its market area but results to date have not been impacted by
inflation. If an extended period of high inflation is encountered, the Company
believes that it will be able to pass on its higher costs to its customers.
The packaged ice industry as a whole is extremely seasonal. In the warm
weather regions where the Company primarily operates, however, this seasonality
is less pronounced. Historically, approximately 65.6% of the Company's revenues
occur during the second and third fiscal quarters when the weather conditions
are generally warmer and demand is greater. Approximately 15.2% of the Company's
revenues occur during the first fiscal quarter, and approximately 19.2% of the
Company's revenues occur during the fourth fiscal quarter when the weather is
generally cooler. These percentages can vary slightly from region to region
within the sunbelt depending upon the degree of volatility of the seasons.
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BUSINESS
COMPANY OVERVIEW
The Company is a leading manufacturer and distributor of packaged ice
and has developed the Packaged Ice System. Currently operating in Arizona,
California, Florida, Louisiana, Nevada, New Mexico, Oklahoma, Tennessee and
Texas, the Company is pursuing a consolidation strategy within the highly
fragmented packaged ice industry. The Company has grown significantly,
primarily through strategic acquisitions and the placement of Packaged Ice
Systems. The Packaged Ice System, which is typically installed in
supermarkets, provides the Company with several competitive advantages,
including substantially higher margins, reduced production and distribution
costs and superior product quality. The Company has fourteen traditional ice
manufacturing facilities serving over 11,000 customer locations and, at
March 31, 1997, had an installed base of 776 Packaged Ice Systems located
primarily in Albertsons, Kroger, HEB Pantry, Wal-Mart Supercenters, Super
K-Mart stores, and supermarkets affiliated with Fleming Companies. Management
believes that the Company will be the second largest packaged ice company in
the United States with pro forma revenues and EBITDA for fiscal 1996 of $26.2
million and $4.6 million, respectively. See "Unaudited Pro Forma Combined
Condensed Financial Statements," and "Selected Historical and Unaudited Pro
Forma Combined Financial Data."
INDUSTRY OVERVIEW
Management estimates that the packaged ice industry has grown by
approximately 3% per annum during the past ten years to over $2.4 billion in
wholesale revenues in 1996. The packaged ice industry is highly seasonal, but
on a year-to-year basis remains stable, generally only affected by excessive
mild weather or rain within a region. The industry has historically been
characterized as highly fragmented with over 3,000 companies, consisting
primarily of "mom and pop" packaged ice companies, many of which are
undercapitalized. Management believes that the six largest ice manufacturers
in the southern and western U.S. account for approximately 6% of wholesale
revenues with the Company's largest competitor accounting for less than 3% of
the market. Traditional ice manufacturers produce and package ice at
centrally-located facilities and distribute to a limited market radius of
approximately 100 miles, mainly due to high shipping and product distribution
costs. Efficient distribution and customer concentration are important, as
transportation is a high cost component in the price of manufactured ice within
a traditional ice delivery system. It is difficult to ensure prompt and
reliable delivery during peak seasonal months in large markets with traditional
ice delivery systems. As a result, the ice business is primarily a regional
service business. Management believes that significant acquisition
opportunities exist for those service-oriented companies with superior ice
delivery systems and significant capital resources.
PACKAGED ICE SYSTEM
In 1994, the Company completed the development of its proprietary
system that utilizes state-of-the-art technology to produce, package and store
ice directly at customer locations. The Packaged Ice System consists of
standard Hoshizaki ice cubers, an ice merchandiser built to the Company's
specifications by Beverage Air, and a bagging machine, the heart of the
Packaged Ice System, manufactured by Lancer, a shareholder of the Company,
under an exclusive equipment manufacturing agreement. Lancer is an engineering
and manufacturing company that is a primary vendor of fountain soft drink
dispensing machines for Coca-Cola, Inc. The majority of bags used in the
Packaged Ice System are manufactured to the Company's specifications by Arrow,
a subsidiary of ConAgra Corporation. The Packaged Ice System is capable of
producing up to 40,000 bags of ice per year and is most frequently used in
large supermarkets. The latest generation of the Packaged Ice System is
equipped with remote communication capability which allows the Company's
national service center to track production, monitor the systems, and diagnose
and correct system errors through the use of a central processing unit. The
Packaged Ice Systems are serviced by trained representatives and are designed
to provide a high degree of reliability and serviceability through the use of
interchangeable parts and a durable stainless steel cabinet. To guard against
product contamination and satisfy consumer demand for high quality, sanitary
ice, the Packaged Ice System was engineered to meet all specifications
delineated by the NSF for ice production and contains a patented automatic
sanitizing system. In addition, the Packaged Ice System is U.L. approved.
The Company began development of the Packaged Ice System in 1990, and
experienced cumulative losses from continuing operations of $1.4 million during
the first four years, which were devoted primarily to research and development.
In addition, management estimates that the Company's strategic partners,
Hoshizaki, Lancer and Beverage Air, funded an aggregate of over $3.5 million of
the development of the Packaged Ice System.
The Packaged Ice System, when combined with traditional delivery
methods, provides the Company with significant advantages, including (i) higher
operating margins, due to significantly reduced production and distribution
costs, (ii) a delivery system designed to supply high volume locations and
capable of cost-effectively servicing a market in excess of 100 miles from its
traditional ice manufacturing facilities, and (iii) the ability to redistribute
production from its traditional ice facilities to additional customers as well
as satisfy seasonal peak demand at stores with Packaged Ice Systems. In
addition, the Packaged Ice System provides numerous advantages to the retailer
including (i) providing a continuous supply of ice, and thus reducing the
frequency of product shortages typical of traditional ice delivery, (ii)
significantly reducing costs associated with delivery and storage at the retail
location, (iii) satisfying consumer demand for a higher quality and more
sanitary ice than typically found with traditional ice delivery, (iv)
effectively managing inventory through computerized production tracking and
dedicated technical
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support, and (v) increasing safety by reducing "slip and fall" accidents.
Management believes the Packaged Ice System can significantly lower the price
of a fully costed bag of ice to a supermarket as compared to traditional ice
delivery. Management believes that the higher margins and quality of the
Packaged Ice System has enabled it to quickly gain market acceptance. At
March 31, 1997, the Company had an installed base of 776 Packaged Ice
Systems, over 90% of which were placed in supermarkets where the Company was
not previously the primary source of packaged ice. Management believes that
the technology utilized in the Packaged Ice System is unique with four existing
and two pending patents covering the bagging device, and that there are
significant barriers to entry for new and existing competitors with respect to
the development of a competitive and reliable machine that performs the same
functions as the Packaged Ice System. See "Risk Factors -- Competition."
BUSINESS STRATEGY
The Company's strategy is to become the leading consolidator in the
packaged ice industry and to maximize its revenues and cash flows by (i)
expanding its market presence by leveraging its proprietary ice machine
technology, (ii) entering new markets by making strategic acquisitions in the
highly fragmented traditional ice industry, and (iii) reducing costs and
exploiting economies of scale.
Expand Market Presence Through Packaged Ice System. Through selective
placement of its proprietary Packaged Ice Systems, the Company will continue to
reduce transportation, storage and service costs, thereby overcoming
traditional geographical constraints inherent to traditional ice delivery.
This strategy not only provides significant cost savings to the Company but (i)
allows for expansion of its delivery radius beyond that of traditional ice
manufacturers, (ii) maximizes sales in existing markets by converting existing
traditional ice customers to the Packaged Ice System, thereby freeing-up
manufacturing capacity for new customers in the market area, and (iii)
optimizes traditional production capacity utilization by reducing ice shortages
during peak demand seasons. The Company has expanded its geographic scope by
selling ice to major national and regional supermarket chains including
Albertsons, Kroger, HEB Pantry and certain stores affiliated with Fleming
Foods, many of whom the Company has successfully convinced to switch from
traditional delivery to higher margin Packaged Ice Systems.
Acquire Traditional Ice Manufacturing Companies in Highly Fragmented
Industry. The Company believes that the highly fragmented packaged ice industry
contains numerous acquisition opportunities. The Company's acquisition
strategy is to target well-managed, traditional ice producers with favorable
demographics and significant customer bases in both new and current market
areas. This acquisition strategy is designed to allow the Company to gain
market share quickly and efficiently, provide for additional distribution
channels through which to place Packaged Ice Systems, and achieve greater
economies of scale. In determining which businesses may be suitable
acquisition candidates, management conducts demographic and competitive
analyses and performs comprehensive due diligence on the target's facilities,
management, existing customer base, and potential for revenue and operating
cash flow improvement.
Reduce Costs and Exploit Economies of Scale. The Company will continue
to seek reduction in operating costs and working capital requirements in its
existing operations, as well as in its future acquisitions, by (i) closing or
combining less efficient or redundant manufacturing and distribution
facilities, (ii) managing vendor relationships to ensure a high level of
responsiveness and favorable pricing, (iii) increasing market concentration of
Packaged Ice Systems to improve merchandising and servicing efficiencies, and
(iv) consolidating certain administrative and selling functions to eliminate
redundancies and excess costs. Since the Company is focusing its acquisition
efforts on related businesses, it anticipates that the customer base of any
acquired business will be similar to its own and therefore administrative areas
such as management information systems, accounting systems and customer support
may be consolidated. Although the Company expects to realize certain cost
savings and economies of scale from the Acquisitions, none are reflected in
"Unaudited Pro Forma Combined Condensed Financial Data."
The Company believes that it is well-positioned to execute its
business strategy given the depth, experience and ability of its management
team. The Company's executive officers are led by James F. Stuart, Chairman
and Chief Executive Officer, who founded Packaged Ice in 1990, and who has
twelve years of industry experience. Mr. Stuart is primarily responsible for
the development of the Packaged Ice System. Other key management personnel are
A.J. Lewis III, President and Chief Operating Officer, and Steven P.
Rosenberg, Vice Chairman. The Company's directors and officers as a group hold
a 48% fully diluted equity interest in the Company (including shares
attributable to directors designated by shareholders). The Company's
shareholder group also includes Norwest Equity Partners V ("Norwest"), a
partnership managed by Norwest Venture Capital Management, Inc., a venture
capital firm with over $1 billion under management. Norwest is the Company's
largest shareholder and maintains board representation.
DISTRIBUTION AND SALES
Efficient service, distribution and pricing are the key determinants
of profitability due to the limited amount of product differentiation in the
packaged ice industry. The Company delivers ice to consumers through (i)
placement of Packaged Ice Systems, and (ii) traditional distribution methods.
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Packaged Ice System Placement. By producing and bagging the ice at the
customer's location, the Company's Packaged Ice System reduces the Company's
distribution costs. To store and inventory ice, traditional producers build
expensive refrigerated facilities and incur significant utility costs to
maintain temperatures below freezing. The Packaged Ice System eliminates these
storage costs by moving ice production to the site of the customer.
Traditional manufacturers are also subject to high transportation costs,
especially over long distances. These expenses are minimized by on-site
production. Remote communications systems between the Packaged Ice Systems and
the Company's national service center allow for monitoring of on-site
inventories and usage, thereby enhancing the Company's service quality and
efficiency. In severe weather conditions this technology provides instant
information on the need for supplemental ice deliveries and allows rapid,
cost-effective responses to each individual customer's product and servicing
needs. As a result of these cost savings, the proprietary Packaged Ice System
provides the Company with (i) higher operating margins, and (ii) a delivery
system designed to supply high volume locations and capable of cost-effectively
servicing a market in excess of 100 miles from its traditional ice
manufacturing facilities.
The Company places its Packaged Ice Systems inside supermarkets and
other commercial locations, such as airport catering facilities, construction
staging areas, and large manufacturing plants. The Company provides the
machines and pays for all installation costs, while the retailer provides and
pays for the cost of water, sewer and electricity. The Company maintains
ownership of the machines and charges its customers by the bag. The Company's
prices are competitive with prices for bagged ice delivered by traditional ice
companies. The Company believes that retailers are becoming increasingly aware
of the benefits of the Packaged Ice System, which provides a high quality
product without the necessity of receiving large shipments of ice on a weekly
or more frequent basis.
In accordance with the Company's expansion strategy, the placement of
the Packaged Ice Systems at customer locations is based upon a thorough review
of each site, which primarily focuses on the historical ice sales at the site.
Also included in the site review is an analysis of the surrounding trade area,
the level of overall retail activity, the level of direct competition and the
proximity of the site to other Packaged Ice Systems operated by the Company.
Further, the Company reviews each site in order to ensure that the site has
high visibility and easy access for the consumer, that the site meets the
Company's standards for sanitary conditions including a connection to the
municipal water supply, that it has received, where available, an acceptable
rating from the local health department, and that it has an acceptable power
source. Upon completion of this review, the Company makes a determination as
to the viability of the location and whether a single machine or multiple
machines are required at the time of initial installation. Multiple machines
may be installed at a site if the volume of sales so warrants.
The Company believes that providing frequent, regular and reliable
service and support is one of the most important elements in the operation of
its machine network. In order to maintain this level of service and support,
the Company has implemented its route servicing system, utilizing trained
service representatives to perform the Company's regularly scheduled service
procedures. A service representative has a route consisting of up to 30
Packaged Ice Systems, each of which are visited and serviced on a regular
basis. The Company maintains regional centers in Tucson, Arizona; Phoenix,
Arizona; Orange County, California; Baton Rouge, Louisiana; Las Vegas, Nevada;
Albuquerque, New Mexico; Dallas, Texas; San Antonio, Texas; Austin, Texas;
Corpus Christi, Texas; Houston, Texas; and Miami, Florida which are designed to
support the activities of the service representatives. Inventories of filters,
supplies and machine parts are maintained at the centers for use in service
calls. Finally, the Company maintains 24-hour, toll-free telephone support for
responding to consumer calls regarding machine operation problems.
Traditional Distribution. The Company transports packaged ice produced
at its traditional manufacturing facilities to its retail and commercial
customers. The Company utilizes an extensive computerized database which
tracks the time and quantity of customer purchases, estimates customer
inventory levels, catalogues client service histories and details on-site
storage capacities. The system then interrelates this data with information
concerning truck availability and capacity. This allows the Company to
efficiently schedule daily deliveries and service calls. In addition, the
Company's market presence provides it with the necessary customer density to
efficiently transport its products.
PRODUCTS
The Company markets its products to satisfy a broad range of
customers, including retailers, commercial users, restaurants and agricultural
users under a variety of brand names, including Mission Party Ice and Crystal
Ice. The Company produces its ice in cube, half-moon, cylindrical and crushed
forms to satisfy the demand of particular customers. The Company's primary ice
product is cocktail ice packaged in eight pound bags, which it sells
principally to convenience stores and supermarkets. The Company also sells
cocktail ice in assorted bag sizes ranging from 20 to 40 pounds to restaurants,
bars, stadiums, vendors and caterers. In addition, the Company sells block ice
in 10 and 300 pound sizes, primarily to commercial, agricultural and industrial
customers.
CUSTOMERS
The Company markets its products to a broad range of customers,
including supermarket chains, convenience stores, commercial users,
agricultural buyers, resorts and restaurants and competitive producers and
self-suppliers who experience
37
<PAGE> 42
supply shortages. Management believes that the superior economics and product
quality of the Packaged Ice System has allowed it to develop relationships with
certain high volume national supermarket chains, and will continue its
penetration into this segment.
Retailers with no internal ice production capacity are the primary
purchasers of the Company's manufactured ice products and users of its Packaged
Ice System. Management believes that reasonable pricing when combined with
quality service results in customer loyalty. The Company has a diversified
customer base, with its largest customer accounting for approximately 8.6% of
pro forma net sales in 1996. In addition, the Company has geographically
diversified its customer base. The geographic expansion of the Company's
customer base protects it from adverse environmental factors such as abnormally
cold summer weather in a particular region.
COMPETITION
The traditional manufactured ice industry is highly competitive. In
addition to the Company's direct competition, numerous convenience and grocery
retailers operate commercial ice plants for internal use or manufacture and bag
ice at their store locations. Because only one ice manufacturer typically
services an individual retail site, the Company's products generally do not
face competition at the retail level. The traditional delivery packaged ice
industry in the southern and western U.S. is led by six regional,
multi-facility competitors, consisting of the Company, Reddy Ice, Mountain
Water, Glacier Ice, Mid-South Ice, and Triangle Ice, and includes numerous
local and regional companies of varying sizes and competitive resources. The
Company believes that the capabilities of the Packaged Ice System and the
Company's associated cost structure and technological resources, enable it to
increase sales to supermarkets quickly and expand beyond its existing market.
The Company's principal competitor within many of its primary market areas is
Reddy Ice, a subsidiary of Suiza Foods, Inc., a company with greater financial
resources than the Company. The remaining competitors vary greatly in terms of
their relative size and market strength.
Competition in the packaged ice industry is based primarily on
service, price and quality. In order to successfully compete, an ice
manufacturer must be able to substantially increase production and distribution
on a seasonal basis while maintaining cost efficiency. Management believes
that the Company's high quality traditional production facilities, substantial
financial resources resulting from this Offering, high regional market share
and associated route density and proprietary ice machine technology provide it
with numerous competitive advantages. The Company believes that there are
significant barriers to entry to new and existing competitors with respect to
the development of a machine with the same functions as the Packaged Ice
System, such as the substantial capital outlay required to develop such a
machine, the larger number of machines needed to achieve competitive operating
efficiencies, the time and cost involved in developing a sophisticated service
network, and the identification of locations suitable to place the machines.
To the Company's knowledge, of its principal competitors, only Reddy Ice
delivers ice through the use of a similar machine known as the "Ice Factory."
In 1994, the Company acquired the assets of Southco, Inc., which had
approximately 175 Ice Factory systems in Texas. The Company has systematically
replaced the Ice Factory machines with the Packaged Ice System and now operates
only 16 Ice Factory systems, all of which are scheduled for replacement in
1997. See "Risk Factors -- Competition."
INTELLECTUAL PROPERTY
The Company regards the Packaged Ice System as proprietary and relies
primarily on a combination of patents, nondisclosure and confidentiality
agreements, and other copy protection methods to secure and protect its
intellectual property rights. The Company holds or has exclusive rights to
five United States patents and has one patent pending relating to the Packaged
Ice Systems.
While the Company views the patents relating to the bagging device as
important to the value of the Packaged Ice System as a whole, there can be no
assurance that any issued patent will provide the Company with a meaningful
competitive advantage, that competitors will not design alternatives to reduce
or eliminate the benefits of any issued patent or that challenges will not be
instituted against the validity or enforceability of these patents. Other
companies may obtain patents claiming products or processes that are necessary
for, or useful to, the development of the Company's products, in which case the
Company may be required to obtain licenses for patents or for proprietary
technology in order to develop, manufacture or market its products. There can
be no assurance that the Company would be able to obtain such licenses on
commercially reasonable terms, if at all.
The Company does not hold any registered trademarks, but believes that
it has common law protection for certain of its trademarks in certain markets.
The Company protects certain of its proprietary materials and
processes by relying on trade secret laws and non-disclosure and
confidentiality agreements and requires all of its employees and third-party
developers to sign nondisclosure agreements. There can be no assurance that
confidentiality or trade secrets will be maintained or that others will not
independently develop or obtain access to such materials or processes.
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<PAGE> 43
FACILITIES
The Company has fourteen manufacturing plants located in Arizona,
California, New Mexico, Tennessee and Texas. These fourteen plants have a
combined manufacturing capacity of approximately 1390 tons per day. The
Company intends to consolidate or close two of its manufacturing facilities in
order to obtain greater efficiencies in certain markets. In addition, the
Company has service centers for its Packaged Ice Systems in Arizona,
California, Florida, Louisiana and Nevada. These service centers are staffed
by trained route service representatives who visit and merchandise the Packaged
Ice Systems on a weekly or more frequent basis.
GOVERNMENT REGULATION
The packaged ice industry is subject to various federal, state and
local laws and regulations, which require the Company, among other things, to
obtain licenses for its business plants and machines, to pay annual license and
inspection fees, to comply with certain detailed design and quality standards
regarding its plants and the Packaged Ice Systems and to continuously control
the quality and quantity of its ice.
The Company's packaged ice products are subject to federal and state
regulation as a food pursuant to the federal Food, Drug and Cosmetic Act,
regulations promulgated thereunder by the Food and Drug Administration ("FDA")
and analogous state statutes. These statutes and regulations impose
comprehensive good manufacturing practices requirements governing the sanitary
conditions of the facilities where ice is manufactured, the design and
maintenance of the equipment used to manufacture the ice, the quality of source
water and the sanitary practices of employees during ice production. The State
of Florida has imposed yet additional requirements that include quarterly
testing of the ice for the presence of microbes and certain substances
regulated under the federal Safe Drinking Water Act, specific requirements for
keeping ice packaging operations separate from other activities and labeling
requirements for the bags used including the name of the company and the net
weight. All of the Company's Packaged Ice Systems and ice manufacturing
facilities are subject to routine and random safety, health and quality
inspections. The Company believes that its facilities, manufacturing practices
and Packaged Ice Systems are in compliance with all applicable federal, state
and local laws and regulations and that the Company will be able to maintain
such substantial compliance in the future.
The Company is subject to certain health and safety regulations
including regulations issued pursuant to the Occupational Safety and Health Act
("OSHA"). These regulations require the Company to comply with certain
manufacturing, health and safety standards to protect its employees from
accidents.
ENVIRONMENTAL MATTERS
The Company's ice manufacturing and ice storage operations are subject
to federal, state and local environmental laws and regulations. As a result,
the Company has the potential to be involved from time to time in
administrative or legal proceedings relating to environmental matters. There
can be no assurance that the aggregate amount of any environmental liabilities
that might be asserted in any such proceeding will not be material. The
Company cannot predict the types of environmental laws or regulations that may
from time to time be enacted in the future by federal, state or local
governments, how existing or future laws or regulations will be interpreted or
enforced or what types of environmental conditions may be found to exist at its
facilities. The enactment of more stringent laws or regulations or a more
strict interpretation of existing laws and regulations may require additional
expenditures by the Company, some of which could be material.
The Company generates and handles certain hazardous substances in
connection with the manufacture and storage of packaged ice. The handling and
disposal of these substances and wastes is subject to federal, state and local
regulations, and site contamination originating from the release or disposal of
such substances or wastes can lead to significant liabilities. In addition,
certain of the Company's current and former facilities are located in
industrial areas and have been in operation for many years. As a consequence,
it is possible that historical activities on property currently or formerly
owned by the Company or that current or historical activities on neighboring
properties have affected properties currently or formerly owned by the Company
and that, as a result, additional environmental issues may arise in the future,
the precise nature of which the Company cannot now predict.
The Company thus may become liable for site contamination at
properties currently or formerly owned by the Company. Although such liability
has not had a material adverse affect on the financial condition or operating
results of the Company in the past, and the Company has no knowledge of claims
that could be expected to have a material adverse affect on its financial
condition or operations, there can be no assurance that the Company will not
incur significant costs in connection with historical handling or disposal of
such substances and wastes.
INSURANCE
The Company carries general and product liability insurance. Its
combined coverage per occurrence and aggregate loss coverages are in amounts
the Company believes to be adequate. Although the Company is not aware of any
actions having ever been filed and believes that the technology utilized at its
manufacturing facilities and contained in its machines makes any
39
<PAGE> 44
contamination of the ice manufactured at its plants or dispensed by its
machines unlikely, any significant damage awards against the Company in excess
of the Company's insurance coverage could result in a material loss to the
Company.
EMPLOYEES AND LABOR RELATIONS
At March 14, 1997, the Company had 393 full-time employees, 44 of whom
are local managers or corporate executives, 299 of whom are hourly employees
and 50 of whom are sales, clerical, data processing or other administrative
employees. The Company also employs approximately 60 additional employees
during its summer peak season. The Company generally has not experienced
difficulty in meeting its seasonal employment needs.
With the exception of 63 employees of SWI, none of the Company's
employees are represented by a union or are subject to a collective bargaining
agreement. The Company has never experienced a work stoppage due to labor
difficulties and management believes its relationship with its employees is
good.
LITIGATION AND OTHER LEGAL PROCEEDINGS
The Company is a party in certain legal proceedings that have resulted
from the ordinary conduct of its business, including several personal injury
lawsuits. In the opinion of the Company's management, none of these
proceedings is expected to have a material adverse effect on the Company.
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<PAGE> 45
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The Company has assembled an experienced management team to oversee
the development and operation of the Company. The name, age and respective
position of each director and executive officer of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James F. Stuart 55 Chairman of the Board of Directors and Chief Executive Officer
A.J. Lewis III 41 President and Chief Operating Officer, Director
Steven P. Rosenberg 38 Vice Chairman of the Board of Directors
H.D. Wiginton 59 Vice President, Marketing
Diana F. Rice 47 Treasurer, Controller and Secretary
Stephen R. Sefton 41 Director
Richard A. Coonrod 66 Director
Robert G. Miller 46 Director
</TABLE>
The following is a brief description of the background and principal
occupation of each director and executive officer:
James F. Stuart, Chairman of the Board and Chief Executive Officer and
a founder of Packaged Ice, served as President of the Company from 1990 until
January 1997, when he was elected Chairman of the Board of Directors and Chief
Executive Officer. Mr. Stuart is Chairman of the Executive Committee of the
Board of Directors.
A.J. Lewis III is President and Chief Operating Officer, a position to
which he was elected in January 1997. Mr. Lewis has been an investor and
director of the Company since 1991, and also serves on the Executive Committee.
Mr. Lewis acquired Mission in 1988 and was its president and the sole director
until its acquisition by the Company. He founded STPI in 1991 and was its
president and a director from inception until its acquisition by the Company.
Since 1989, Mr. Lewis has been a director and president of Southwest Texas
Equipment Distributors, Inc., which is a distributor of Hoshizaki ice
equipment.
Steven P. Rosenberg is Vice Chairman of the Board of Directors, an
officer position to which he was elected in March 1997. Mr. Rosenberg has been
an investor and a director since 1991 and also serves on the Executive
Committee. Mr. Rosenberg is involved in special projects for the Company.
From 1992 to February 1997, Mr. Rosenberg was President of Arrow, now a wholly
owned subsidiary of ConAgra. Arrow is a diversified food product packaging
company which supplies the Company with a substantial portion of its plastic
bags.
H.D. Wiginton is Vice President, Marketing. He joined the Company in
July 1996. For the five years prior to joining the Company, Mr. Wiginton was
Executive Vice President of Tower Marketing, a Texas-based, regional food
brokerage concern.
Diana F. Rice is Treasurer, Controller and Assistant Secretary of the
Company. Ms. Rice joined the Company in July 1993 as a contract controller,
became full-time controller in January 1994, and was elected to the offices of
Controller and Assistant Secretary in June 1996. Ms. Rice was elected to the
office of Treasurer in March 1997. From 1992 until joining the Company, Ms.
Rice was a contract controller to Glass Wholesalers, Inc., Houston, Texas, a
wholesale distributor of glass doors and custom glass products.
Stephen R. Sefton has been a director since 1995 and is a member of
the Compensation and Audit Committee of the Board of Directors. Mr. Sefton was
designated to be elected as a director by Norwest Equity Partners V, L.P., the
Company's largest shareholder. Since 1986, Mr. Sefton has been Vice President
of Norwest Venture Capital Management, Inc. where he is responsible for
originating, approving and managing investments for its various investment
partnerships. Mr. Sefton is a general partner of Itasca Partners II which is
general partner of Norwest Equity Partners V, L.P.
Richard A. Coonrod has been a director since 1995 and is a member of
the Compensation Committee of the Board of Directors. Mr. Coonrod was
designated to be elected as a director by The Food Fund Limited Partnership
("Food Fund"), a shareholder of the Company. Mr. Coonrod has been a general
partner of The Food Fund Limited Partnership, a Minneapolis-based limited
partnership specializing in food-related investments, since 1989 and has been
President of Coonrod Agriproduction Corporation, a food and agribusiness
consulting and investment firm, since 1985. Mr. Coonrod has been a director of
Orange-co, Inc. since 1987, and has been a director of Michael Foods, Inc.
since 1994.
Robert G. Miller is a private investor and was Chairman of the Board
of Directors of SWI for the past five years until its acquisition by the
Company. From 1980 to 1992, Mr. Miller was President and Chief Executive
Officer of Glacier Water, Inc., a publicly traded water vending company.
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<PAGE> 46
VOTING AGREEMENT
In excess of 80% of the shareholders have entered into a voting
agreement (the "Voting Agreement") which fixes the number of directors at no
less than five and no more than nine and provides for the election to the Board
of Directors of the Company of (i) James F. Stuart, (ii) one representative
designated by The Food Fund, who shall initially be Richard A. Coonrod, (iii)
one representative designated by Norwest Equity Partners V, who shall initially
be Stephen R. Sefton, (iv) one representative designated by Steven P.
Rosenberg, who shall initially be Steven P. Rosenberg, and (v) A. J. Lewis III.
The Voting Agreement terminates upon the earlier of (i) the agreement of the
holders of 80% of the Company's Common Stock, Series A Preferred Stock and
Series B Preferred Stock voting as a single class on as converted basis, (ii)
the completion by the Company of an initial public offering resulting in
aggregate net proceeds to the Company and any selling shareholders of
$7,500,000 or more, (iii) the merger or consolidation of the Company with or
into another entity which results in the shareholders 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) as to any party's right to
designate a director, the reduction of such shareholder's holdings to less than
50% of the September 20, 1995 levels. Amendments to the Voting Agreement
require the agreement of holders of 80% of the Company's Common Stock, Series A
Preferred Stock and Series B Preferred Stock voting on an as converted basis.
In addition, certain holders of in excess of 50% of the Company's voting stock
have entered into a Voting Agreement with certain former shareholders of SWI to
elect Robert G. Miller to the Board of Directors.
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<PAGE> 47
EXECUTIVE COMPENSATION
The following table sets forth certain compensation information for
the Chief Executive Officer of the Company and the Company's only other highly
compensated executive officer (the "Named Executive Officers.") Compensation
information is shown for fiscal 1994, 1995 and 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
SECURITIES
UNDERLYING
OTHER ANNUAL OPTIONS/ ALL OTHER
NAME/PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION SARS COMPENSATION
- ----------------------- ---- ------ ----- ------------ ---- ------------
<S> <C> <C> <C> <C> <C> <C>
James F. Stuart 1996 $125,000 -- --(1) -- $1,827(2)
Chairman, Chief Executive Officer 1995 75,000 -- --(1) -- --
1994 75,000 -- --(1) -- --
A.J. Lewis III (3) $125,000 -- --(1) -- --
President, Chief Operating Officer
H. D. Wiginton 1996(4) 18,333 -- --(1) 6,000 3,000(5)
Vice President, Marketing
</TABLE>
(1) Did not receive perquisites and other personnel benefits from Packaged
Ice in excess of $50,000 or 10% of the Named Executive Officer's total
annual salary and bonus paid for the years indicated.
(2) Contributions to Packaged Ice's 401(k) plan made by Packaged Ice in
1996 in the amount of $1,827.
(3) Did not serve as executive officer of Packaged Ice at the end of the
last completed fiscal year.
(4) Represents partial year compensation. No compensation information is
provided for prior years as Mr. Wiginton's employment commenced
November 1996.
(5) Automobile allowance.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table provides certain information regarding the number
of stock options to purchase shares of the Company's Common Stock granted to
the Named Executive Officers during the year ended December 31, 1996.
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL REALIZABLE VALUE
OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED IN APPRECIATION FOR OPTION
UNDERLYING FISCAL PER SHARE TERM
OPTIONS YEAR EXERCISE OR EXPIRATION ----
NAME GRANTED 1996 BASE PRICE DATE 5% 10%
- ---- ------- ---- ---------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
H. D. Wiginton 6,000 100% $7.50 12/17/2006 $28,300 $71,718
</TABLE>
43
<PAGE> 48
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides certain information regarding the
exercise of stock options to purchase shares of the Company's Common Stock
during the year ended December 31, 1996, by the Named Executive Officers, and
the fiscal year-end value of stock options held by such officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
NUMBER OF OPTIONS/SARS AT SAR'S AT FISCAL
SHARES FISCAL YEAR END(#) YEAR END(1)
ACQUIRED ON ------------------ -----------
NAME EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
James F. Stuart __ __ __ __ __
A.J. Lewis III __ __ __ __ __
H. D. Wiginton __ __ 6,000 __ $15,000
</TABLE>
(1) Based on a fiscal year end of December 31, 1996, and a fair market
value of $10.00 per share, as determined by the Company's Board of
Directors. The value of in-the-money options is calculated as the
difference between the fair market value of the Packaged Ice Common
Stock underlying the options at fiscal year end and the exercise price
of the options. Exercisable options refer to those options that are
exercisable as of December 31, 1996, while Unexercisable options refer
to those options that become exercisable at various times thereafter.
DIRECTOR COMPENSATION
Directors of the Company are elected annually and hold office until
the next annual meeting of shareholders or until their successors are elected
and qualified. See "-- Voting Agreement." Directors are not compensated for
their services as directors. Directors are reimbursed, however, for ordinary
and necessary expenses incurred in attending board or committee meetings.
STOCK OPTION PLAN
The Company adopted the Packaged Ice, Inc. Stock Option Plan on July
26, 1994 (the "Option Plan"). Under the Option Plan, options to purchase up to
130,000 shares of Common Stock may be granted to employees, outside directors
and consultants and advisers to the Company or any subsidiary. The purposes of
the Option Plan are to further the growth, development and financial success of
the Company by providing additional financial incentives to key personnel and
to retain and attract qualified individuals who will contribute to the overall
success of the Company. Shares that by reason of the expiration of an option
(other than by reason of exercise) or which are no longer subject to purchase
pursuant to an option granted under the Option Plan may be reoptioned
thereunder. The Option Plan is currently administered by the Board of
Directors, but the Board of Directors may determine to delegate this
responsibility to a committee of the Board which would then have the authority
to set specific terms and conditions of options granted under the Option Plan
and administer the Option Plan. Options granted under the Option Plan are
non-qualified options and are not intended to be "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended. Stock
options granted under the Option Plan may be granted for a term not to exceed
ten years and are not transferable other than by will or the laws of descent
and distribution. Each option may be exercised within the term of the option
pursuant to which it was granted (so long as the optionee, if an employee,
continues to be employed by the Company). In addition, an option may be
exercised as to vested shares within 90 days after the termination of
employment of the optionee (except in the case of a termination for cause, in
which case the option shall automatically expire on termination), and in the
event of a termination in case of death, disability or eligible retirement, all
options shall become exercisable and may be exercised until the earlier of the
first anniversary of such event or the stated expiration date.
The exercise price of all stock options must be at least equal to the
fair market value of the Common Stock on the date of grant. Stock options may
be exercised by payment in cash of the exercise price with respect to each
share to be purchased, or by a method in which a concurrent sale of the
acquired stock is arranged, with the exercise price payable in cash from such
sale proceeds.
At June 3, 1997, the Company had outstanding options for 75,900 shares
of Common Stock at a weighted average exercise price of $7.24 of which 28,500
were presently exercisable. All options granted under the Option Plan have a
five-year vesting period, which will be accelerated in the event of a change of
control or initial public offering. All of the outstanding options were
granted at exercise prices determined by the Board of Directors to be equal to
the fair market value of the Common Stock on the date of grant. To date, no
options have been exercised under the Option Plan.
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<PAGE> 49
EMPLOYMENT AND TERMINATION
None of the executive officers currently have employment agreements,
with the exception of H. D. Wiginton. Mr. Wiginton, the Company's Vice
President, Marketing, entered into an employment agreement effective November
1, 1996, which establishes a base salary of $110,000 per year, provides for
certain cash bonus incentives relating to his performance and grants Mr.
Wiginton the immediate right to purchase 6,000 shares of Common Stock plus
6,000 shares under the Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1996, A. J. Lewis III and Richard
A. Coonrod served as members of the Compensation Committee. During 1996, no
member of the Compensation Committee was an officer, former officer or employee
of the Company or any of its subsidiaries. During 1996, no executive officer
of the Company served as a member of: (i) the compensation committee of another
entity in which one of the executive officers of such entity served on the
Company's Compensation Committee, (ii) the Board of Directors of another entity
in which one of the executive officers of such entity served on the Company's
Compensation Committee, or (iii) the compensation committee of another entity
in which one of the executive officers of such entity served as a member of the
Company's Board of Directors. A. J. Lewis III resigned from the Compensation
Committee upon being named an executive officer.
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<PAGE> 50
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of June 16, 1997
with respect to the beneficial ownership of Packaged Ice Common Stock (assuming
conversion of the Series A Preferred Stock and Series B Preferred Stock which
have voting rights equivalent to that of the Common Stock) by: (i) each
director of the Company, (ii) each Named Executive Officer of the Company,
(iii) each other person known to hold 5% or more of the outstanding shares of
Common Stock, and (iv) all current executive officers (regardless of salary and
bonus level) and directors of the Company as a group. Unless otherwise
indicated, the persons listed in the table below have sole voting and
investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
SHARES %
------ -
<S> <C> <C>
James F. Stuart 358,700 7.0%
8572 Katy Freeway, Suite 101
Houston, Texas 77024
A. J. Lewis III (1) 393,943 7.7%
1120 E. Durango
San Antonio, Texas 78205
Steven P. Rosenberg (2) 473,401 9.2%
5430 LBJ Freeway, Suite 1600
Dallas, Texas 75219
Stephen R. Sefton (3) 820,449 16.0%
Jack Stazo (4) 260,864 5.1%
10606 N. Evers Park
Houston, Texas 77024
Norwest Equity Partners V (5) 820,449 16.0%
222 South Ninth St, Suite 2800
Minneapolis, MN 55402-3388
Richard A. Coonrod (6) 91,161 1.8%
5720 Smetana Drive, Suite 300
Minnetonka, MN 55343
H. D. Wiginton 12,000 0.2%
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Robert G. Miller 286,540 5.6%
4425 West Olive, Suite 310
Glendale, Arizona 85302
Fleming Companies (7) 298,231 5.8%
6301 Waterford Blvd.
Oklahoma City, OK 73118
All directors and executive officers
as a group (8 persons) (1) (8) 2,448,194 47.9%
</TABLE>
(1) Includes 2,000 shares of Common Stock held by Mr. Lewis, as Trustee,
25,000 shares owned by South Texas Equipment Distributors, Inc., a
corporation owned by Mr. and Mrs. Lewis, and 69,350 shares held by Mr.
and Mrs. Lewis as tenants in common.
(2) Includes 83,221 shares of Series B Preferred Stock.
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<PAGE> 51
(3) Includes 405,000 shares of Series A Preferred Stock and 37,449 shares
of Series B Preferred Stock. Mr. Sefton does not own any shares of
record. However, as Vice President of Norwest Venture Capital
Management, Inc., and general partner of Itasca Partners II, the
general partner of Norwest Equity Partners V, Mr. Sefton may be deemed
to be the beneficial owner of the shares held by Norwest Equity
Partners V. Mr. Sefton disclaims beneficial ownership of the shares
held by Norwest Equity Partners V.
(4) Includes 4,000 shares of Common Stock held by Jack Stazo as Trustee.
(5) Includes 405,000 shares of Series A Preferred Stock and 37,449 shares
of Series B Preferred Stock.
(6) Includes 45,000 shares of Series A Preferred Stock and 4,161 shares of
Series B Preferred Stock. Mr. Coonrod does not own any shares of
record. However, as general partner of Food Fund, Mr. Coonrod may be
deemed to be the beneficial owner of the shares held by Food Fund.
Mr. Coonrod disclaims beneficial ownership of the Shares held by Food
Fund.
(7) Fleming Companies received an offer from Suiza Foods, Inc. to purchase
all of Fleming Companies' Common Stock for $1,491,155, triggering a
right of first refusal of the Company under the Shareholders Agreement
(as defined). The Company has exercised its right of first refusal and
intends to effect a substantially concurrent sale for cash of Qualified
Capital Stock or warrants to acquire Qualified Capital Stock to obtain
the proceeds necessary to purchase Fleming Companies Common Stock.
(8) Includes 450,000 shares of Series A Preferred Stock and 124,831 shares
of Series B Preferred Stock.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain decisions concerning the operations or financial structure of
the Company, including, without limitation, matters relating to the
Acquisitions, may present conflicts of interest between the Company, certain
shareholders, directors and officers, described as follows:
Shareholders Agreement. All current shareholders of Packaged Ice are
parties to a Shareholders Agreement (the "Shareholders Agreement") which
restricts the transfer of their shares of capital stock of the Company and
grants the Company and the other shareholders a right of first refusal to
purchase shares which a shareholder attempts to transfer. The Shareholders
Agreement terminates upon the occurrence of any of the following: (i) if the
Company permanently ceases to do business; (ii) the Company completes an
underwritten public offering of its Common Stock which results in net proceeds
to the Company and any selling shareholders of at least $7,500,000; or (iii)
upon the written agreement of the holders of no less than eighty percent (80%)
of the voting power of the outstanding Common Stock and Preferred Stock voting
as a single class.
Tag-Along and Co-Sale Rights. James F. Stuart and Jack Stazo, founding
shareholders, have entered into agreements with certain other shareholders
granting such shareholders the right to participate pro rata in sales to third
parties.
Voting Agreement. In excess of 80% of the Company's shareholders are
bound by a Voting Agreement which establishes the number and make up of the
Board of Directors. See "Management -- Voting Agreement."
Stock Purchase Agreements with Norwest, et al. On September 20, 1995,
Packaged Ice entered into a stock purchase agreement with Norwest and Food Fund
("Norwest Agreement") pursuant to which the Company issued 450,000 shares of
Series A Preferred Stock at a price of $5.56 per share and 420,000 shares of
Common Stock at a price of $5.00 per share. In addition, the Stock Purchase
Agreement requires a vote of two-thirds of the Board of Directors before the
Company may take certain actions relating to distributions, granting demand
registration rights, guaranteeing indebtedness, making loans, changing the
business, making acquisitions, issuing securities and pledging assets. In
connection with the issuance of stock, Norwest and Food Fund were granted
demand and piggy-back registration rights under a registration rights
agreement. The demand right gives the investors the right to cause the Company
to register their securities at any time after September 20, 2000 and before
September 20, 2004. In addition, Norwest and Food Fund were granted a put
option to sell their stock back to the Company at fair market value, which
option becomes effective only if Norwest and Food Fund have been unable to
register their stock by September 20, 2003. The put option terminates in the
event the Company completes a firmly underwritten public offering of Common
Stock, provided that the gross offering price equals or exceeds $7,500,000. In
December 1996, Norwest, Food Fund and Steven P. Rosenberg advanced $750,000 to
the Company under convertible demand notes. On January 17, 1997, the Company
entered into a stock purchase agreement with Norwest, Food Fund and Steven P.
Rosenberg pursuant to which the Company issued 124,831 shares of Series B
Preferred Stock at a price of $6.07 per share in exchange for the cancellation
of the $750,000 of demand notes. As a result of the issuance of Series B
Preferred Stock, the Shareholders Agreement and the Voting Agreement were
amended to include the Series B Preferred Stock. In addition, Mr. Rosenberg
was granted demand registration rights under the September 20, 1995
registration rights agreement. The Company has amended the September 20, 1995
registration rights agreement to grant demand registration rights to Mr.
Rosenberg, Food Fund and Norwest which are substantially similar to those
granted in connection with the issuance of the Warrants. Holders of Series A
Preferred Stock and Series B Preferred Stock have contractual preemptive rights
to acquire capital stock and have waived such preemptive rights with respect to
the Offering.
Stock Purchase Agreements with Individual Investors. The Company
entered into a stock purchase agreement dated December 23, 1993 which granted
certain individual shareholders piggy-back registration rights with respect to
the Common Stock and the right to receive financial and other information and
notice of certain events. The Company entered into a stock purchase agreement
on September 20, 1995 with individual investors which granted them piggy-back
registration rights, contractual preemptive rights to acquire capital stock,
and the right to receive financial and other information. Such holders have
waived their preemptive rights with respect to the Offering. In addition, this
agreement requires a vote of two-thirds of the Board of Directors before the
Company may take certain actions relating to distributions, granting demand
registration rights, guaranteeing indebtedness, making loans, changing the
business, making acquisitions, issuing securities and pledging assets. The
Board of Directors has unanimously approved the issuance of the securities and
all ancillary agreements.
Agreements with A.J. Lewis III. A.J. Lewis III is the President and
Chief Operating Officer and a director of the Company. Mr. Lewis and his wife,
Liza B. Lewis, own 7.7% of the fully diluted shares of Common Stock of the
Company. Mr. and Mrs. Lewis have been granted demand registration rights in
connection with the Mission Acquisition. Prior to completion of the Mission
Acquisition, Mr. Lewis and his wife owned 100% of Mission and 80% of STPI. Mr.
Lewis and his wife also own Southwest Texas Equipment Distributors, Inc. which
is a shareholder of the Company. Southwest Texas Equipment Distributors, Inc.,
an ice equipment sales and rental company, has the exclusive right to supply
Hoshizaki ice cubers to the Company under an agreement dated September 9, 1991.
Mr. Lewis holds the option to purchase the real estate on which Mission's
facilities are located. Mr. Lewis intends to exercise this option in 1998. As
part of the Mission Acquisition, the Company will lease these facilities from
Mr. Lewis on arms-length terms approved by a disinterested majority of the
Board of Directors. These agreements with Mr. Lewis may result in conflicts of
interest with respect to certain matters affecting the
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Company, such as potential business opportunities, business dealings, demands
on Mr. Lewis' time, possible corporate transactions and other strategic
decisions affecting the future of the Company and Mr. Lewis.
Agreements with SWI and its Principals. Prior to completion of the SWI
Acquisition, Dale M. Johnson, Robert G. Miller and Alan S. Bernstein together
owned 95% of SWI. After completion of the Acquisition, Messrs. Johnson, Miller
and Bernstein will own an aggregate of 16% of the fully diluted shares of
Common Stock of the Company. Messrs. Johnson, Miller and Bernstein will be
granted demand registration rights in connection with the SWI Acquisition.
Prior to the SWI Acquisition, Packaged Ice and SWI were parties to an option
agreement and master lease agreement under which SWI granted to the Company the
right to acquire SWI on specified terms, and under which SWI obtained the right
to lease Packaged Ice Systems and place them in SWI's market area. The option
agreement and master lease agreement with SWI terminated upon consummation of
the SWI Acquisition. Mr. Miller owns and leases to SWI the real property on
which an ice manufacturing plant in Phoenix, Arizona is located.
Other Transactions and Relationships with Shareholders. Akin, Gump,
Strauss, Hauer & Feld, L.L.P. ("Akin Gump") provides legal services to the
Company. Cecil Schenker, a shareholder of the Company, is the sole shareholder
of Cecil Schenker, P.C., a partner of Akin Gump. Alan Schoenbaum, the son of
Stanley Schoenbaum, a shareholder of the Company, is the sole shareholder of
Alan Schoenbaum, P.C., a partner of Akin Gump. Kenneth H. Johnson, a
shareholder, provides legal services to the Company. Bill Highsmith, a
shareholder, has acted as an insurance agent for the Company in connection with
the Company's health insurance and key-man life insurance. James M. Raines, a
shareholder, provided investment banking services to the Company in connection
with the sale of the Old Notes, for which he was granted an extension of a
Common Stock purchase warrant granted previously to him, and for which he will
receive a finder's fee from Jefferies & Company, Inc. The warrant gave Mr.
Raines the right to purchase 43,296 shares of Common Stock at a price of $5.78
per share. Mr. Raines acquired 18,271 shares under his warrant pursuant to a
cashless exercise Steven P. Rosenberg, a shareholder and director of the
Company, is a consultant and former president of Arrow, which supplies plastic
bags to the Company. Lancer Corporation, a shareholder, supplies the Company's
proprietary bagging devices under an exclusive contract. Fleming Companies, a
shareholder, is a significant customer of the Company. Fleming Companies has
offered to sell its shares of Common Stock to the Company under the
Shareholders Agreement. See "Principal Shareholders," footnote 7 on page 47.
The Company believes that the transactions referred to above are no
less favorable than transactions which would have been obtained from unrelated
third parties. Any future transactions between the Company and related parties
will be approved by outside directors and will be on terms no less favorable
then those which could have been obtained from unrelated third parties.
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THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof
became entitled to the benefits of certain registration rights under the
Registration Rights Agreement. The Exchange Notes are being offered hereunder
in order to satisfy the obligations of the Company under the Registration
Rights Agreement. See "Registration Rights; Additional Interest."
For each $1,000 principal amount of Old Notes surrendered to the
Company pursuant to the Exchange Offer, the holder of such Old Notes will
receive $1,000 principal amount of Exchange Notes. Upon the terms and subject
to the conditions set forth in this Prospectus and in the accompanying Letter
of Transmittal, the Company will accept all Old Notes properly tendered prior
to 5:00 p.m., New York City time, on the Expiration Date. Holders may tender
some or all of their Old Notes pursuant to the Exchange Offer in integral
multiples of $1,000 principal amount.
Under existing interpretations of the staff of the SEC, including
Exxon Capital Holdings Corporation, SEC No-Action Letter (available April 13,
1989),the Morgan Stanley Letter and Mary Kay Cosmetics, Inc., SEC No-Action
Letter (available June 5, 1991), the Company believes that the Exchange Notes
would in general be freely transferable after the Exchange Offer without
further registration under the Securities Act by the respective holders thereof
(other than a "Restricted Holder," being (i) a broker-dealer who purchased Old
Notes exchanged for such Exchange Notes directly from the Company to resell
pursuant o Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an affiliate of the Company within the meaning of Rule
405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder is not participating in, and has no arrangement with any person
to participate in, the distribution (within the meaning of the Securities Act)
of such Exchange Notes. Eligible holders wishing to accept the Exchange Offer
must represent to the Company that such conditions have been met. Any holder of
Old Notes who tenders in the Exchange Offer for the purpose of participating in
a distribution of the Exchange Notes could not rely on the interpretation by
the staff of the SEC enunciated in the Morgan Stanley Letter and similar
no-action letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a
broker-dealer tendering Old Notes acquired directly from the Company for its
own account, (ii) any Exchange Notes to be received by it are being acquired in
the ordinary course of its business and (iii) it is not participating in, and
it has no arrangement with any person to participate in, the distribution
(within the meaning of the Securities Act) of the Exchange Notes. In addition,
in connection with any resales of Exchange Notes, any broker-dealer (a
"Participating Broker-Dealer") who acquired Old Notes for its own account as a
result of market-making activities or other trading activities must acknowledge
that it will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such Exchange Notes. The staff of the SEC
has taken the position in no-action letters issued to third parties including
Shearman & Sterling, SEC No-Action Letter (available July 2, 1993), that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes (other than a resale of an unsold allotment
from the original sale of Old Notes) with this Prospectus, as it may be amended
or supplemented from time to time. Under the Registration Rights Agreement, the
Company is required to allow Participating Broker-Dealers to use this
Prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of such Exchange Notes. See "Plan of Distribution."
The Exchange Offer shall be deemed to have been consummated upon the
earlier to occur of (i) the Company having exchanged Exchange Notes for all
outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant
to the Exchange Offer, Exchange Notes for all Old Notes that have been tendered
and not withdrawn on the date that is 30 days following the commencement of the
Exchange Offer. In such event, holders of Old Notes seeking liquidity in their
investment would have to rely on exemptions to registration requirements under
the securities laws, including the Securities Act.
As of the date of this Prospectus, $50,000,000 principal amount of Old
Notes are issued and outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes to be eligible for trading in the
Private Offering, Resale and Trading through Automated Linkages (PORTAL)
Market, the National Association of Securities Dealers' screen based, automated
market trading of securities eligible for resale under Rule 144A.
The Company shall be deemed to have accepted for exchange validly
tendered Old Notes when, as and if the Company has given oral or written notice
thereof to the Exchange Agent. See "-- Exchange Agent." The Exchange Agent will
act as agent for the tendering holders of Old Notes for the purpose of
receiving Exchange Notes from the Company and delivering Exchange Notes to such
holders. If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date. Holders of Old Notes who tender in the Exchange
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Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Notes pursuant to the Exchange Offer. The Company will pay
all charges and expenses, other than certain applicable taxes, in connection
with the Exchange Offer. See "-- Fees and Expenses."
This Prospectus, together with the accompanying Letter of Transmittal,
is being sent to all registered holders as of the date of this Prospectus.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean ______________ , 1997 unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer
is extended. In order to extend the Expiration Date, the Company will notify
the Exchange Agent of any extension by oral or written notice and will mail to
the record holders of Old Notes an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time. The Company
reserves the right (i) to delay acceptance of any Old Notes, to extend the
Exchange Offer or to terminate the Exchange Offer and to refuse to accept Old
Notes not previously accepted, if any of the conditions set forth herein under
"-- Termination" shall have occurred and shall not have been waived by the
Company (if permitted to be waived by the Company), by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, and (ii)
to amend the terms of the Exchange Offer in any manner deemed by it to be
advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform
the holders of the Old Notes of such amendment. Without limiting the manner in
which the Company may choose to make public announcements of any delay in
acceptance, extension, termination or amendment of the Exchange Offer, the
Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest payable semi-annually on April
15 and October 15 of each year, commencing October 15, 1997. Holders of
Exchange Notes of record on October 1, 1997 will receive interest on May 15,
1997 from the date of issuance of the Exchange Notes, plus an amount equal to
the accrued interest on the Old Notes from the date of issuance of the Old
Notes, April 17, 1997,to the date of exchange thereof. Consequently, assuming
the Exchange Offer is consummated prior to the record date in respect of the
October 15, 1997 interest payment for the Old Notes, holders who exchange their
Old Notes for Exchange Notes will receive the same interest payment on October
15, 1997 that they would have received had they not accepted the Exchange
Offer. Interest on the Old Notes accepted for exchange will cease to accrue
upon issuance of the Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and
date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile or an Agent's
message, together with the Old Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
The tender by a holder of Old Notes will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal. Delivery of all
documents must be made to the Exchange Agent at its address set forth herein.
Holders may also request that their respective brokers, dealers, commercial
banks, trust companies or nominees effect such tender for such holders. The
method of delivery of Old Notes and the Letter of Transmittal and all other
required documents to the Exchange Agent is at the election and risk of the
holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company. Only a holder of Old Notes may tender such Old Notes in
the Exchange Offer. The term "holder" with respect to the Exchange Offer means
any person in whose name Old Notes are registered on the books of the Company
or any other person who has obtained a properly completed stock power from the
registered holder.
The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility to, and received by, the Exchange Agent and
forming a part of a Book-Entry Confirmation, which states that such Book-Entry
Transfer Facility has received an express acknowledgment from the participant
in such Book-Entry Transfer Facility tendering Old Notes which are the subject
of such Book-Entry Confirmation that such participant has received and agrees
to be bound by the terms of the Letter of Transmittal, and that the Company may
enforce such agreement against such participant.
Any beneficial holder whose Old Notes are registered in the name of
such holder's broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on behalf of the registered holder.
If such beneficial holder wishes to tender directly, such beneficial holder
must, prior to completing and executing the Letter of Transmittal and
delivering his Old Notes, either make appropriate
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arrangements to register ownership of the Old Notes in such holder's name or
obtain a properly completed bond power from the registered holder. The transfer
of record ownership may take considerable time. If the Letter of Transmittal
is signed by the record holder(s) of the Old Notes tendered thereby, the
signature must correspond with the name(s) written on the face of the Old Notes
without alteration, enlargement or any change whatsoever. If the Letter of
Transmittal is signed by a participant in DTC, the signature must correspond
with the name as it appears on the security position listing as the holder of
the Old Notes. Signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution")unless the Old Notes tendered pursuant thereto are tendered (i) by
a registered holder (or by a participant in DTC whose name appears on a
security position listing as the owner) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal and the Exchange Notes are being issued directly to such
registered holder (or deposited into the participant's account at DTC) or (ii)
for the account of an Eligible Institution. If the Letter of Transmittal is
signed by a person other than the registered holder of any Old Notes listed
therein, such Old Notes must be endorsed or accompanied by appropriate bond
powers which authorize such person to tender the Old Notes on behalf of the
registered holder, in either case signed as the name of the registered holder
or holders appears on the Old Notes. If the Letter of Transmittal or any Old
Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority to so act must be submitted with the Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC with an Agent's Message) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required
documents) and the tendered Old Notes (or a timely confirmation received of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC) with
the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Company's acceptance
of which would, in the opinion of the Company or its counsel, be unlawful. The
Company also reserves the absolute right to waive any conditions of the
Exchange Offer or defects or irregularities in tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in the Letter of Transmittal) shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned without cost by the Exchange Agent to the tendering
holder of such Old Notes unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date. In addition,
the Company reserves the right in its sole discretion to (i) purchase or make
offers for any Old Notes that remain outstanding subsequent to the Expiration
Date, or, as set forth under "-- Termination," to terminate the Exchange Offer
and (ii) to the extent permitted by applicable law, purchase Old Notes in the
open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers may differ from the terms of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Old
Notes at DTC within two business days after the date of this Prospectus, and
any financial institution which is a participant in DTC may make book-entry
delivery of the Old Notes by causing DTC to transfer such Old Notes into the
Exchange Agent's account in accordance with DTC's procedure for such transfer.
Although delivery of Old Notes may be effected through book-entry transfer into
the Exchange Agent's account at DTC, and Agent's Message must be transmitted to
an received by the Exchange Agent on or prior to the Expiration Date at one of
its addresses set forth below under "B Exchange Agent", or the guaranteed
delivery procedure described below must be complied with. DELIVERY OF DOCUMENTS
TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All references in
this Prospectus to deposit or delivery of Old Notes shall be deemed to include
DTC's book-entry delivery method.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer
on a timely basis and deliver an Agent's Message, may effect a tender if: (i)
the tender is made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by
facsimile transmission, mail or hand delivery)setting forth the name and
address of the holder of the Old Notes, the registration number or numbers of
such Old Notes (if applicable), and the total principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that,
within five business days after the Expiration Date, the Letter of Transmittal,
together with the Old Notes in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC) and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal, together with the certificate(s)
representing all tendered Old Notes in proper form for transfer(or a
confirmation of such a book-entry transfer) and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within five
business days after the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms
and conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.
Old Notes tendered in exchange for Exchange Notes (or a timely
confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC) must be received by the Exchange Agent, with the Letter
of Transmittal and any other required documents, by the Expiration Date or
within the time periods set forth above pursuant to a Notice of Guaranteed
Delivery from an Eligible Institution. Each holder tendering the Old Notes for
exchange sells, assigns and transfers the Old Notes to the Exchange Agent, as
agent of the Company, and irrevocably constitutes and appoints the Exchange
Agent as the holder's agent and attorney-in-fact to cause the Old Notes to be
transferred and exchanged. The holder warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Old Notes and to
acquire the Exchange Notes issuable upon the exchange of such tendered Old
Notes, that the Exchange Agent, as agent of the Company, will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances, and that the Old Notes tendered for
exchange are not subject to any adverse claims when accepted by the Exchange
Agent, as agent of the Company. The holder also warrants and agrees that it
will, upon request, execute and deliver any additional documents deemed by the
Company or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment and transfer of the Old Notes. All authority
conferred or agreed to be conferred in the Letter of Transmittal by the holder
will survive the death, incapacity or dissolution of the holder and any
obligation of the holder shall be binding upon the heirs, personal
representatives, successors and assigns of such holder.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date, unless previously accepted for exchange. To
withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date and prior to acceptance for exchange
thereof by the Company. Any such notice of withdrawal must (i) specify the name
of the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including, if applicable, the
registration number or numbers and total principal amount of such Old Notes),
(iii) be signed by the Depositor in the same manner as the original signature
on the Letter of Transmittal by which such Old Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Depositor withdrawing the
tender, (iv) specify the name in which any such Old Notes are to be registered,
if different from that of the Depositor and (v) if applicable because the Old
Notes have been tendered pursuant to the book-entry procedures, specify the
name and number of the participant's account at DTC to be credited, if
different than that of the Depositor. All questions as to the validity, form
and eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company ,whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be
issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes which have been tendered but which are not accepted
for exchange will be returned to the holder thereof without cost to such holder
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described above under "--Procedures for Tendering" at any
time prior to the
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<PAGE> 58
Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will
not be required to accept for exchange any Old Notes not theretofore accepted
for exchange, and may terminate the Exchange Offer if it determines that the
Exchange Offer violates any applicable law or interpretation of the staff of
the SEC.
If the Company determines that it may terminate the Exchange Offer, as
set forth above, the Company may (i) refuse to accept any Old Notes and return
any Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period. Holders of Old Notes will have
certain rights against the Company under the Registration Rights Agreement
should the Company fail to consummate the Exchange Offer.
EXCHANGE AGENT
U.S. Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, 27th Floor
Dallas, Texas 75201
Attention: Corporate Trust Department
Facsimile: (214) 754-1303
Telephone: (214) 754-1255
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will
be borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone. The Company will not make any payments to brokers,
dealers or other persons soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse the Exchange Agent for its reasonable
out-of-pocket expenses in connection therewith. The Company may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus, Letters of Transmittal and related documents to the beneficial
owners of the Old Notes and in handling or forwarding tenders for exchange.
The other expenses incurred in connection with the Exchange Offer
including fees and expenses of the Exchange Agent and Trustee and accounting
and legal fees, will be paid by the Company. The Company will pay all transfer
taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange
Offer. If, however, Exchange Notes or Old Notes not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the
Company upon the consummation of the Exchange Offer. The expenses of the
Exchange Offer will be amortized by the Company over the term of the Exchange
Notes under generally accepted accounting principles.
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DESCRIPTION OF NOTES
The Exchange Notes will be issued, and the Old Notes were issued,
pursuant to the indenture (the "Indenture"), by and among the Company, the
Subsidiary Guarantors and U.S. Trust Company of Texas, N.A., as Trustee (the
"Trustee") dated April 17, 1997. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "TIA"). The following summary of
certain provisions of the Indenture, the Notes and the Subsidiary Guarantees
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the TIA, and to all of the provisions of the
Indenture (copies of which can be obtained from the Company upon request),
including the definitions of certain terms therein and those terms made a part
of the Indenture by reference to the TIA as in effect on the date of the
Indenture. The definitions of certain capitalized terms used in the following
summary are set forth under "-- Certain Definitions" below. For purposes of
this Section, references to the "Company" shall mean Packaged Ice, Inc.,
excluding its Subsidiaries.
The Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the Notes. The Notes
may be presented for registration of transfer and exchange at the offices of
the Registrar, which currently is the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to Holders of
the Notes. The Company will pay principal (and premium, if any) on the Notes
at the Trustee's corporate office in New York, New York. In addition, in the
event the Notes do not remain in book-entry form, interest may be paid at the
Company's option, by wire transfer or check mailed to the registered address of
the Holders as shown on the Note Register.
As of the date of the Indenture, all of the Company's Subsidiaries
will be Restricted Subsidiaries. Subject to the requirements of the Indenture,
the Company will be able to designate future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to the restrictive
covenants set forth in the Indenture.
Any Old Notes that remain outstanding after the completion of the
Exchange Offer, together with the Exchange Notes issued in connection with the
Exchange Offer, will be treated as a single class of securities under the
Indenture.
The obligations of the Company under the Notes will be guaranteed on a
senior basis, jointly and severally, by each of the Subsidiary Guarantors. See
"-- Ranking and Guarantees."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $50,000,000
and will mature on April 15, 2004. Interest on the Notes will accrue at the
rate of 12% per annum and will be payable semi-annually on each April 15 and
October 15 commencing on October 15, 1997 to the persons who are registered
Holders at the close of business on the April 1 and October 1 immediately
preceding the applicable interest payment date. Interest on the Notes will
accrue from and including the most recent date to which interest has been paid
or, if no interest has been paid, from and including the Issue Date. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. Interest on the Notes may increase if the Company fails to fulfill its
obligations under the Registration Rights Agreement, and all references to
"interest" herein include any such increased interest. See "Exchange Offer;
Registration Rights; Additional Interest."
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole at any
time or in part from time to time, on and after April 15, 2001, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on April 15 of the year
set forth below, plus, in each case, accrued and unpaid interest thereon to the
date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2001 107.00%
2002 103.50%
2003 and thereafter 100.00%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to April 15,
2000, the Company may redeem up to an aggregate of $17.5 million principal
amount of Notes at a redemption price of 112% of the principal amount thereof,
plus accrued and unpaid interest thereon to the redemption date, with the net
proceeds of any Public Equity Offering; provided that at least $32.5 million in
aggregate principal amount of Notes remain outstanding immediately after the
occurrence of such redemption; and provided, further, that such redemption
occurs within 90 days of the date of the closing of such Public Equity
Offering.
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<PAGE> 60
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method
as the Trustee shall deem fair and appropriate; provided, however, that no
Notes of a principal amount of $1,000 or less shall be redeemed in part.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and
after the redemption date, interest will cease to accrue on Notes or portions
thereof called for redemption.
RANKING AND GUARANTEES
The indebtedness of the Company evidenced by the Notes will rank
senior in right of payment to all Subordinated Indebtedness of the Company and
pari passu in right of payment with all existing and future senior Indebtedness
of the Company. The Notes are unsecured and holders of secured Indebtedness of
the Company will effectively rank prior to Holders of the Notes with respect to
the assets securing such secured Indebtedness. As of December 31, 1996, after
giving pro forma effect to the issuance of the Notes and the application of the
estimated net proceeds therefrom, the Company would have had no senior
Indebtedness outstanding.
Each Subsidiary Guarantor fully and unconditionally guarantees,
jointly and severally, to each Holder and the Trustee, the full and prompt
performance of the Company's obligations under the Indenture and the Notes,
including the payment of principal of and interest on the Notes. The
Subsidiary Guarantee of each Subsidiary Guarantor will rank pari passu in right
of payment to all existing and future senior Indebtedness of such Subsidiary
Guarantor. As of December 31, 1996, after giving pro forma effect to the
issuance of the Notes and the application of the estimated net proceeds
therefrom, the Subsidiary Guarantors would have had no senior Indebtedness
outstanding. The obligations of each Subsidiary Guarantor are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Subsidiary Guarantee or pursuant to its contribution obligations
under the Indenture, will result in the obligations of such Subsidiary
Guarantor under the Subsidiary Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law. Each Subsidiary
Guarantor that makes a payment or distribution under a Subsidiary Guarantee
shall be entitled to a contribution from each other Subsidiary Guarantor in an
amount pro rata, based on the net assets of each Subsidiary Guarantor,
determined in accordance with GAAP.
Each Subsidiary Guarantor may consolidate with or merge into or sell
its assets to the Company or another Subsidiary Guarantor without limitation,
or with other Persons upon the terms and conditions set forth in the Indenture.
See "-- Certain Covenants -- Mergers, Consolidations and Sale of Assets" and
"-- Certain Covenants -- Asset Sales." In the event all of the capital stock of
a Subsidiary Guarantor is sold (including by way of merger or consolidation) by
the Company and the sale complies with the provisions set forth in "-- Certain
Covenants -- Asset Sales," the Subsidiary Guarantee with respect to such
Subsidiary Guarantor will be released.
Separate financial statements of the Subsidiary Guarantors are not
included herein (except for SWI, Mission and STPI) because such Subsidiary
Guarantors are jointly and severally liable with respect to the Company's
obligations pursuant to the Notes, and the aggregate net assets, earnings and
equity of the Subsidiary Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes on a Business
Day (the "Change of Control Payment Date") not more than 60 nor less than 30
days following such Change of Control, pursuant to the offer described below
(the "Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest thereon to
the date of repurchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes pursuant to the procedures required by
the Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other
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<PAGE> 61
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being repurchased
by the Company. The Paying Agent will promptly mail or otherwise deliver to
each Holder of Notes so tendered the Change of Control Payment for such Notes,
and the Trustee will promptly authenticate and mail (or cause to be transferred
by book-entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture will not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction. The provisions of the Indenture may
not afford Holders protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction affecting the
Company that may adversely affect Holders, if such transaction is not the type
of transaction included within the definition of Change of Control. A
transaction involving the management of the Company or its Affiliates, or a
transaction involving a recapitalization of the Company will result in a Change
of Control only if it is the type of transaction specified in such definition.
The existence of a Holder's rights to require the Company to
repurchase Notes in connection with a Change of Control may deter a third party
from acquiring the Company in a transaction that would constitute a "Change of
Control."
The source of funds for any repurchase of Notes upon a Change of
Control will be the Company's cash or cash generated from operations or other
sources, including borrowings or sales of assets; however, there can be no
assurance that sufficient funds will be available at the time of any Change of
Control to repay all Indebtedness owing under other senior Indebtedness or to
make any required repurchases of the Notes. Any failure by the Company to
repurchase Notes tendered pursuant to a Change of Control Offer will constitute
an Event of Default. See "Risk Factors -- Substantial Leverage and Ability to
Service Debt."
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and repurchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Company and its Subsidiaries, taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under New York law, which is the law governing the Indenture and the Notes.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries, taken as a whole, to another Person or group may be uncertain.
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CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Indebtedness. (a) The Indenture provides that neither
the Company nor any of its Subsidiaries will, directly or indirectly, Incur any
Indebtedness, including, without limitation, any Acquired Indebtedness (other
than Permitted Indebtedness).
(b) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur Indebtedness (including, without limitation, Acquired
Indebtedness), in each case, if (i) no Default or Event of Default shall have
occurred and be continuing on the date of the proposed Incurrence thereof or
would result as a consequence of such proposed Incurrence and (ii) immediately
after giving effect to such proposed Incurrence, the Consolidated Fixed Charge
Coverage Ratio of the Company is at least equal to 2.0 to 1.0 if such proposed
Incurrence is on or prior to March 31, 1999; and at least equal to 2.50 to 1.0
if such proposed Incurrence is thereafter.
(c) Neither the Company nor any Subsidiary Guarantor will, directly
or indirectly, in any event Incur any Indebtedness that by its terms (or by the
terms of any agreement governing such Indebtedness) is subordinated to any
other Indebtedness of the Company or such Subsidiary Guarantor, as the case may
be, unless such Indebtedness is also by its terms (or by the terms of any
agreement governing such Indebtedness) made expressly subordinate to the Notes
or the Subsidiary Guarantee of such Subsidiary Guarantor, as the case may be,
to the same extent and in the same manner as such Indebtedness is subordinated
pursuant to subordination provisions that are most favorable to the holders of
any other Indebtedness of the Company or such Subsidiary Guarantor, as the case
may be.
(d) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur no more than $37,500,000 of secured Indebtedness.
Limitation on Restricted Payments. The Indenture provides that neither
the Company nor any of its Subsidiaries will, directly or indirectly (a)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company, or any warrants, rights or options to acquire shares of any class
of such Capital Stock, other than through the exchange therefor solely of
Qualified Capital Stock of the Company or warrants, rights or options to
acquire Qualified Capital Stock of the Company, (b) make any principal payment
on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire
for value, prior to any scheduled final maturity, scheduled repayment or
scheduled sinking fund payment, any Subordinated Indebtedness of the Company or
(c) make any Investment (other than Permitted Investments) in any Person (each
of the foregoing prohibited actions set forth in clauses (a), (b) and (c) being
referred to as a "Restricted Payment"), if at the time of such proposed
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default has occurred and is continuing or would result therefrom,
or (ii) the Company is not able to Incur at least $1.00 of additional
Indebtedness in accordance with paragraph (b) of "-- Limitation on
Indebtedness" above (as if such Restricted Payment had been made as of the last
day of the Four Quarter Period), or (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Issue Date exceeds or would exceed the sum of: (u) 50% of the Consolidated Net
Income (or if Consolidated Net Income shall be a loss, minus 100% of such loss)
of the Company during the period (treating such period as a single accounting
period) from the beginning of the first fiscal quarter commencing after the
Issue Date to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment; (v) 100% of the aggregate Net Equity Proceeds received by
the Company from any Person from the issuance and sale subsequent to the Issue
Date of Qualified Capital Stock of the Company other than any Qualified Capital
Stock sold to a Subsidiary of the Company; (w) the aggregate net cash proceeds
received after the Issue Date by the Company (other than from any of its
Subsidiaries) upon the exercise of any options, warrants or rights to purchase
shares of Qualified Capital Stock of the Company; (x) the aggregate net cash
proceeds received after the Issue Date by the Company from the issuance or sale
(other than to any of its Subsidiaries) of debt securities or shares of
Disqualified Capital Stock that have been converted into or exchanged for
Qualified Capital Stock of the Company, together with the aggregate cash
received by the Company at the time of such conversion or exchange; (y) an
amount equal to the net reduction in Investments, subsequent to the date of the
Indenture, in any Person resulting from payments of interest on debt,
dividends, repayments of loans or advances, return of capital, or other
transfers of property (but only to the extent such distributions are not
included in the calculation of Consolidated Net Income), in each case, to the
Company or any Subsidiary from any Person, not to exceed in the case of any
Person, the amount of Investments previously made by the Company or any
Subsidiary in such Person and which was treated as a Restricted Payment; and
(z) $100,000.
Notwithstanding the foregoing, these provisions do not prohibit: (1)
the acquisition of Capital Stock of the Company or warrants, rights or options
to acquire Capital Stock of the Company either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or warrants, rights or options
to acquire Qualified Capital Stock of the Company, or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock of
the Company or warrants, rights or options to acquire Qualified Capital Stock
of the Company; (2) the acquisition of any Subordinated Indebtedness of the
Company either (i) solely in exchange for shares of Qualified Capital Stock of
the Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a
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Subsidiary of the Company) of (A) shares of Qualified Capital Stock of the
Company or warrants, rights or options to acquire Qualified Capital Stock of
the Company or (B) Permitted Refinancing Indebtedness; or (3) loans by the
Company or any Subsidiary to employees in the ordinary course of business up to
an aggregate principal amount of $100,000 at any one time outstanding;
provided, however, that in the case of clauses (1), (2) and (3) of this
paragraph, no Default or Event of Default shall have occurred and be continuing
at the time of such payment or as a result thereof. In determining the
aggregate amount of Restricted Payments made subsequent to the Issue Date,
amounts expended pursuant to clauses (1)(ii), (2)(i) and (2)(ii)(A) shall, in
each case, be included in such calculation.
For purposes of the foregoing provisions, the amount of any Restricted
Payment (other than cash) shall be the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) on the date of the Restricted Payment of the asset(s)
proposed to be transferred by the Company or such Subsidiary, as the case may
be, pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment complies with the Indenture
and setting forth in reasonable detail the basis upon which the required
calculations were computed, which calculations may be based upon the Company's
latest available internal quarterly financial statements.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would be permitted by the
provisions of this "Limitation on Restricted Payments" covenant and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the
extent repaid in cash prior to such designation) in the Restricted Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
clause (iii) of the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation.
For purposes of this covenant, if a particular Restricted Payment
involves a non-cash payment, including a distribution of assets, then such
Restricted Payment shall be deemed to be an amount equal to the cash portion of
such Restricted Payment, if any, plus an amount equal to the fair market value
of the non-cash portion of such Restricted Payment.
Limitation on Dividends. The Indenture provides that the Company will
not declare or pay any dividend or make any distribution (other than dividends
or distributions payable solely in Qualified Capital Stock of the Company) on
shares of the Company's Capital Stock to holders of such Capital Stock.
Asset Sales. The Indenture provides that the Company will not, and
will not permit any of its Subsidiaries to, engage in an Asset Sale unless (i)
the Company or the Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value (evidenced
by a resolution of the Board of Directors of the Company set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Properties
issued or sold or otherwise disposed of and (ii) at least 85% of the
consideration therefor received by the Company or such Subsidiary is in the
form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Subsidiary's most recent balance
sheet) of the Company or any Subsidiary (other than contingent liabilities and
liabilities that are Subordinated Indebtedness or otherwise by their terms
subordinated to the Notes or the Subsidiary Guarantees) that are assumed by the
transferee of any such assets pursuant to a customary novation agreement that
releases the Company or such Subsidiary from further liability and (y) any
notes or other obligations received by the Company or any such Subsidiary from
such transferee that are converted by the Company or such Subsidiary into cash
within 180 days of closing such Asset Sale (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 180 days after the receipt of any Net Cash Proceeds from any
Asset Sale, the Company may (i) apply all or any of the Net Cash Proceeds
therefrom to repay Indebtedness (other than Subordinated Indebtedness) of the
Company or any Subsidiary, provided, in each case, that the related loan
commitment of any revolving credit facility or other borrowing (if any) is
thereby permanently reduced by the amount of such Indebtedness so repaid, or
(ii) invest all or any part of the Net Cash Proceeds thereof in properties and
other capital assets that replace the properties or other capital assets that
were the subject of such Asset Sale or in other properties or other capital
assets that will be used in the Ice Business. Pending the final application of
any such Net Cash Proceeds, the Company may temporarily reduce borrowings under
any revolving credit facility or otherwise invest such Net Cash Proceeds in any
manner that is not prohibited by the Indenture. Any Net Cash Proceeds from an
Asset Sale that are not applied or invested as provided in the first sentence
of this paragraph will be deemed to constitute "Available Proceeds Amount."
When the aggregate Available Proceeds Amount exceeds $2.5 million, the Company
shall make an offer to purchase, from all Holders of the Notes and any then
outstanding Pari Passu Indebtedness required to be repurchased or repaid on a
permanent basis in connection with an Asset Sale, an aggregate principal amount
of Notes and any such Pari Passu Indebtedness equal to such Available Proceeds
Amount as follows:
(i) (A) The Company shall make an offer to purchase (an
"Asset Proceeds Offer") from all Holders of the Notes in accordance
with the procedures set forth in the Indenture the maximum principal
amount (expressed as a multiple of $1,000) of Notes that may be
purchased out of an amount (the "Payment Amount") equal to the product
of
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such Available Proceeds Amount multiplied by a fraction, the numerator
of which is the outstanding principal amount of the Notes and the
denominator of which is the sum of the outstanding principal amount of
the Notes and such Pari Passu Indebtedness, if any (subject to
proration in the event such amount is less than the aggregate Offered
Price (as defined in clause (ii) below) of all Notes tendered), and
(B) to the extent required by any such Pari Passu Indebtedness and
provided there is a permanent reduction in the principal amount of
such Pari Passu Indebtedness, the Company shall make an offer to
purchase such Pari Passu Indebtedness (a "Pari Passu Offer") in an
amount (the "Pari Passu Indebtedness Amount") equal to the excess of
the Available Proceeds Amount over the Payment Amount.
(ii) The offer price for the Notes shall be payable in cash
in an amount equal to 100% of the principal amount of the Notes
tendered pursuant to an Asset Proceeds Offer, plus accrued and unpaid
interest, if any, to the date such Asset Proceeds Offer is consummated
(the "Offered Price"), in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate Offered Price of the
Notes tendered pursuant to an Asset Proceeds Offer is less than the
Payment Amount relating thereto or the aggregate amount of the Pari
Passu Indebtedness that is purchased or repaid pursuant to the Pari
Passu Offer is less than the Pari Passu Indebtedness Amount (such
shortfall constituting an "Asset Proceeds Deficiency"), the Company
may use such Asset Proceeds Deficiency, or a portion thereof, for
general corporate purposes, subject to the limitations of the
"Limitation on Restricted Payments" covenant.
(iii) If the aggregate Offered Price of Notes validly
tendered and not withdrawn by Holders thereof exceeds the Payment
Amount, Notes to be purchased will be selected on a pro rata basis.
Upon completion of such Net Proceeds Offer and Pari Passu Offer, the
amount of Excess Proceeds shall be reset to zero.
The Company will not permit any Subsidiary to enter into or suffer to
exist any agreement (excluding Permitted Liens) that would place any
restriction of any kind (other than pursuant to law or regulation) on the
ability of the Company to make an Asset Proceeds Offer following any Asset
Sale. The Company will comply with Rule 14e-1 under the Exchange Act, and any
other securities laws and regulations thereunder, if applicable, in the event
that an Asset Sale occurs and the Company is required to purchase Notes as
described above.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Indenture provides that neither the Company nor any of its
Subsidiaries will, directly or indirectly, create or otherwise cause or permit
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (a) pay dividends or make any other distributions
on its Capital Stock; (b) make loans or advances or pay any Indebtedness or
other obligation owed to the Company or to any Subsidiary of the Company; or
(c) transfer any of its property or assets to the Company or to any Subsidiary
of the Company (each such encumbrance or restriction in clause (a), (b), or (c)
a "Payment Restriction"), except for such encumbrances or restrictions existing
under or by reason of: (1) applicable law; (2) the Indenture; (3) customary
non-assignment provisions of any lease or license agreements or similar
agreements entered into in the ordinary course of business of any Subsidiary of
the Company; (4) any instrument governing Acquired Indebtedness Incurred in
accordance with paragraph (b) of the covenant "-- Limitation on Indebtedness";
provided that such encumbrance or restriction is not, and will not be,
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, becoming a Subsidiary of
the Company; (5) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date; (6) any restriction or
encumbrance contained in contracts for the sale of assets to be consummated in
accordance with the Indenture solely in respect of the assets to be sold
pursuant to such contract; (7) any restrictions on the sale or other
disposition or encumbrance of any property securing Indebtedness as a result of
a Permitted Lien on such property; (8) any agreement relating to an acquisition
of property, so long as the encumbrances or restrictions in any such agreement
relate solely to the property so acquired and are not or were not created in
anticipation of or in connection with the acquisition thereof; (9) the Credit
Facilities; or (10) any encumbrance or restriction contained in Permitted
Indebtedness or Permitted Refinancing Indebtedness Incurred to Refinance the
Indebtedness Incurred pursuant to an agreement referred to in clause (4), (5)
or (9) above; provided that the provisions relating to such encumbrance or
restriction contained in any such Permitted Refinancing Indebtedness are no
less favorable to the Company or to the Holders in any material respect in the
reasonable and good faith judgment of the Board of Directors of the Company
than the provisions relating to such encumbrance or restriction contained in
agreements referred to in such clause (4), (5) or (9).
Limitation on Issuances and Sales of Capital Stock of Subsidiaries.
The Indenture provides that the Company will not cause or permit any of its
Subsidiaries to issue or sell any Capital Stock (other than to the Company or
to a wholly-owned Subsidiary of the Company) or permit any Person (other than
the Company or a wholly-owned Subsidiary of the Company) to own or hold any
Capital Stock of any Subsidiary of the Company or any Lien or security interest
therein; provided, however, that such covenant shall not prohibit the
disposition (by sale, merger or otherwise) of all of the Capital Stock of a
Subsidiary provided any Net Cash Proceeds therefrom are applied in accordance
with the covenants described under "-- Asset Sales."
Limitation on Liens. The Indenture provides that the Company will not,
and will not permit any Subsidiary to, directly or indirectly, create, incur,
assume, affirm or suffer to exist or become effective any Lien of any kind
except for Permitted Liens, upon any of their respective property or assets,
whether now owned or acquired after the Issue Date, or any income, profits or
proceeds therefrom, to secure (a) any Indebtedness of the Company or such
Subsidiary (if it is not also a Subsidiary Guarantor),
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unless prior to, or contemporaneously therewith, the Notes are equally and
ratably secured, or (b) any Indebtedness of any Subsidiary Guarantor, unless
prior to, or contemporaneously therewith, the Subsidiary Guarantees are equally
and ratably secured; provided, however, that if such Indebtedness is expressly
subordinated to the Notes or the Subsidiary Guarantees, the Lien securing such
Indebtedness will be subordinated and junior to the Lien securing the Notes or
the Subsidiary Guarantees, as the case may be, with the same relative priority
as such Indebtedness has with respect to the Notes or the Subsidiary
Guarantees. The foregoing covenant will not apply to any Lien securing
Acquired Indebtedness, provided that any such Lien extends only to the property
or assets that were subject to such Lien prior to the related acquisition by
the Company or such Subsidiary and was not created, incurred or assumed in
contemplation of such transaction. The incurrence of additional secured
Indebtedness by the Company and its Subsidiaries is subject to further
limitations on the incurrence of Indebtedness as described under "-- Limitation
on Indebtedness."
Mergers, Consolidations and Sale of Assets. The Indenture provides
that the Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
Company's assets (determined on a consolidated basis for the Company and the
Company's Subsidiaries) whether as an entirety or substantially as an entirety
to any Person unless: (i) either (1) the Company shall be the surviving or
continuing corporation or (2) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and of the Company's Subsidiaries
substantially as an entirety (the "Surviving Entity") (x) shall be a
corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia and (y) shall expressly
assume, by supplemental indenture (in form and substance satisfactory to the
Trustee), executed and delivered to the Trustee, the due and punctual payment
of the principal of, and premium, if any, and interest on all of the Notes and
the performance of every covenant of the Notes, the Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and, if
applicable, the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness Incurred or
anticipated to be Incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall be
able to Incur at least $1.00 of additional Indebtedness pursuant to paragraph
(b) of "-- Limitation on Indebtedness"; provided that in determining the
Consolidated Fixed Charge Coverage Ratio of the Company or such Surviving
Entity, as the case may be, such ratio shall be calculated as if the
transaction (including the Incurrence of any Indebtedness or Acquired
Indebtedness) took place on the first day of the Four Quarter Period; (iii)
immediately before and immediately after giving effect to such transaction and,
if applicable, the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness Incurred or anticipated to be Incurred and any Lien granted in
connection with or in respect of the transaction), no Default and no Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of the Indenture
and that all conditions precedent in the Indenture relating to such transaction
have been satisfied.
Upon any such consolidation, merger, conveyance, lease or transfer in
accordance with the foregoing, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the
same effect as if such successor had been named as the Company therein, and
thereafter (except in the case of a sale, assignment, transfer, lease,
conveyance or other disposition) the predecessor corporation will be relieved
of all further obligations and covenants under the Indenture and the Notes.
Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose
Subsidiary Guarantee is to be released in accordance with the terms of the
Guarantee and the Indenture in connection with any transaction complying with
the provisions of "-- Asset Sales") will not, and the Company will not cause or
permit any Subsidiary Guarantor to, consolidate with or merge with or into any
Person, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets, other than the Company or any other Subsidiary
Guarantor unless: (i) the entity formed by or surviving any such consolidation
or merger (if other than the Subsidiary Guarantor), or to which such
disposition shall have been made, is a corporation organized and existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) such entity assumes by supplemental indenture all of the obligations of
the Subsidiary Guarantor on the Subsidiary Guarantee; (iii) immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; and (iv) immediately after giving effect to such
transaction and the use of any net proceeds therefrom on a pro forma basis, the
Company could satisfy the provisions of clause (ii) of the first paragraph of
this covenant. Any merger or consolidation of a Subsidiary Guarantor with and
into the Company (with the Company being the surviving entity) or another
Subsidiary Guarantor need only comply with clause (iv) of the first paragraph
of this covenant.
Limitation on Transactions with Affiliates. The Indenture provides
that neither the Company nor any Subsidiary of the Company will conduct any
business or enter into any transaction or series of transactions with or for
the benefit of any of their Affiliates (each an "Affiliate Transaction") but
excluding Specified Affiliate Transactions, except in good faith and on terms
that
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are no less favorable to the Company or such Subsidiary, as the case may be,
than those that could have been obtained in a comparable transaction on an
arm's-length basis from a Person not an Affiliate of the Company or such
Subsidiary. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $250,000 shall
be approved by the Board of Directors of the Company, such approval to be
evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
the Company or any Subsidiary of the Company enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) that involves an aggregate fair market value of more than $3,000,000, the
Company or such Subsidiary shall, prior to the consummation thereof, obtain a
favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Subsidiary, as the case may be,
from a financial point of view, from an Independent Financial Advisor and file
the same with the Trustee. Notwithstanding the foregoing, the restrictions set
forth in this covenant shall not apply to (i) transactions between the Company
and any Subsidiary or between Subsidiaries, (ii) any employee compensation
arrangement of the Company or any Subsidiary which has been approved by a
majority of the Company's disinterested directors and found in good faith by
such directors to be in the reasonable best interest of the Company or such
Subsidiary, as the case may be, or (iii) customary directors' fees,
indemnification and similar arrangements.
Additional Subsidiary Guarantees. If the Company or any of its
Subsidiaries transfers or causes to be transferred, in one transaction or a
series of related transactions, any property to any Subsidiary that is not a
Subsidiary Guarantor, or if the Company or any of its Subsidiaries shall
organize, acquire or otherwise invest in another Subsidiary having total assets
with a book value in excess of $50,000, then such transferee or acquired or
other Subsidiary shall (i) execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which such
Subsidiary shall fully and unconditionally guarantee all of the Company's
obligations under the Notes and the Indenture on the terms set forth in the
Indenture and (ii) deliver to the Trustee an Opinion of Counsel that such
supplemental indenture has been duly authorized, executed and delivered by such
Subsidiary and constitutes a legal, valid, binding and enforceable obligation
of such Subsidiary. Thereafter, such Subsidiary shall be a Subsidiary
Guarantor for all purposes of the Indenture.
Limitation on Conduct of Business. The Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to, engage in the
conduct of any business other than the Ice Business on a basis consistent with
the conduct of such business as it is conducted on the Issue Date.
Limitation on Status as Investment Company. The Indenture will
prohibit the Company and the Subsidiary Guarantors from being required to
register as an "investment company" (as that term is defined in the Investment
Company Act of 1940, as amended), or from otherwise becoming subject to
regulation under the Investment Company Act of 1940.
Sale and Leaseback Transactions. The Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to, enter into
any sale and leaseback transaction; provided that the Company or any
Subsidiary, as applicable, may enter into a sale and leaseback transaction if
(i) the Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Indebtedness relating to such sale and leaseback transaction
pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in
clause (b) of the covenant described above under the caption "-- Limitation on
Indebtedness" and (b) incurred a Lien to secure such Indebtedness pursuant to
the covenant described above under the caption "-- Limitation on Liens," (ii)
the gross cash proceeds of such sale and leaseback transaction are at least
equal to the fair market value (as determined in good faith by the Board of
Directors of the Company and set forth in an Officers' Certificate delivered to
the Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described under the caption "--
Asset Sales."
Reports to Holders. The Company will file with the Commission all
information, documents and reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company
is then subject to such filing requirements so long as the Commission will
accept such filings. The Company will file with the Trustee, within 15 days
after it files them with the Commission, copies of the annual reports and of
the information, documents and other reports (or copies of such portions of any
of the foregoing as the Commission may by rules and regulations prescribe),
without exhibits, which the Company files with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. Regardless of whether the Company is
required to furnish such reports to its stockholders pursuant to the Exchange
Act, the Company will cause its consolidated financial statements, comparable
to that which would have been required to appear in annual or quarterly
reports, to be delivered to the Trustee and the Holders. The Company will also
make such reports available to prospective purchasers of the Notes, securities
analysts and broker-dealers upon their request. In addition, the Indenture
requires that for so long as any of the Notes remain outstanding the Company
will make available to any prospective purchaser of the Notes or beneficial
owner of the Notes in connection with any sale thereof the information required
by Rule 144A(d)(4) under the Securities Act, until such time as the Company has
either consummated the exchange offer for the Notes for securities identical in
all material respects which have been registered under the Securities Act or
until such time as the holders thereof have disposed of such Notes pursuant to
an effective registration statement filed by the Company.
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of
Default":
(i) the failure to pay interest on any Note for a period of
30 days or more after such interest becomes due and payable; or
(ii) the failure to pay the principal on any Note, when such
principal becomes due and payable, at maturity, upon redemption,
pursuant to an Asset Sale Offer or a Change of Control Offer or
otherwise; or
(iii) (x) the failure of the Company or any Subsidiary
Guarantor to comply with any of the terms or provisions of "-- Certain
Covenants -- Mergers, Consolidations and Sale of Assets" or (y) a
default in the observance or performance of any other covenant or
agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying
the default from the Trustee or from Holders of at least 25% in
principal amount of outstanding Notes; or
(iv) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness of the Company or of any Subsidiary of the
Company (or the payment of which is guaranteed by the Company or any
Subsidiary of the Company) which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness
after any applicable grace period provided in such Indebtedness on the
date of such default (a "payment default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and,
in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which
there has been a payment default or the maturity of which has been so
accelerated, aggregates $1,000,000; or
(v) one or more judgments in an aggregate amount in excess of
$1,000,000 (which are not covered by third-party insurance as to which
a financially sound insurer has not disclaimed coverage) being
rendered against the Company or any of its Subsidiaries and such
judgments remain undischarged, or unstayed or unsatisfied for a period
of 60 days after such judgment or judgments become final and
non-appealable; or
(vi) certain events of bankruptcy, insolvency or
reorganization affecting the Company or any of its Subsidiaries; or
(vii) any of the Subsidiary Guarantees cease to be in full
force and effect or any of the Subsidiary Guarantees are declared to
be null and void and unenforceable or any of the Subsidiary Guarantees
are found to be invalid or any of the Subsidiary Guarantors denies its
liability under its Subsidiary Guarantee (other than by reason of
release of a Subsidiary Guarantor in accordance with the terms of the
Indenture).
If an Event of Default (other than an Event of Default specified in
clause (vi) above with respect to the Company) occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the then outstanding Notes may declare the unpaid
principal of, premium, if any, and accrued and unpaid interest on, all the
Notes then outstanding to be due and payable, by a notice in writing to the
Company (and to the Trustee, if given by Holders) and upon such declaration
such principal amount, premium, if any, and accrued and unpaid interest will
become immediately due and payable. If an Event of Default with respect to the
Company specified in clause (vi) above occurs, all unpaid principal of, and
premium, if any, and accrued and unpaid interest on, the Notes then outstanding
will ipso facto become due and payable without any declaration or other act on
the part of the Trustee or any Holder.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and premium, if any, and interest on the Notes which has become
due solely by virtue of such acceleration) have been cured or waived and if the
rescission would not conflict with any judgment or decree. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
Notwithstanding the foregoing, if an Event of Default specified in
clause (iv) above shall have occurred and be continuing, such Event of Default
and any consequential acceleration shall be automatically rescinded if the
Indebtedness that is the subject of such Event of Default has been repaid, or
if the default relating to such Indebtedness is waived or cured and if such
Indebtedness has been accelerated, the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness (provided, in each
case, that such repayment, waiver, cure or rescission is effected within a
period of 10 days from the continuation of such default beyond the applicable
grace period or the occurrence of such acceleration).
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The Holders of a majority in principal amount of the Notes may waive
any existing Default or Event of Default under the Indenture, and its
consequences, except a Default in the payment of the principal of or interest
on any Notes or a Default in respect of any term or provision of the Notes or
the Indenture that cannot be modified or amended without the consent of all
Holders.
Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture and under the TIA. Subject to the provisions of
the Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable security or indemnity. Subject to all
provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the then outstanding Notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.
Under the Indenture, the Company is required to provide an Officers'
Certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided, that such officers shall provide
such certification at least annually whether or not they know of any Default or
Event of Default) that has occurred and, if applicable, describe such Default
or Event of Default and the status thereof.
DEFEASANCE
The Indenture provides that the Company may, at its option and at any
time, elect to have the obligations of the Company and the Subsidiary
Guarantors discharged in accordance with the provisions set forth below with
respect to the Notes then outstanding. Such defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by such outstanding Notes and the Company and the Subsidiary Guarantors shall
be deemed to have satisfied all their respective other obligations under the
Notes, the Subsidiary Guarantees and the Indenture, except for (i) the rights
of holders of such outstanding Notes to receive payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments
are due, (ii) the Company's and the Subsidiary Guarantors' respective
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and (iv) the redemption and defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
respective obligations of the Company and the Subsidiary Guarantors released
with respect to certain covenants in the Indenture ("covenant defeasance"), and
any omission to comply with such obligations shall not constitute a Default or
an Event of Default with respect to the Notes. In order to exercise either
defeasance or covenant defeasance, (i) the Company must irrevocably deposit
with the Trustee, in trust, for the benefit of the holders of the Notes, cash
in U.S. dollars, U.S. Government Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest on such outstanding Notes on the stated maturity thereof or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of defeasance, the Company shall have delivered to the
Trustee an Opinion of Counsel stating that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the Issue Date, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred; (iii) in the case of covenant defeasance, the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit; (v) such defeasance or
covenant defeasance shall not result in a breach or violation of, or constitute
a default under, the Indenture or any other material agreement or instrument to
which the Company is a party or by default under, the Indenture or any other
material agreement or instrument to which the Company is a party or by which it
is bound; (vi) in the case of defeasance or covenant defeasance, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization or
similar law affecting creditors' rights generally and that such defeasance or
covenant defeasance will not result in the Trustee or the trust arising from
such deposit constituting an Investment Company as defined in the Investment
Company Act of 1940, as amended; and (vii) the Company shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel each stating
that all conditions precedent provided for relating to either the defeasance or
the covenant defeasance, as the case may be, have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of
the Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does not
adversely affect the rights of any of the Holders. Other modifications and
amendments of the Indenture may be made with the consent of
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the Holders of a majority in principal amount of the then outstanding Notes
issued under the Indenture, except that, without the consent of each Holder of
the Notes affected thereby, no amendment may, directly or indirectly: (i)
reduce the amount of Notes whose Holders must consent to an amendment; (ii)
reduce the rate of or change the time for payment of interest, including
defaulted interest, on any Notes; (iii) reduce the principal of or change the
fixed maturity of any Notes, or change the date on which any Notes may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price therefor; (iv) make any Notes payable in money other than that stated in
the Notes; (v) make any change in provisions of the Indenture protecting the
right of each Holder to receive payment of principal of and interest on such
Note on or after the due date thereof or to bring suit to enforce such payment,
or permitting Holders of a majority in principal amount of the Notes to waive
Defaults or Events of Default; (vi) amend, modify or change the obligation of
the Company to make or consummate a Change of Control Offer, an Asset Sale
Offer or waive any default in the performance thereof or modify any of the
provisions or definitions with respect to any such offers; (vii) adversely
affect the ranking of the Notes or the Subsidiary Guarantees; or (viii) release
any Subsidiary Guarantor from any of its obligations under its Subsidiary
Guarantee or the Indenture otherwise than in accordance with the terms of the
Indenture.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Guarantees are governed
by, and construed in accordance with, the laws of the State of New York.
THE TRUSTEE
U.S. Trust Company of Texas, N.A. is the Trustee under the Indenture.
The Indenture provides that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture, and
use the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payments of claims in certain cases or to realize on certain
property received in respect of any such claim as security or otherwise.
Subject to the TIA, the Trustee will be permitted to engage in other
transactions; provided, that if the Trustee acquires any conflicting interest
as described in the TIA, it must eliminate such conflict or resign within 90
days of becoming aware of such conflicting interest as provided in the TIA or
apply to the Commission for permission to continue as Trustee. The Trustee may
resign at any time, in which case a successor trustee is to be appointed
pursuant to the terms of the Indenture.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the Indenture. Reference is made to the Indenture for the full definition of
all such terms, as well as any other terms used herein for which no definition
is provided.
"Acquired Indebtedness" of any Person means Indebtedness of another
Person and any of its Subsidiaries existing at the time such other Person
becomes a Subsidiary of such Person or at the time it merges or consolidates
with such Person or any of such Person's Subsidiaries or is assumed by such
Person or any Subsidiary of such Person in connection with the acquisition of
assets from such other Person and in each case not Incurred by such Person or
any Subsidiary of such Person or such other Person in connection with, or in
anticipation or contemplation of, such other Person becoming a Subsidiary of
such Person or such acquisition, merger or consolidation, and which
Indebtedness is without recourse to the Company or any of its Subsidiaries or
to any of their respective properties or assets other than the Person or such
Person's Subsidiaries or the assets to which such Indebtedness related prior to
the time such Person becomes a Subsidiary of the Company or the time of such
acquisition, merger or consolidation.
"Affiliate" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct or cause the direction of management or policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning set forth in "-- Certain
Covenants -- Limitation on Transactions with Affiliates."
"Asset Acquisition" means (i) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be merged with or into the
Company or any Subsidiary of the Company or (ii) the acquisition by the Company
or any Subsidiary of the Company of assets of any Person
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comprising an existing business (whether existing as a separate entity),
subsidiary, division or unit of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition to any Person other than the Company or any of its
Subsidiaries (including, without limitation, by means of a sale and leaseback
transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, in one or a series of
related transactions, of (a) any Capital Stock of any Subsidiary held by the
Company or any other Subsidiary, (b) all or substantially all of the properties
and assets of any division or line of business of the Company or any of its
Subsidiaries, (c) any other properties or assets of the Company or any of its
Subsidiaries other than transfers of cash, Cash Equivalents, accounts
receivable, or properties or assets in the ordinary course of business;
provided that the transfer of all or substantially all of the properties or
assets of the Company and its Subsidiaries, taken as a whole, will be governed
by the provisions of the Indenture described above under the captions "--
Certain Covenants -- Mergers, Consolidations and Sale of Assets" and/or "--
Change of Control" and not by the provisions of the "Asset Sales" covenant.
For the purposes of this definition, the term "Asset Sale" also shall not
include any of the following: (i) sales of damaged, worn-out or obsolete
equipment or assets that, in the Company's reasonable judgment, are either (A)
no longer used or (B) no longer useful in the business of the Company or its
Subsidiaries; (ii) any lease of any property entered into in the ordinary
course of business and with respect to which the Company or any Subsidiary is
the lessor, except any such lease that provides for the acquisition of such
property by the lessee during or at the end of the term thereof for an amount
that is less than the fair market value thereof at the time the right to
acquire such property is granted; (iii) a Restricted Payment or Permitted
Investment permitted under "Certain Covenants -- Limitation on Restricted
Payments;" and (iv) any transfers that, but for this clause (iv), would be
Asset Sales, if (A) the Company elects to designate such transfers as not
constituting Asset Sales and (B) after giving effect to such transfers, the
aggregate fair market value of the properties or assets transferred in such
transaction or any such series of related transactions so designated by the
Company does not exceed $1,000,000.
"Asset Proceeds Offer" has the meaning set forth in "-- Certain
Covenants -- Asset Sales."
"Attributable Indebtedness" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended). As used in the preceding sentence, the
"net rental payments" under any lease for any such period shall mean the sum of
rental and other payments required to be paid with respect to such period by
the lessee thereunder, excluding any amounts required to be paid by such lessee
on account of maintenance and repairs, insurance, taxes, assessments, water
rates or similar charges. In the case of any lease that is terminable by the
lessee upon payment of penalty, such net rental payment shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
"Available Proceeds Amount" has the meaning set forth in "-- Certain
Covenants -- Asset Sales."
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the board of directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in the City of New York are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease that are
required to be classified and accounted for as capital lease obligations under
GAAP and, for purposes of this definition, the amount of such obligations at
any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than 270 days from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
180 days from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause
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(iv) above; (vi) deposits available for withdrawal on demand with any
commercial bank not meeting the qualifications specified in clause (ii) above,
provided that all such deposits do not exceed $5,000,000 in the aggregate at
any one time; (vii) demand and time deposits and certificates of deposit with
any commercial bank organized in the United States not meeting the
qualifications specified in clause (ii) above, provided that such deposits and
certificates support bond, letter of credit and other similar types of
obligations incurred in the ordinary course of business; and (viii) investments
in money market or other mutual funds substantially all of whose assets
comprise securities of the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole to any person (as such term is used in Section 13(d)(3) of the Exchange
Act) other than to the Company or a Subsidiary Guarantor; (ii) the Company
consolidates with or merges into another Person or any Person consolidates
with, or merges into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is changed into or
exchanged for cash, securities or other property, other than any such
transaction where (a) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving or resulting Person that is
Qualified Capital Stock and (b) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than a majority of the Voting Stock of the surviving or resulting Person
immediately after such transaction; (iii) the adoption of a plan relating to
the liquidation or dissolution of the Company not involving a merger or
consolidation or a sale or other disposition of assets described in clause (i)
above; (iv) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any person (as defined
above), excluding Permitted Holders, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the total voting power of the Voting Stock
of the Company; provided that the sale of Voting Stock of the Company to a
Person or Persons acting as underwriters in connection with a firm commitment
underwriting shall not constitute a Change of Control; or (v) the first day on
which a majority of the members of the Board of Directors of the Company are
not Continuing Directors (other than by action of the Permitted Holders). For
purposes of this definition, any transfer of an equity interest of an entity
that was formed for the purpose of acquiring Voting Stock of the Company will
be deemed to be a transfer of such portion of such Voting Stock as corresponds
to the portion of the equity of such entity that has been so transferred.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation,
all series and classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income plus (ii)
to the extent that any of the following shall have been taken into account in
determining Consolidated Net Income, (A) all income taxes of such Person and
its Subsidiaries paid or accrued in accordance with GAAP for such period (other
than income taxes attributable to extraordinary, unusual or nonrecurring gains
or losses or taxes attributable to sales or dispositions of assets outside the
ordinary course of business), Consolidated Interest Expense, amortization
expense and depreciation expense, and (B) other non-cash items (other than
non-cash interest) reducing Consolidated Net Income, other than any non-cash
item which requires the accrual of or a reserve for cash charges for any future
period and other than any non-cash charge constituting an extraordinary item of
loss, less other non-cash items increasing Consolidated Net Income, all as
determined on a consolidated basis for such Person and its Subsidiaries in
conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters for which financial information is available (the "Four Quarter
Period") ending on or prior to the date of the transaction or event giving rise
to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for the Four
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis for the
period of such calculation to (i) the Incurrence or repayment of any
Indebtedness of such Person or any of its Subsidiaries (and the application of
the proceeds thereof) giving rise to the need to make such calculation and any
Incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the Incurrence or repayment of Indebtedness in
the ordinary course of business for working capital purposes pursuant to
working capital facilities, at any time subsequent to the first day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Incurrence
or repayment, as the case may be (and the application of the proceeds thereof),
occurred on the first day of the Four Quarter Period, and (ii) any Asset Sales
or Asset Acquisitions (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of such Person or
one of its Subsidiaries (including any Person who becomes a Subsidiary as a
result of any such Asset Acquisition) Incurring, assuming or otherwise being
liable for Acquired Indebtedness) at any time subsequent to the first day of
the Four Quarter Period and on or prior to the Transaction Date, as if such
Asset Sale or Asset Acquisition (including the Incurrence, assumption or
liability for any such Indebtedness or Acquired Indebtedness and also including
any Consolidated EBITDA, based upon the four fiscal quarters of such Person for
which financial information is available immediately preceding such Asset
Acquisition, associated with such Asset Acquisition) occurred on the first day
of the Four Quarter Period; provided that the Consolidated EBITDA of any Person
acquired shall be included only to the extent includable pursuant to the
definition of "Consolidated Net Income." If such Person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third person,
the preceding sentence shall give effect to the
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Incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary
of such Person had directly Incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on Indebtedness
determined on a fluctuating basis as of the Transaction Date (including
Indebtedness actually Incurred on the Transaction Date) and which will continue
to be so determined thereafter shall be deemed to have accrued at a fixed rate
per annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date; and (2) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Common Stock)
paid, accrued or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated Federal, state and local tax rate
of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the aggregate of the interest expense (without deduction of
interest income) of such Person and its Subsidiaries (excluding amortization of
deferred financing fees) for such period, on a consolidated basis, as
determined in accordance with GAAP, and including (a) all amortization of
original issue discount (other than any original issue discount on Indebtedness
attributable to proceeds of the sale of warrants issued in connection with the
Incurrence of such Indebtedness); (b) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Subsidiaries during such period; (c) net cash costs under all
Interest Swap Obligations (including amortization of fees); (d) all capitalized
interest; and (e) the interest portion of any deferred payment obligations for
such period.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) after-tax gains from Asset
Sales or abandonments or reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains, (c) the net income or loss
of any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Subsidiary of the referent Person,
(d) the net income (but not loss) of any Subsidiary of the referent Person to
the extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by a contract, operation of law or
otherwise, (e) the net income of any Person, other than a Subsidiary of the
referent Person, except to the extent of cash dividends or distributions paid
to the referent Person or to a wholly-owned Subsidiary of the referent Person
by such Person, (f) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, (g)
income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued), and (h) in the case of a successor
to the referent Person by consolidation or merger or as a transferee of the
referent Person's assets, any earnings of the successor corporation prior to
such consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries for such period, on a consolidated
basis, as determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issue Date; (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election or (iii) was elected or nominated for election
pursuant to the Voting Agreement.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Disqualified Capital Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part, on
or prior
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to the final maturity date of the Notes.
"Events of Default" has the meaning set forth in "-- Events of
Default."
"Exchange Act" means the Securities Exchange Act of 1934, as amended
or any successor statute or statutes thereto.
"Existing Indebtedness" means up to $4.0 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries in
existence on the Issue Date, until such amounts are repaid.
"Fair market value" or "fair value" means, with respect to any asset
or property, the price which could be negotiated in an arm's-length, free
market transaction, for cash, between an informed and willing seller and an
informed and willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair market value shall be determined
by the Board of Directors of the Company acting reasonably and in good faith
and shall be evidenced by a Board Resolution delivered to the Trustee;
provided, however, that if the aggregate non-cash consideration to be received
by the Company or any of its Subsidiaries from any Asset Sale could be
reasonably likely to exceed $2,500,000 the fair market value shall be
determined by an Independent Financial Advisor.
"Family Member" means, when used with reference to any natural Person,
such Person's spouse, siblings, parents, children, or other lineal descendants
(whether by adoption or consanguinity), and shall mean a trust, the primary
beneficiary of which is the Person's spouse, siblings, parents, children, or
other lineal descendants (whether by adoption or consanguinity).
"Financial Advisor" means an accounting, appraisal or investment
banking firm of nationally recognized standing that is, in the reasonable and
good faith judgment of the Board of Directors of the Company, qualified to
perform the task for which such firm has been engaged.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Ice Business" means (i) the manufacture and sale (including, without
limitation, direct sales, wholesale sales and retail sales) of ice; (ii) the
manufacture and sale of ice and water by means of ice manufacturing or water
purification equipment (including ice makers, bins, baggers, merchandisers,
delivery devices and related equipment) installed on the premises of the
Company's customer(s) whether or not such equipment is owned by the Company,
the customers, or a third party; (iii) contract on-premises ice or water
service (including leasing of ice or water related equipment) for a customer's
internal use; (iv) providing cold storage and freezer related services in
conjunction with the traditional ice business; (v) the sale of products
incidental or related to the foregoing; and (v) all logical extensions of the
foregoing.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise,
of any such Indebtedness or other obligation on the balance sheet of such
Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have
meanings correlative to the foregoing); provided, however, that (A) any
Indebtedness assumed in connection with an acquisition of assets and any
Indebtedness of a Person existing at the time such Person becomes a Subsidiary
(whether by merger, consolidation, acquisition or otherwise) of the Company or
at the time such Person is merged or consolidated with the Company or any
Subsidiary of the Company shall be deemed to be Incurred at the time of the
acquisition of such assets or by such Subsidiary at the time it becomes, or is
merged or consolidated with, a Subsidiary of the Company or by the Company at
the time of such merger or consolidation, as the case may be, and (B) any
amendment, modification or waiver of any document pursuant to which
Indebtedness was previously Incurred shall not be deemed to be an Incurrence of
Indebtedness unless such amendment, modification or waiver shall increase the
principal or premium thereof or interest rate thereon (including by way of
original issue discount). A guarantee by the Company or a Subsidiary Guarantor
of Indebtedness Incurred by the Company or a Subsidiary Guarantor, as
applicable, shall not be a separate incurrence of Indebtedness.
"Indebtedness" means with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and accrued liabilities arising
in the ordinary course of business that are not overdue by 90 days or more or
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the
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reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) all Indebtedness of others (including all
dividends of other Persons for the payment of which is) guaranteed, directly or
indirectly, by such Person or that is otherwise its legal liability or which
such Person has agreed to purchase or repurchase or in respect of which such
Person has agreed contingently to supply or advance funds but excluding
endorsements of negotiable instruments and documents in the ordinary course of
business, (vii) net liabilities of such Person under Interest Swap Obligations,
(viii) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on any asset or property (including, without limitation, leasehold
interests and any other tangible or intangible property) of such Person,
whether or not such Indebtedness is assumed by such Person or is not otherwise
such Person's legal liability; provided that if the Obligations so secured have
not been assumed by such Person or are otherwise not such Person's legal
liability, the amount of such Indebtedness for the purposes of this definition
shall be limited to the lesser of the amount of such Indebtedness secured by
such Lien or the fair market value of the assets or property securing such
Lien, and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends if any.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date; provided that the
amount outstanding at any time of any non-interest bearing Indebtedness or
other Indebtedness issued with original issue discount is the full amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP, but such Indebtedness shall only be deemed to be Incurred as of the date
of original issuance thereof.
"Independent" when used with respect to any specified Person means
such a Person who (a) is in fact independent, (b) does not have any direct
financial interest or any material indirect financial interest in the Company
or any of its Subsidiaries, or in any Affiliate of the Company or any of its
Subsidiaries and (c) is not an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions for the
Company or any of its Subsidiaries. Whenever it is provided in the Indenture
that any Independent Person's opinion or certificate shall be furnished to the
Trustee, such Person shall be appointed by the Company and approved by the
Trustee in the exercise of reasonable care, and such opinion or certificate
shall state that the signer has read this definition and that the signer is
Independent within the meaning thereof.
"Interest Swap Obligations" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
"Investment" by any Person means any direct or indirect (i) loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property (valued at the fair market value thereof as
of the date of transfer) to others or payments for property or services for the
account or use of others, or otherwise) (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business); (ii) purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by any other
Person; (iii) guarantee or assumption of any Indebtedness or any other
obligation of any other Person (except for an assumption of Indebtedness for
which the assuming Person receives consideration at the time of such assumption
in the form of property or assets with a fair market value at least equal to
the principal amount of the Indebtedness assumed, extensions of trade credit or
other advances to customers on commercially reasonable terms in accordance with
normal trade practices or otherwise in the ordinary course of business,
workers' compensation, utility, lease and similar deposits and prepaid expenses
made in the ordinary course of business, and endorsements of negotiable
instruments and documents in the ordinary course of business); and (iv) all
other items that would be classified as investments on a balance sheet of such
Person prepared in accordance with GAAP. The amount of any Investment shall
not be adjusted for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment. If the Company or any
Subsidiary of the Company sells or otherwise disposes of any Common Stock of
any direct or indirect Subsidiary of the Company such that, after giving effect
to any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Subsidiary not sold or disposed of.
"Issue Date" means the date on which the Notes were first issued under
the Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statute or statutes) of any jurisdiction other than to reflect
ownership by a third party of property leased to the referent Person or any of
its Subsidiaries under a lease that is not in the nature of a conditional sale
or title retention agreement).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents (including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents) received by the Company or any of its Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to
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such Asset Sale (including, without limitation, brokerage, legal, accounting
and investment banking fees and sales commissions), (b) taxes paid or payable
((1) including, without limitation, income taxes reasonably estimated to be
actually payable as a result of any disposition of property within two years of
the date of disposition and (2) after taking into account any reduction in tax
liability due to available tax credits or deductions and any tax sharing
arrangements) and (c) appropriate amounts to be provided by the Company or any
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"Net Equity Proceeds" means (a) in the case of any sale by the Company
of Qualified Capital Stock of the Company, the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions and the like
(including, without limitation, brokerage, legal, accounting and investment
banking fees and commissions) incurred in connection therewith, and (b) in the
case of any exchange, exercise, conversion or surrender of any outstanding
Indebtedness of the Company or any Subsidiary issued after the Issue Date for
or into shares of Qualified Capital Stock of the Company, the amount of such
Indebtedness (or, if such Indebtedness was issued at an amount less than the
stated principal amount thereof, the accrued amount thereof as determined in
accordance with GAAP) as reflected in the consolidated financial statements of
the Company prepared in accordance with GAAP as of the most recent date next
preceding the date of such exchange, exercise, conversion or surrender (plus
any additional amount required to be paid by the holder of such Indebtedness to
the Company or to any wholly-owned Subsidiary of the Company upon such
exchange, exercise, conversion or surrender and less any and all payments made
to the holders of such Indebtedness, and all other expenses incurred by the
Company in connection therewith), in each case (a) and (b) to the extent
consummated after the Issue Date.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by two officers of
the Company.
"Opinion of Counsel" means a written opinion from legal counsel which
and who are reasonably acceptable to the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company that
is pari passu in right of payment to the Notes.
"Paying Agent" shall initially be the Trustee until a successor paying
agent for the Notes is selected in accordance with the Indenture.
"Payment default" has the meaning set forth in "-- Events of Default."
"Permitted Holders" means the following Persons: Norwest Equity
Partners V, a Minnesota Limited Partnership, Fleming Companies, Inc., The Food
Fund II Limited Partnership, A. J. Lewis III, Steven P. Rosenberg, and James F.
Stuart, and any of their respective Affiliates and Family Members, each of the
foregoing individually being a Permitted Holder.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Notes;
(ii) Indebtedness under any Existing Indebtedness;
(iii) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Company or any Subsidiary thereof
in the ordinary course of business, including guarantees or
obligations of the Company or any Subsidiary thereof with respect to
letters of credit supporting such bid, performance or surety
obligations (in each case other than for an obligation for money
borrowed);
(iv) Permitted Refinancing Indebtedness;
(v) the Subsidiary Guarantees of the Notes;
(vi) Interest Swap Obligations of the Company; provided,
however, that such Interest Swap Obligations are entered into to
protect the Company and its Subsidiaries from fluctuations in interest
rates on Indebtedness Incurred in accordance with the Indenture to the
extent the notional principal amount of such Interest Swap Obligation
does not exceed the principal amount of the Indebtedness to which such
Interest Swap Obligation relates;
(vii) Indebtedness of a direct or indirect Subsidiary of the
Company to the Company or to a direct or indirect Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a
direct or indirect Subsidiary of
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the Company in each case subject to no Lien held by a Person other
than the Company or a direct or indirect Subsidiary of the Company;
provided, that if as of any date any Person other than the Company or
a direct or indirect Subsidiary of the Company owns or holds any such
Indebtedness or holds a Lien in respect of such Indebtedness, such
date shall be deemed the date of the Incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(viii) Indebtedness of the Company to a direct or indirect
Subsidiary of the Company for so long as such Indebtedness is held by
a direct or indirect Subsidiary of the Company in each case subject to
no Lien; provided that (a) any Indebtedness of the Company to any
direct or indirect Subsidiary of the Company is unsecured and
subordinated, pursuant to a written agreement, to the Company's
Obligations under the Indenture and the Notes, and (b) if as of any
date any Person other than a direct or indirect Subsidiary of the
Company owns or holds any such Indebtedness or any Person holds a Lien
in respect of such Indebtedness, such date shall be deemed the date of
the Incurrence of Indebtedness not constituting Permitted Indebtedness
by the issuer of such Indebtedness; and
(ix) additional Indebtedness not to exceed an aggregate
principal amount of $15,000,000 at any one time outstanding and any
guarantee thereof.
"Permitted Investments" means (a) Investments in cash and Cash
Equivalents; (b) Investments by the Company or by any Subsidiary of the Company
in any Person that is or will become immediately after such Investment a direct
or indirect Subsidiary of the Company; (c) any Investments in the Company by
any Subsidiary of the Company; provided that any Indebtedness evidencing such
Investment is unsecured; (d) Investments made by the Company or by its
Subsidiaries as a result of an Asset Sale made in compliance with "-- Certain
Covenants -- Asset Sales"; (e) Interest Swap Obligations to the extent the same
constitute Permitted Indebtedness; (f) Investments in an amount not to exceed
$2,000,000 at any one time outstanding; (g) Investments held by any Person on
the date such Person becomes a Subsidiary to the extent such Investments are
not incurred in anticipation of or in connection with such acquisition; and (h)
Investments in stock, obligations or securities received in settlement of debts
owing to the Company or any Subsidiary as a result of bankruptcy or insolvency
proceedings or upon the foreclosure, perfection or enforcement of any Lien in
favor of the Company or any Subsidiary, in each case as to debt owing to the
Company or any Subsidiary that arose in the ordinary course of business of the
Company or any such Subsidiary, provided that any stocks, obligations or
securities received in settlement of debts that arose in the ordinary course of
business (and received other than as a result of bankruptcy or insolvency
proceedings or upon foreclosure, perfection or enforcement of any Lien) that
are, within 30 days of receipt, converted into cash or Cash Equivalents shall
be treated as having been cash or Cash Equivalents at the time received.
"Permitted Liens" means the following types of Liens:
(i) Liens existing as of the date of the Indenture;
(ii) Liens securing the Notes, the Subsidiary Guarantees or
any Indebtedness under the Credit Facilities;
(iii) Liens in favor of the Company;
(iv) Liens for taxes, assessments and governmental charges
or claims either (i) not delinquent or (ii) contested in good faith by
appropriate proceedings and as to which the Company or its
Subsidiaries shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(v) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not delinquent for more than 30 days or being contested in good
faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made in respect thereof;
(vi) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the payment
or performance of tenders, statutory or regulatory obligations, surety
and appeal bonds, bids, government contracts and leases, performance
and return of money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(vii) judgment Liens not giving rise to an Event of Default
so long as any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated
shall not have expired;
(viii) any interest or title of a lessor under any Capital
Lease Obligation or operating lease;
(ix) Liens securing Purchase Money Indebtedness incurred in
compliance with the "Limitation on Indebtedness" covenant; provided,
however, that (i) the related Purchase Money Indebtedness shall not be
secured by
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any property or assets of the Company or any Subsidiary other than the
property or assets so acquired and any proceeds therefrom and (ii) the
Lien securing any such Indebtedness shall be created within 90 days of
such acquisition;
(x) Liens securing obligations under or in respect of
Interest Swap Obligations;
(xi) Liens upon specific items of inventory or other goods
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or
other goods;
(xii) Liens securing reimbursement obligations with respect
to commercial letters of credit that encumber documents and other
property or assets relating to such letters of credit and products and
proceeds thereof;
(xiii) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Subsidiaries, including
rights of offset and set-off; and
(xiv) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company and Liens on
property or assets of a Subsidiary existing at the time it became a
Subsidiary, provided that such Liens were in existence prior to the
contemplation of the acquisition and do not extend to any assets other
than the property of such Person or the acquired property (and the
proceeds thereof), as applicable.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Subsidiaries incurred pursuant to
clause (i), (ii) or (v) of the definition of "Permitted Indebtedness"; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so exchanged, refinanced,
renewed, replaced, defeased or refunded (plus the amount of related prepayment
penalties, fees and reasonable expenses incurred in connection therewith); (ii)
such Permitted Refinancing Indebtedness has a final maturity date later than
the final maturity date of, and has a Weighted Average Life to Maturity equal
to or greater than the Weighted Average Life to Maturity of, the Indebtedness
being exchanged, refinanced, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being exchanged, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes or the Subsidiary
Guarantees, such Permitted Refinancing Indebtedness is subordinated in right of
payment to, the Notes or the Subsidiary Guarantees, as the case may be, on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being exchanged, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Subsidiary that is the obligor on the Indebtedness
being exchanged, refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or any Subsidiary incurred in connection with the
acquisition by the Company or such Subsidiary, subsequent to the Issue Date, of
any property or assets.
"Public Equity Offering" means an underwritten offer and sale of
Qualified 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).
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, renew, refund, repay, prepay, redeem, defease or retire, or to issue
a security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Registrar" shall initially mean the Trustee until a successor
registrar for the Notes is selected in accordance with the Indenture.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Specified Affiliate Transactions" means certain transactions among
the Company and Subsidiaries and certain Affiliates which were entered into
prior to the Issue Date as set forth in a Schedule to the Indenture.
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"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor that is expressly subordinated in right of payment to the
Notes or the Subsidiary Guarantees, as the case may be.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall be deemed not
to be a Subsidiary of the Company for purposes hereof and of the Indenture.
"Subsidiary Guarantee" means any guarantee of the Notes by a
Subsidiary Guarantor in accordance with the provisions described under "--
Ranking and Guarantees."
"Subsidiary Guarantor" means (i) each of Packaged Ice Leasing, Inc.,
Southco Ice, Inc., Packaged Ice Mission, Inc., Packaged Ice STPI, Inc. and
Packaged Ice Southwestern, Inc. and (ii) each of the Company's Subsidiaries
that in the future executes a supplemental indenture in which such Subsidiary
agrees to be bound by the terms of the Indenture as a Subsidiary Guarantor;
provided that any Person constituting a Subsidiary Guarantor as described above
shall cease to constitute a Guarantor when its respective Subsidiary Guarantee
is released in accordance with the terms of the Indenture.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company
which at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors as provided below) and (2) any Subsidiary
or Subsidiaries of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any lien on any property
of, any other Subsidiary of the Company which is not a Subsidiary of the
Subsidiary of the Company to be so designated or otherwise an Unrestricted
Subsidiary, provided that either (x) the Subsidiary of the Company to be so
designated has total consolidated assets of $100,000 or less at the time of
designation or (y) immediately after giving pro forma effect to such
designation, the Company could incur $1.00 of additional Indebtedness pursuant
to paragraph (b) of the covenant entitled "Limitation on Indebtedness." Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a Board Resolution giving effect to such designation
and an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-owned Subsidiary" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities which normally have the
right to vote in the election of directors, other than director's qualifying
shares, are owned by such Person or any wholly-owned Subsidiary of such Person.
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REGISTRATION RIGHTS; ADDITIONAL INTEREST
Pursuant to the Registration Rights Agreement, the Company agreed to
file with the Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the Exchange Notes.
Upon the effectiveness of the Exchange Offer Registration Statement, the
Company will offer to the Holders of Transfer Restricted Securities pursuant to
the Exchange Offer who are able to make certain representations the opportunity
to exchange their Transfer Restricted Securities for Exchange Notes. Under
existing SEC interpretations, the Transfer Restricted Securities would, in
general, be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided, however, that in the case of
broker-dealers participating in the Exchange Offer, a prospectus meeting the
requirements of the Securities Act will be delivered upon resale by such
broker-dealers in connection with resales of the Exchange Notes. If (i) the
Company is not required to file the Exchange Offer Registration Statement or
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any Holder of Transfer
Restricted Securities notifies the Company within the specified time period
that (A) it is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) that it may not resell the Exchange Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer and
owns Old Notes acquired directly from the Company or an affiliate of the
Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Old Notes by the Holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. The Company will use its best efforts to
cause the applicable registration statement to be declared effective as
promptly as possible by the Commission. For purposes of the foregoing,
"Transfer Restricted Securities" means each Note until (i) the date on which
such Note has been exchanged by a person other than a broker-dealer for an
Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iv) the date on
which such Note is distributed to the public pursuant to Rule 144 under the
Securities Act.
The Registration Rights Agreement provides that: (i) the Company will
file an Exchange Offer Registration Statement with the Commission on or prior
to 60 days after the Issue Date, (ii) the Company will use its best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 120 days after the Issue Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue
on or prior to 30 business days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, Exchange Notes
in exchange for all Old Notes tendered prior thereto in the Exchange Offer and
(iv) if obligated to file the Shelf Registration Statement, the Company will
use its best efforts to file the Shelf Registration Statement with the
Commission on or prior to 30 days after such filing obligation arises (and in
any event within 90 days after the Issue Date) and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 90 days
after such obligation arises. If (a) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with the Exchange Offer or resales of
Transfer Restricted Securities, as the case may be, during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the interest rate
on the Transfer Restricted Securities, with respect to the first 90-day period
immediately following the occurrence of such Registration Default will increase
("Additional Interest") by 0.50% per annum and will increase by an additional
0.50% per annum with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Additional
Interest of 1.5% per annum with respect to all Registration Defaults. All
accrued Additional Interest will be paid by the Company on each Interest
Payment Date to the Global Note Holder by wire transfer of immediately
available funds and to Holders of Certificated Securities by wire transfer to
the accounts specified by them or by mailing checks to their registered
addresses if no such accounts have been specified. Following the cure of all
Registration Defaults, the accrual of Additional Interest will cease.
Each holder of Old Notes who wishes to exchange such Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of business, (ii) it is
not participating in, and it has no arrangement with any person to participate
in the distribution (within the meaning of the Securities Act) of the Exchange
Notes and (iii) it is neither an affiliate of the Company, as defined in Rule
405 of the Securities Act, nor a broker-dealer tendering notes acquired
directly from the Company for its own account. If the holder is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Old Notes
that were acquired as a result of market-making activities or other trading
activities, it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Company
has agreed, for a period of 180 days after consummation of the Exchange Offer,
to make available a prospectus meeting the requirements of the Securities Act
to any such broker-dealer for use in connection with any resale of any Exchange
Notes acquired in the Exchange Offer. Holders of Notes will also be required
to deliver information to be used in connection with the Shelf Registration
Statement and to provide
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comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Additional Interest set forth above.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth in the next paragraph, the Exchange Notes will be
issued in the form of one or more fully registered Global Notes (collectively,
the "Global Note"). The Global Note will be deposited with, or on behalf of,
DTC and registered in the name of a nominee of DTC.
Notes (i) originally purchased by or transferred to Accredited
Investors who are not qualified institutional buyers (as defined in "Transfer
Restrictions"), or (ii) held by qualified institutional buyers which elect to
take physical delivery of their certificates instead of holding their interest
through the Global Note (and which are thus ineligible to trade through DTC)
(collectively referred to herein as the "Non-Global Purchasers") will be
issued, in registered certificated form, "Certificated Securities"). Upon the
transfer to a qualified institutional buyer of any Certificated Security
initially issued to a Non-Global Purchaser, such Certificated Security will,
unless the transferee requests otherwise or the Global Note has previously been
exchanged in whole for Certificated Securities, be exchanged for an interest in
the Global Note.
The Company expects that pursuant to procedures established by DTC (i)
upon deposit of the Global Note, DTC or its custodian will credit, on its
internal system, portions of the Global Note which shall be comprised of the
corresponding respective principal amount of the Global Note to the respective
accounts of persons who have accounts with such depositary and (ii) ownership
of the Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC or its nominee (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts initially will be
designated by or on behalf of the Initial Purchaser and ownership of beneficial
interests in the, Global Note will be limited to persons who have accounts with
DTC ("participants") or persons who hold interests through participants.
Qualified institutional buyers may hold their interests in the Global Note
directly through DTC if they are participants in such system, or indirectly
through organizations which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of
the Notes, DTC or such nominee will be considered the sole owner or holder of
the Notes represented by the Global Note for all purposes under the Indenture.
No beneficial owner of an interest in the Global Note will be able to transfer
such interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium (if any) and interest (including
Additional Interest) on the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interest in the Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any
payment of the principal of, premium (if any) and interest (including
Additional Interest) on the Global Note, will credit participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Note as shown on the records of DTC or
its nominee. The Company also expects that payments by participants to owners
of beneficial interests in the Global Note held through such participants will
be governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and be settled in accordance with DTC rules in
same day funds. If a holder requires physical delivery of a Certificated
Security for any reason, including to sell Notes to persons in states which
require physical delivery of such securities or to pledge such securities, such
holder must transfer its interest in the Global Note in accordance with the
normal procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised the Company that DTC will take any action permitted to
be taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Note are credited and only in respect
to such portion of Notes, the aggregate principal amount of Notes as to which
such participant or participants have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Note
for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to
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hold securities for its participants and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes in accounts of its participants, thereby eliminating the
need for physical movement of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and
certain other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of DTC,
it is under no obligation to perform such procedures, and such procedures may
be discontinued at any time. None of the Company, the Trustee or the Warrant
Agent will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary
for the Global Note and a successor depositary is not appointed by the Company,
within 90 days, the Company will issue Certificated Securities in exchange for
the Global Note.
TRANSFER RESTRICTIONS ON OLD NOTES
The Old Notes have not been registered under the Securities Act and
may not be offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act. Accordingly, the Old Notes were offered and sold by the Initial Purchaser
only (i) to a limited number of "qualified institutional buyers" (as defined in
Rule 144A promulgated under the Securities Act) ("QIBs") in compliance with
Rule 144A; and (ii) to a limited number of other institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the
Securities Act) ("Accredited Investors") that prior to their purchase of any
Notes delivered to the Initial Purchaser a letter containing certain
representations and agreements.
Each purchaser of Old Notes, by its acceptance thereof, will be deemed
to have acknowledged represented and agreed as follows:
1. It is purchasing the Old Notes for its own account or an
account with respect to which it exercises sole investment discretion
and that it and any such account is (i) a QIB, and is aware that the
sale to it is being made in reliance on Rule 144A; or (ii) an
Accredited Investor.
2. It acknowledges that the Old Notes have not been
registered under the Securities Act and may not be offered or sold
except as set forth below.
3. It shall not resell or otherwise transfer the Old Notes
except (i) to the Company or any subsidiary thereof, (ii) to a QIB in
compliance with Rule 144A, (iii) to an Accredited Investor that, prior
to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Trustee, a signed letter containing certain
representations and agreements relating to the restrictions on
transfer of the Old Notes (the form of which letter can be obtained
from the Trustee), (iv) pursuant to the exemption from registration
provided by Rule 144 promulgated under the Securities Act (if
available), or (v) pursuant to an effective registration under the
Securities Act. Each Accredited Investor that is not a QIB and that
is an original purchaser of the Old Notes will be required to sign an
agreement to the foregoing effect.
4. It agrees that it will give to each person to whom it
transfers Old Notes notice of any restrictions on transfer of Old
Notes.
5. It understands that the Old Note will bear a legend
substantially to the following effect unless otherwise agreed by the
Company and the holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A PROMULGATED UNDER THE SECURITIES ACT)
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501 (a) (1), (2), (3) OR (7) PROMULGATED UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C) TO
AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE OR WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY), (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE SECURITIES ACT
(IF AVAILABLE)
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OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE OR WARRANT
AGENT AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
6. It acknowledges that the Trustee will not be required to
accept for registration of transfer any Old Note acquired by it,
except upon presentation of evidence satisfactory to the Company and
the Trustee that the restrictions set forth herein have been complied
with.
7. It acknowledges that the Company, the Initial Purchaser
and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and agrees that if any
of the acknowledgments, representations or agreements deemed to have
been made by its purchase of Old Notes are no longer accurate, it
shall promptly notify the Company and Initial Purchaser. If it is
acquiring any Old Notes as a fiduciary or agent for one or more
investor accounts, it represents that it has sole investment
discretion with respect to each such account and it has full power to
make the foregoing acknowledgments, representations and agreements on
behalf of each account.
The Old Notes may not be sold or transferred to, and each
purchaser by its purchase of the Old Notes shall be deemed to have represented
and covenanted that it is not acquiring the Old Notes for or on behalf of, any
pension or welfare plan (as defined in Section 3 of the Employee Retirement
Income Security Act of 1974 ("ERISA")), except that such a purchase for or on
behalf of a pension or welfare plan shall be permitted:
(1) to the extent such purchase is made by or on behalf of a
bank collective investment fund maintained by the purchase in which no
plan (together with any other plans maintained by the same employer or
employee organization) has an interest in excess of 10% of the total
assets in such collective investment fund and the applicable
conditions of Prohibited Transaction exemption 91-38 issued by the
Department of Labor are satisfied;
(2) to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by the purchase
in which, at any time while the Old Notes are outstanding, no plan
(together with any other plans maintained by the same employer or
employee organization) has an interest in excess of 10% of the total
of all assets in such pooled separate account and the applicable
conditions of Prohibited Transaction Exemption 90-1 issued by the
Department of Labor are satisfied;
(3) to the extent such purchase is made on behalf of a plan
by (A) an investment advisor registered under the Investment Advisers
Act of 1940 that had as of the last day of its most recent fiscal year
total assets under its management and control in excess of $50,000,000
and had shareholders' or partners' equity in excess of $750,000, as
shown in its most recent balance sheet prepared in accordance with
generally accepted accounting principles, (B) a bank as defined in
Section 202(a) of the Investment Advisers Act of 1940 with equity
capital in excess of $1,000,000 as of the last day of its most recent
fiscal year or (C) an insurance company which is qualified under the
laws of more than on state to manage, acquire or dispose of any assets
of a plan, which company had, as of the last day of its most recent
fiscal year, net worth in excess of $1,000,000 and which is subject to
supervision and examination by a state authority having supervision
over insurance companies, in each case, such investment advisor, bank
or insurance company is otherwise a qualified professional asset
manager, as such term is used in the Prohibited Transaction Exemption
84-14 issued by the Department of Labor, and the assets of such plan
when combined with the assets of other plans established or maintained
by the same employer (or affiliate thereof) or employee organization
and managed by such investment advisor, bank or insurance company, do
not represent more than 20% of the total client assets managed by such
investment advisor, bank or insurance company and the applicable
conditions or Prohibited Transaction Exemption 84-14 are otherwise
satisfied; or
(4) to the extent such plan is a governmental plan (as
defined in Section 3 of ERISA) which is not subject to the provisions
of Title 1 of ERISA or Section 4975 of the Code.
Each purchaser by its purchase of the Old Notes shall also be deemed
to have represented that (a) if it is an insurance company, no part of the
funds to be used to purchase the Old Notes to be purchased by it constitutes
assets allocated to any separate account maintained by it such that the use of
such funds constitutes a transaction in violation of Section 406 of ERISA or a
Prohibited Transaction, as such term is defined in Section 4975 of the Code,
which could be subject to, respectively, a civil penalty assessed pursuant to
Section 502 of ERISA or a tax imposed by Section 4975 of the Code and (b) if it
is not an insurance company, that no part of the funds to be used to purchase
the Old Notes to be purchased by it constitutes assets allocated to any
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trust, plan or account which contains the assets of any employee pension
benefit plan, welfare plan or account prohibited pursuant to the preceding
paragraph of these "Transfer Restrictions."
Purchasers are advised that the Prohibited Transaction Exemptions
described above do not relieve a fiduciary or other party from all prohibited
transaction provisions of the Code and ERISA and from ERISA's general fiduciary
responsibilities including, but not limited to, a fiduciary's obligation to
discharge his or her duties solely in the interests of participants and
beneficiaries.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that it will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale for a period of 180
days after consummation of the Exchange Offer, or such shorter period as will
terminate when all Old Notes acquired by broker-dealers for their own accounts
as a result of market-making activities or other trading activities have been
exchanged for Exchange Notes and resold by such broker-dealers. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. For a period of 180 days after
consummation of the Exchange Offer, or such shorter period as will terminate
when all Old Notes acquired by broker-dealers for their own accounts as a
result of market-making activities or other trading activities have been
exchanged for Exchange Notes and resold by such broker-dealers, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed in the Registration Rights
Agreement to indemnify such broker-dealers against certain liabilities,
including liabilities under the Securities Act.
Any Old Notes not exchanged in the Exchange Offer for Exchange Notes
will remain subject to the transfer restrictions described above.
DESCRIPTION OF SENIOR CREDIT FACILITY
The Company has received a joint commitment from Frost National Bank,
San Antonio and Zion National Bank, Salt Lake City for a Senior Credit Facility
which is expected to provide for a revolving credit and/or term loan facility
in the aggregate principal amount of approximately $20 million. The Senior
Credit Facility is expected to be available to provide liquidity, fund future
working capital requirements of the Company, and finance future acquisitions
consistent with the Company's business strategy. It is anticipated that the
Senior Credit Facility will be guaranteed by the Subsidiary Guarantors, will be
secured by substantially all of the assets of the Company and the stock and
assets of the Subsidiary Guarantors, and will contain customary
representations, warranties and covenants, including financial covenants. See
"Risk Factors -- Senior Credit Facility; Effective Subordination."
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DESCRIPTION OF CAPITAL STOCK AND WARRANTS
GENERAL
The Company's total authorized capital stock consists of 50,000,000
shares of common stock, par value $.01 per share (the "Common Stock") and
5,000,000 shares of preferred stock, par value $.01 per share (the "Preferred
Stock"). The Board of Directors has designated 450,000 shares of the Preferred
Stock as the Series A Convertible Preferred Stock (the "Series A Preferred
Stock") and has designated 200,000 shares of the Preferred Stock as the Series
B Convertible Preferred Stock (the "Series B Preferred Stock"). The Company
has 3,810,270 shares of Common Stock, 450,000 shares of Series A Preferred
Stock and 124,831 shares of Series B Preferred Stock issued and outstanding.
In addition, a total of 130,000 shares of Common Stock have been reserved for
issuance upon exercise of stock options under the Stock Option Plan, 574,831
shares of Common Stock have been reserved for issuance upon conversion of the
Series A Preferred Stock and Series B Preferred Stock, and 639,857 shares have
been reserved for issuance upon exercise of the Warrants.
SERIES A PREFERRED STOCK
In September 1995, the Board of Directors authorized the designation
of 450,000 shares of Series A Preferred Stock. The Series A Preferred Stock
has no rights of redemption or sinking fund provisions, but upon liquidation of
the Company, the Company must pay the holders of Series A Preferred Stock $5.56
per share (an aggregate of $2,502,000) before any amounts may be paid to the
holders of Common Stock. Holders of Series A Preferred Stock are entitled to
vote on all matters upon which the holders of Common Stock have the right to
vote and are generally entitled to vote as a class on any matters adversely
affecting their rights as holders of this series of preferred stock. Each
share of Series A Preferred Stock entitles the holder thereof to such number of
votes per share as equals the whole number of shares of Common Stock into which
each share of Series A Preferred Stock is then convertible. Each share of
Series A Preferred Stock is convertible into Common Stock without payment of
additional consideration at a conversion price of $5.56 per share, subject to
anti-dilution adjustments.
SERIES B PREFERRED STOCK
In December 1996, the Board of Directors authorized the designation of
200,000 shares of Series B Preferred Stock and on January 17, 1997 the Company
issued 124,831 shares in full satisfaction of $750,000 of convertible demand
notes bearing interest at a rate of 10% per annum which were issued in December
1996. The Series B Preferred Stock has no rights of redemption or sinking fund
provisions, but upon liquidation of the Company, the Company must pay the
holders of Series B Preferred Stock $6.07 per share (an aggregate of $757,724)
before any amounts may be paid to the holders of Common Stock. Holders of
Series B Preferred Stock are entitled to vote on all matters upon which the
holders of Common Stock have the right to vote and are generally entitled to
vote as a class on any matters adversely affecting their rights as holders of
this series of preferred stock. Each share of Series B Preferred Stock
entitles the holder thereof to such number of votes per share as equals the
whole number of shares of Common Stock into which each share of Series B
Preferred Stock is then convertible. Each share of Series B Preferred Stock is
convertible into Common Stock without payment of additional consideration at a
conversion price of $6.07 per share, subject to anti-dilution adjustments.
WARRANTS
General. The Company issued Warrants as part of the issuance of Old
Notes. Each Warrant, when exercised, will entitle the holder thereof to
receive 10.2377 shares of Common Stock of the Company (each, a "Warrant Share")
at an exercise price of $.01 per share (the "Exercise Price"). A total of
50,000 Warrants, representing 511,885 Warrant Shares were issued in connection
with the Old Notes; in addition, the Company issued to the Initial Purchaser
warrants to purchase 127,972 shares of Common Stock at an exercise price of
$.01 per share. The Exercise Price and the number of Warrant Shares issuable
on exercise of a Warrant are both subject to adjustment in certain cases. See
"Adjustments" below. The Warrants are exercisable at any time on or after the
Issue Date (the "Exercisability Date"). Unless exercised, the Warrants will
automatically expire on the maturity date of the Notes (the "Expiration Date").
The Company will give notice of expiration not less than 90 nor more than 120
days prior to the Expiration Date to the registered holders of the then
outstanding Warrants. The Warrants will entitle the holders thereof to
purchase in the aggregate approximately 10% of the outstanding Common Stock of
the Company on a fully diluted basis as of the date of issuance of the
Warrants.
Voting Rights. The holders of the Warrants will have no right to vote
on matters submitted to the stockholders of the Company and will have no right
to receive cash dividends. The holders of the Warrants will not be entitled to
share in the assets of the Company in the event of the liquidation, dissolution
or winding up of the Company's affairs.
Adjustments. Each of the number of Warrant Shares purchasable upon
the exercise of the Warrants and the Exercise Price will be subject to
adjustment in certain events including: (i) the payment by the Company of
dividends (or other distributions) on the Common Stock of the Company payable
in shares of such Common Stock or other shares of the Company's capital stock,
(ii) subdivisions, combinations and reclassifications of the Common Stock, and
(iii) the distribution to all holders of the Common Stock of any of the
Company's assets, debt securities or any rights or warrants to purchase
securities (excluding
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cash dividends or other cash distributions from current or retained earnings).
Subject to certain exceptions set forth in the Warrant Agreement, if
the Company issues (i) shares of Common Stock for a consideration per share
less than the current market value per share or (ii) any securities convertible
into or exchangeable for Common Stock for a consideration per share of Common
Stock initially deliverable upon conversion or exchange of such securities that
is less than the current market value per share on the date of issuance of such
securities, 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 or convertible securities), a
portion of such Common Stock 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.
Registration Rights. The Company has granted demand and piggy back
registration rights to holders of the Warrants pursuant to a Securityholders'
and Registration Rights Agreement (the "Securityholders' Agreement"). From
time to time after 180 days following the completion by the Company of a public
equity offering, holders of Warrant shares owning, individually or in the
aggregate, not less than the not less than 25% of the Warrant shares held in
the aggregate by all holders of Warrant shares may make a written request for
registration under the Securities Act of their warrant shares. Subject to
certain conditions, within 120 days of the receipt of such written request for
such a demand registration, the Company shall file with the Commission and use
its best efforts to cause to become effective under the Securities Act a
registration statement with respect to such securities. This summary of the
Securityholders' Agreement does not purport to be complete and is qualified in
its entirety by reference to the terms and provisions of the Securityholders'
Agreement.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by shareholders of the Company. Subject to any
preferential rights of any outstanding series of preferred stock designated by
the Board of Directors, the holders of Common Stock are entitled to receive,
ratably, with the holders of the Series A Preferred Stock and the Series B
Preferred Stock, such dividends, if any, as may be declared from time to time
by the Board of Directors out of funds legally available therefor. In the
event of liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to receive pro rata all assets of the Company
available for distribution to such holders after distribution in full of the
preferential amount to be distributed to holders of shares of the Series A
Preferred Stock and the Series B Preferred Stock. All outstanding shares of
Common Stock are validly issued, fully paid and nonassessable. The Company's
Articles of Incorporation deny preemptive rights and cumulative voting, however
the Company has granted certain preferential rights to purchase new issuances
of shares to certain shareholders. These rights expire upon an initial public
offering of at least $7.5 million. The Common Stock has no conversion rights
or other subscription rights and there are no redemption or sinking fund
provisions applicable to the Common Stock. The Company has granted piggy-back
and/or demand registration rights to certain shareholders. See "Certain
Relationships and Related Transactions."
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
The Company's Articles of Incorporation (the "Articles of
Incorporation") provide that the Board of Directors is vested with authority to
establish, from time-to-time, series of unissued shares of any class, to
determine and fix the designation and the relative rights, preferences and
limitations of the shares of each series so established, and to increase or
decrease the number of shares within each such series. The relative rights and
preferences of shares may vary in any respect between series, but all shares of
the same series shall be identical in all respects. The authority possessed by
the Board of Directors to issue different classes and series of stock could
potentially be used to discourage attempts by others to obtain control of the
Company through a merger, tender offer, proxy contest or otherwise by making
such attempts more difficult to achieve or more costly. The Board of Directors
may issue Preferred Stock with voting and conversion rights that could
adversely affect the voting power of the holders of Common Stock. There are no
agreements or understandings for the issuance of Preferred Stock and the Board
of Directors has no present intention to issue any Preferred Stock other than
the Series A Preferred Stock and Series B Preferred Stock described herein.
Article 1302-7.06 of the Texas Miscellaneous Corporation Act ("TMCA")
authorizes a Texas corporation to include a provision in its articles of
incorporation limiting or eliminating the personal liability of its directors
to the corporation and its shareholders for monetary damages for breach of
directors' fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors exercise an informed business judgment
based on all material information reasonably available to them. Absent the
limitations authorized by such provision, directors are accountable to
corporations and their shareholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Although
Article 1302-7.06 of the TMCA does not change a director's duty of care, it
enables corporations to limit available relief to equitable remedies such as
injunction or rescission. Pursuant to such provision, the Articles of
Incorporation limit the personal liability of directors of the Company (in
their capacity as directors but not in their capacity as officers) to the
Company or its shareholders to the fullest extent permitted by the TMCA.
Specifically, a director of the Company will not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for (i) any breach of
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the director's duty of loyalty to the Company or its shareholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases, redemptions or other distributions, and (iv) any transaction
from which the director derived an improper personal benefit.
The inclusion of this provision may have the effect of reducing the
likelihood of derivative litigation against directors and may discourage or
deter shareholders or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful, might
otherwise have benefitted the Company and its shareholders. However, the
inclusion of this provision together with a provision which requires the
Company to indemnify its officers and directors against certain liabilities, is
intended to enable the Company to attract qualified persons to serve as
directors who might otherwise be reluctant to do so.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The discussion below is intended to be a general description of the
United States tax considerations material to an investment in the Units. It
does not take into account the individual circumstances of any particular
investor and does not purport to discuss all of the possible tax consequences
of the purchase, ownership and disposition of the Notes, Warrants, or Common
Stock, and is not intended as tax advice. Therefore, prospective investors are
urged to consult their own tax advisors with respect to the tax consequences of
an investment in the Units, including the application of state, local, foreign
and other tax laws.
GENERAL
The following is a summary of certain United States federal income tax
consequences associated with the acquisition, ownership, and disposition of the
Notes and the Warrants. The following summary does not discuss all of the
aspects of federal income taxation that may be relevant to a prospective holder
of the Notes and Warrants in light of its particular circumstances, or to
certain types of holders that are subject to special treatment under the
federal income tax laws (including persons who hold the Notes and Warrants as
part of a conversion, straddle or hedge, dealers in securities, insurance
companies, tax-exempt organizations, financial institutions, broker-dealers and
S corporations). Further, except as specifically provided, this summary
pertains only to holders that are citizens or residents of the United States,
corporations, partnerships, or other entities created in or under the laws of
the United States or any political subdivision thereof, or estates or trusts
the income of which is subject to United States federal income taxation
regardless of its source. For taxable years beginning after December 31, 1996,
a trust will be considered a U.S. holder of a Note only if the trust is subject
to the supervision of a court within the United States and the control of a
United States fiduciary as described in Section 7701(a)(30) of the Internal
Revenue Code of 1986 (the "Code"). In addition, this summary does not describe
any tax consequences under state, local, or foreign tax laws and is limited to
holders who hold Notes, Warrants and Common Stock as "Capital Assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Code.
This summary is based upon the Code, Treasury Regulations (the
"Regulations."), rulings and pronouncements issued by the Internal Revenue
Service ("IRS") and judicial decisions now in effect, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes may be applied retroactively in a manner that could adversely
affect the holder of the Notes or Warrants. The Company has not sought and
will not seek any rulings from the IRS or opinions from counsel with respect to
the matters discussed below. There can be no assurance that the IRS will not
take positions concerning the tax consequences of the valuation, purchase,
ownership or disposition of the Units that are different from those discussed
herein.
CLASSIFICATION OF THE NOTES
Under applicable authorities, the Notes should be treated as
indebtedness of the Company for federal income tax purposes. In the unlikely
event that the Notes are treated as equity, the amount treated as a
distribution on any such instrument would be treated as (i) ordinary dividend
income to the extent of the current or accumulated earnings and profits of the
Company, (ii) a return of capital to the extent of a holder's basis in a Note,
and (iii) thereafter, capital gain.
Pursuant to Section 385(c) of the Code, a holder of a Note is required
to treat such Note as indebtedness for all United States federal income tax
purposes unless such holder discloses such inconsistent treatment on such
holder's tax return. The characterization of the Notes by the Company is not
binding on the IRS.
TAXATION OF THE NOTES
Issue Price. The issue price of the Notes will be the first price at
which a substantial amount of such Units are sold to investors. In order to
determine the issue price for the Notes and Warrants (initially sold as
"Units"), the aggregate issue price of the Notes and the Warrants must be
allocated between each of such Securities based upon their relative fair market
values on the date of issuance. If a holder purchases a Unit for the issue
price of the Unit, the holder's initial tax basis for the Note and the Warrants
constituting the Unit will equal the portion of the issue price of the Unit
allocated to each. The Company intends to
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allocate the issue price of the Units on a per Note and per Warrant basis. A
holder of a Unit may not adopt a different allocation unless such holder
properly discloses such different allocation on such holder's federal income
tax return for the year in which the Units were acquired.
Original Issue Discount. As noted above, because the Notes are being
offered as a part of a Unit including the Warrants, a portion of the offering
price for a Unit will be allocated to the Notes and a portion to the Warrants.
Since the portion allocable to a Note will be less than the Note's principal
amount, a Note will likely be issued at a discount from its face amount. If
the discount (generally referred to as "original issue discount" or "OID")
exceeds a statutory de minimis amount (1/4 of 1% of an obligation's stated
redemption price at maturity multiplied by the number of complete years to its
maturity), the Notes will be considered to be issued with original issue
discount. In addition to including in income the amount of stated interest
received or accrued, a holder will be required to include a portion of any such
OID as ordinary income for federal income tax purposes each year over the term
of the Notes so as to provide a constant yield to maturity.
The total amount of OID with respect to each Note will be the
difference between the issue price and the stated redemption price at maturity.
The issue price of a Unit will be the price paid by the purchasers (other than
the Underwriters) of the Units at their initial offering. This issue price
will then be allocated between the Note and the Warrant that comprise the Unit
as described above based on their relative fair market values. The stated
redemption price at maturity of a Note is the sum of all payments provided by
the Note other than "qualified stated interest" payments. Stated interest on
the Notes will constitute "qualified stated interest". Thus, the stated
redemption price at maturity of a Note will be equal to the principal amount of
such
Accept as provided in "-- Taxation of the Notes -- Subsequent
Purchasers" below, under the OID rules, in general, holders of Notes with OID
must include in gross income for federal income tax purposes the sum of the
daily portions of OID with respect to the Note for each day during the taxable
year or portion of a taxable year on which such holder holds the Note (such
sum, "Accrued OID"). The daily portion is determined by allocation to each day
of any accrual period within a taxable year a pro rata portion of an amount
equal to the adjusted issue price of the Note at the beginning of the accrual
period multiplied by the yield to maturity of the Note. For purposes of
computing OID, the Company will use six-month accrual periods that end on the
days in the calendar year corresponding to the maturity date of the Notes and
the date six months prior to such maturity date, with the possible exception of
the initial accrual period for the Notes. The adjusted issue price of a Note
at the beginning of any accrual period is the issue price of the Note increased
by the Accrued OID for all prior accrual periods (less all payments made on the
Notes other than payments of qualified stated interest). The yield to maturity
of a debt instrument is the interest rate that will produce an amount equal to
the issue price of the debt instrument used in computing the present value of
all payments to be made pursuant to the debt instrument The Company will
annually furnish to certain record holders of the Notes and to the IRS
information with respect to any OID accruing during the calendar year as may be
required by applicable Regulations.
Disposition of Notes. Generally, any sale or redemption or other
disposition of Notes (including in connection with an Asset Proceeds Offer)
will result in taxable gain or loss equal to the difference between (i) the
amount of cash and the fair market value of other property received and (ii)
the holder's adjusted tax basis in the Note. In the case of an initial holder
who purchases a Unit for the issue price of the Unit, the adjusted tax basis of
a Note will initially equal the portion of the issue price of the Unit that is
allocated to the Note and will be increased by any Accrued OID includable in
such holder's gross income, and decreased by all payments received by such
holder on such Note, other than a payment of qualified stated interest. Any
gain or loss upon a sale or other disposition of a Note will generally be
capital gain or loss, which will be long-term if the Note has been held by the
holder for more than one year.
Subsequent Purchasers. The foregoing does not discuss special rules
which may affect the treatment of purchasers that acquire Notes other than at
the time of original issuance at the issue price, including those provisions of
the Code relating to the treatment of "market discount," "acquisition premium"
and "amortizable bond premium." For example, the market discount provisions of
the Code may require a subsequent purchaser of Notes at a market discount to
treat all or a portion of any gain recognized upon sale or other disposition of
the Notes as ordinary income and to defer a portion of any interest expense
that would otherwise be deductible on any indebtedness incurred or maintained
to purchase or carry such Notes until the holder disposes of the Notes in a
taxable transaction.
AHYDO Rules. Sections 163(e)(5) and (i) of the Code affect the
treatment of interest on certain high yield OID debt instruments maturing more
than five years from the date of issuance ("AHYDOs"). The rules are complex
and ambiguous in many respects, and their full potential application to the
Notes cannot be anticipated with precision.
The Notes will constitute AHYDOs if (i) the Notes have "significant
original issue discount" within the meaning of the Code, and (ii) the yield to
maturity of the Notes is equal to or greater than the sum of the relevant
applicable federal rate (the "AFR") for the month in which the Notes are
issued, plus five percentage points. Based upon their terms, the Notes may
have "significant original issue discount." The relevant AFR for mid-term debt
instruments issued in March 1997 is 6.32% compounded semiannually. The Company
cannot yet ascertain whether the Notes will actually constitute AHYDOs under
the foregoing rules. If the Notes are AHYDOs, as described above, a portion of
the tax deductions that would otherwise be available to the Company in respect
of the Notes will be deferred or disallowed, which, in turn, might reduce the
after-tax cash
83
<PAGE> 88
flows of the Company. More particularly, if the Notes constitute AHYDOs, the
Company will not be entitled to deduct OID that accrues with respect to the
Notes until amounts attributable to OID are paid in cash or property
(excluding, however, stock of the Company or a related entity).
In addition, if the yield to maturity of the Notes exceeds the sum of
the relevant AFR plus six percentage points (the "Excess Yield"), the
"disqualified portion" of the OID accruing on the Notes will be characterized
as a nondeductible dividend with respect to the Company. The "disqualified
portion" of the OID is the lesser of (i) the amount of OID on the instrument
and (ii) the portion of the total return on such instrument that bears the same
ratio to such total return as the "Excess Yield" bears to the total yield to
maturity on the instrument. The tax treatment to holders of Notes will be
unaffected by these provisions except that corporate holders of the Notes may
be treated as receiving distributions with respect to the stock of the Company
(rather than interest on such debt instrument) eligible for the dividends
received deduction, subject to applicable limitations, to the extent of the
"disqualified portion" of the OID and to the extent that such distributions
would have been treated as dividends if actually made by the Company with
respect to its stock.
EXCHANGE OFFER
The offer to exchange Old Notes for Exchange Notes pursuant to the
Exchange Offer should not constitute a material modification of the terms of
the Old Notes and, therefore, such exchange should not constitute an exchange
for United States federal income tax purposes. Accordingly, such exchange
should have no United States federal income tax consequences to holders of
Notes. The basis of the Exchange Notes will be the same as the basis of the
Notes immediately before the exchange and the holding period of the Exchange
Notes will include the holding period of the Notes.
BACKUP WITHHOLDING
A noncorporate holder may be subject, under certain circumstances, to
backup withholding at a 31 percent rate with respect to payments received with
respect to the Notes and the Common Stock acquired upon exercise of a Warrant.
This withholding generally applies only if the holder (i) fails to furnish his
or her social security or other taxpayer identification number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) is notified by the IRS that he or she has
failed to report properly payments of interest and dividends and the IRS has
notified the Company that he or she is subject to back-up withholding, or (iv)
fails, under certain circumstances, to provide a certified statement, signed
under penalty of perjury, that the TIN provided is his or her correct number
and that he or she is not subject to backup withholding. Any amount withheld
from a payment to a holder under the backup withholding rules is allowable as a
credit against such holder's federal income tax liability, provided that the
required information is furnished to the IRS. Certain holders (including,
among others, corporations and foreign individuals who comply with certain
certification requirements) are not subject to backup withholding. Holders
should consult their tax advisors as to their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption.
These backup withholding tax and information reporting rules currently
are under review by the IRS and proposed Regulations issued on April 15, 1996,
if finalized would modify certain of such rules generally with respect to
payments made after December 31, 1997. Accordingly, the application of such
rules to the Notes and Common Stock acquired upon exercise of a Warrant could
be changed.
84
<PAGE> 89
LEGAL MATTERS
Certain legal matters regarding the Notes will be passed upon for the
Company by Akin, Gump, Strauss, Hauer & Feld, L.L.P., San Antonio, Texas.
Cecil Schenker, a shareholder of the Company, is the sole shareholder of a
professional corporation which is a partner of Akin, Gump, Strauss, Hauer &
Feld, L.L.P. Alan Schoenbaum, the son of a shareholder of the Company, is the
sole shareholder of a professional corporation which is a partner of Akin,
Gump, Strauss, Hauer & Feld, L.L.P.
EXPERTS
The (i) consolidated financial statements of Packaged Ice, Inc. as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996, (ii) the combined financial statements of Mission Party Ice,
Inc. (a S corporation) and Southwest Texas Packaged Ice, Inc. (an affiliated S
corporation) as of December 31, 1996, and for the period then ended included in
this Prospectus, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon such reports given upon the authority of that firm as experts
in accounting and auditing.
The financial statements of Southwestern Ice, Inc. as of December 31,
1996 and 1995, and for each of the two years then ended included in this
Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
85
<PAGE> 90
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PACKAGED ICE, INC. AND SUBSIDIARIES
Independent Auditors' Report F-2
Consolidated Balance Sheets at March 31, 1997 (unaudited) and December 31, 1996 and 1995 F-3
Consolidated Statements of Operations for the Three Months Ended March 31, 1997
and 1996 (unaudited) and for the Years Ended December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, 1997
(unaudited) and for the Years Ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the Three Months Ended March 31. 1997
and 1996 (unaudited) and for the Years Ended December 31, 1996, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
MISSION PARTY ICE. AND SOUTHWEST TEXAS PACKAGED ICE, INC.
Independent Auditors' Report F-14
Combined Balance Sheet at March 31, 1997 (unaudited) and December 31, 1996 F-15
Combined Statements of Operations and Retained Earnings for the Three Months
Ended March 31, 1997 (unaudited ) and for the Year Ended December 31, 1996 F-16
Combined Statements of Cash Flows for the Three Months Ended March 31, 1997
(unaudited) and for the Year Ended December 31, 1996 F-17
Notes to Combined Financial Statements F-18
Independent Auditors' Report on Additional Information F-22
Combined Balance Sheet with Combining Information for the Year Ended
December 31, 1996 F-23
Combined Statement of Operations with Combining Information for the
Year Ended December 31, 1996 F-24
SOUTHWESTERN ICE, INC.
Report of Independent Public Accountants F-25
Balance Sheets at March 31, 1997 (unaudited) and at December 31, 1996 and 1995 F-26
Statements of Operations and Changes in Retained Earnings for the Three Months Ended
March 31, 1997 and 1996 (unaudited) and for the Years Ended
December 31, 1996 and 1995 F-27
Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996 (unaudited)
and for the Years Ended December 31, 1996 and 1995 F-28
Notes to Financial Statements F-29
</TABLE>
F-1
<PAGE> 91
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Packaged Ice, Inc.:
We have audited the accompanying consolidated balance sheets of
Packaged Ice, Inc. and its subsidiaries (the "Company") as of December 31, 1996
and 1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company at December 31,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
March 21, 1997
F-2
<PAGE> 92
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS,
<TABLE>
<CAPTION>
ASSETS
MARCH 31 DECEMBER 31
1997 1996 1995
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 278,571 $ 169,535 $ 1,032,811
Accounts receivable:
Trade, net 361,250 213,811 181,752
Affiliates 223,535 119,476 169,383
Inventories 98,550 115,825 79,604
Prepaid expenses 29,877 29,309 21,493
------------ ------------ ------------
Total current assets 991,783 647,956 1,485,043
PROPERTY, Net 10,762,789 9,887,687 5,441,480
OTHER ASSETS, Net 1,167,104 987,145 1,123,263
------------ ------------ ------------
TOTAL $ 12,921,676 $ 11,522,788 $ 8,049,786
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,005,484 $ 703,077 $ 229,637
Accounts payable 439,057 324,624 238,414
Payable to affiliates 1,641,791 634,585 169,130
Accrued wages 94,952 112,622 66,570
Other accrued expenses 118,855 97,400 37,577
Notes payable 302,080 3,425 47,225
------------ ------------ ------------
Total current liabilities 3,602,219 1,875,733 788,553
LONG-TERM DEBT, Net 3,075,310 2,831,955 210,500
COMMITMENTS AND CONTINGENCIES (Note 13)
CONVERTIBLE NOTES 750,000
------------ ------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value; 50,000,000 shares authorized; shares issued
and outstanding of 2,832,371 at March 31, 1997, 2,826,371 at
December 31, 1996 and 1995 28,324 28,264 28,264
Preferred stock, $.01 par value; 5,000,000 shares
authorized; Series A convertible--450,000 shares
issued and outstanding at March 31, 1997,
December 31, 1996 and 1995 4,500 4,500 4,500
Preferred stock, $.01 par value; 200,000 shares authorized; Series B
convertible-124,831 shares issued and
outstanding at March 31, 1997 1,248
Additional paid-in capital 9,898,897 9,128,979 9,128,979
Subscription receivable (4,799)
Accumulated deficit (3,688,822) (3,096,643) (2,106,211)
------------ ------------ ------------
Total shareholders' equity 6,244,147 6,065,100 7,050,733
------------ ------------ ------------
TOTAL $ 12,921,676 $ 11,522,788 $ 8,049,786
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 93
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------------- -----------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $ 845,732 $ 649,673 $ 4,426,860 $ 2,830,493 $ 783,670
Cost of sales 459,780 324,722 2,034,828 1,251,527 352,126
----------- ----------- ----------- ----------- -----------
Gross profit 385,952 324,951 2,392,032 1,578,966
431,544
Selling, general and administrative
expenses 574,638 410,046 1,981,278 1,514,542
974,325
Depreciation and amortization expense 478,836 349,814 1,455,693 751,291 224,104
----------- ----------- ----------- ----------- -----------
Loss from operations (667,522) (434,909) (1,044,939) (686,867) (766,885)
Other income, net 160,645 16,602 184,982 75,314
69,494
Interest expense (85,302) (10,213) (130,475) (76,929) (24,522)
----------- ----------- ----------- ----------- -----------
Loss before income taxes (592,179) (428,520) (990,432) (688,482) (721,913)
Income taxes -- -- -- -- --
Net loss $ (592,179) $ (428,520) $ (990,432) $ (688,482) $ (721,913)
=========== =========== =========== =========== ===========
Loss per share of common stock $ (0.21) $ (0.15) $ (0.35) $ (0.26) $ (0.28)
=========== =========== =========== =========== ===========
Weighted average common shares
outstanding 2,828,085 2,826,371 2,826,371 2,682,261 2,614,681
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 94
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK
COMMON STOCK PAR VALUE
-------------------- --------------- ADDITIONAL
NUMBER OF PAR SERIES SERIES PAID-IN SUBSCRIPTION ACCUMULATED
SHARES VALUE A B CAPITAL RECEIVABLE DEFICIT TOTAL
--------- ------- ------- ------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT January 1, 1994 1,559,621 $15,596 $1,027,037 $ (99,999) $ (695,816) $ 246,818
Issuance of common stock 1,066,750 10,668 4,826,297 65,600 4,902,565
Net loss (721,913) (721,913)
--------- ------- ------- ------ ---------- --------- ----------- ----------
BALANCE AT December 31, 1994 2,626,371 26,264 5,853,334 (34,399) (1,417,729) 4,427,470
Issuance of common stock 700,000 7,000 3,279,418 29,600 3,316,018
Repurchase of common stock (500,000) (5,000) (2,495,800) (2,500,800)
Issuance of preferred stock $4,500 2,492,027 2,496,527
Net loss (688,482) (688,482)
--------- ------- ------ ------ ---------- --------- ----------- ----------
BALANCE AT December 31, 1995 2,826,371 28,264 4,500 9,128,979 (4,799) (2,106,211) 7,050,733
Issuance of common stock 4,799 4,799
Net loss (990,432) (990,432)
--------- ------- ------ ------ ---------- --------- ----------- ----------
BALANCE AT December 31, 1996 2,826,371 28,264 4,500 9,128,979 (3,096,643) 6,065,100
Issuance of common stock
(unaudited) 6,000 60 44,940 45,000
Issuance of preferred stock
(unaudited) $1,248 724,978 726,226
Net loss (unaudited) (592,179) (592,179)
--------- ------- ------ ------ ---------- --------- ----------- ----------
Balance at March 31, 1997
(unaudited) 2,832,371 $28,324 $4,500 $1,248 $9,898,897 $ $(3,688,822) $6,244,147
========= ======= ====== ====== ========== ========= =========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 95
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------------------- -----------------------------------------
1997 1996 1996 1995 1994
---------------------------- -----------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (592,179) $ (428,520) $ (990,432) $ (688,482) $ (721,913)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 478,836 349,814 1,455,693 751,291 224,104
Gain from disposal of assets (3,356) (1,956) (2,584)
Changes in assets and liabilities:
Accounts receivable (251,498) 39,785 17,848 (70,366) (270,369)
Inventories 17,276 2,175 (36,221) (37,575) (40,265)
Prepaid expenses (568) 3,227 (7,816) 1,834 15,749
Accounts payable 1,121,639 (60,866) 551,665 185,273 72,524
Accrued expenses (20,000) 58,763 105,875 5,908 73,296
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities 750,150 (37,578) 1,094,028 147,883 (646,874)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (1,350,256) (711,168) (5,744,900) (2,717,444) (2,998,950)
Increase in other assets (253,156) (171,078) (333,918) (243,621) (497,736)
Proceeds from disposition of property 72,871 41,091 153,733
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities (1,530,541) (841,155) (5,925,085) (2,961,065) (3,496,686)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common and
preferred stock 45,000 5,812,545 4,902,565
Repurchase of common stock (2,500,800)
Proceeds from debt issuance 882,784 71,383 3,604,403 82,232 155,077
Proceeds from issuance of convertible
demand notes 750,000
Repayment of debt (38,357) (386,622) (359,510) (160,564)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities 889,427 73,383 3,967,781 3,034,467 4,897,078
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 109,036 (807,350) (863,276) 221,285 753,518
CASH AND EQUIVALENTS, BEGINNING OF
PERIOD 169,535 1,032,811 1,032,811 811,526 58,008
----------- ----------- ----------- ----------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $ 278,571 $ 225,461 $ 169,535 $ 1,032,811 $ 811,526
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION--Cash payments for interest $ 100,201 6,692 $ 114,383 $ 75,606 $ 21,572
=========== =========== =========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES: Note
payable incurred to purchase other assets $ 188,862 $ 574,092
=========== ===========
Demand notes converted to
preferred stock $ 750,000
===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 96
PACKAGED ICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Packaged Ice, Inc. and its wholly owned subsidiaries (the "Company")
own and operate stand-alone automated merchandising ice systems ("ice systems")
installed primarily in retail grocery locations. These ice systems produce and
package bags of cubed ice at the customer's location. At December 31, 1996, the
Company's customers were located primarily in Texas, Louisiana, California,
Nevada, Arizona, Florida and New Mexico.
2. BASIS OF FINANCIAL STATEMENTS
As shown in the consolidated financial statements, the Company
incurred losses in each of the last three years ended December 31, 1996;
however, it was only in late 1992 that the Company emerged from the development
stage to commence its principal operations of owning and operating automated
merchandising ice systems.
The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's
continuation as a going concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations on a timely basis, to comply with
the terms and covenants of its financing agreements, to obtain additional
financing or refinancing as may be required and, ultimately, to attain
successful operations.
In each of the past three years, the Company has consistently
demonstrated the ability to successfully attract additional capital through
debt and equity financing to enable it to expand its operations and meet its
obligations. Management believes the Company will continue in 1997 to meet its
obligations and sustain operations through a combination of increased cash flow
from its expanded base of installed ice systems and through obtaining
additional debt financing and/or equity capital. The Company is currently in
the process of preparing a private placement offering circular to issue
$50,000,000 of senior unsecured debt which will be unconditionally guaranteed,
jointly and severally by each of the Company's wholly owned subsidiaries (see
Note 12). Proceeds from the offering are expected to be used for two pending
acquisitions, retirement of existing long-term debt, and for future capital
expenditures, acquisitions and working capital. See Note 14 for additional
information regarding the pending acquisitions and the private debt offering.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The consolidated financial statements
include the accounts of Packaged Ice, Inc. and its wholly owned subsidiaries.
All significant intercompany transactions have been eliminated upon
consolidation.
Presentation of Unaudited Interim Financial Information--The
consolidated financial statements presented herein at March 31, 1997 and for
the three-month periods ended March 31, 1996 and 1997 are unaudited; however,
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows
for the periods covered have been made and are of a normal, recurring nature.
Accounting measurements at interim dates inherently involve greater reliance on
estimates than at year end. The results of the interim periods are not
necessarily indicative of results to expect for the full year.
Inventories--Inventories consist of ice packaging polyethylene bags
and spare parts and are valued at the lower of first-in first-out cost or
market basis.
Property--Property is carried at cost and is being depreciated on a
straight-line basis over an estimated life of three to seven years. Maintenance
and repairs are charged to expense as incurred, while capital improvements
which extend the useful lives of the underlying assets are capitalized.
Other Assets--Other assets, consisting primarily of costs to acquire a
competitor's ice system location contracts, ice system patents and deferred
financing costs, are being amortized over 5, 17 and 3 years, respectively (see
Note 5).
Impairment of Long-Lived Assets--In March 1995 the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which requires that long-lived assets be
reviewed by an entity for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS No. 121 in 1996 did not result in a charge to
earnings in the accompanying financial statements.
F-7
<PAGE> 97
Income Taxes--The Company accounts for income taxes under the
liability method, which requires, among other things, recognition of deferred
income tax liabilities and assets for the expected future tax consequences of
events that have been recognized in the Company's consolidated financial
statements or tax returns. Under this method, deferred income tax liabilities
and assets are determined based on the temporary differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities and the recognition of available tax carryforwards.
Revenue Recognition--Under the contract terms, revenue is recognized
based upon the number of ice packaging polyethylene bags delivered to and
accepted by customers. Once accepted, there is no right of return with respect
to the bags delivered.
Earnings Per Share--The computation of earnings per share is based on
the weighted average number of shares outstanding. Shares of common stock
issuable under stock options have not been included in the computation of
earnings per share as their effect is antidilutive.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997; earlier
application is not permitted. SFAS No. 128 revises the methodology to be used in
computing earnings per share such that the computations required for primary and
fully diluted earnings per share are to be replaced with "basic" and "diluted"
earnings per share. Basic earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding during the year.
Diluted earnings per share is computed in the same manner as fully diluted
earnings per share, except that, among other changes, the average share price
for the period is used in all cases when applying the treasury stock method to
potentially dilutive outstanding options. The Company will adopt SFAS 128
effective December 31, 1997, and, as required, will restate earnings per share
for all periods presented. The Company anticipates that the amounts to be
reported for basic and diluted earnings per share for the three months ended
March 31, 1997 and 1996 and the years ended December 31, 1996, 1995 and 1994
will not differ significantly from the amounts reported under the current
accounting standards.
Cash Flows--The Company considers all highly liquid investments
purchased with a remaining maturity of three months or less to be cash
equivalents.
Fair Values of Financial Instruments--The Company's financial
instruments include certain current assets and liabilities where carrying value
approximates fair value. In addition, the carrying value of financial
instruments related to notes payable and long-term debt approximates fair value
as such instruments have variable rate terms.
Use of Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
4. PROPERTY AND EQUIPMENT
Property and equipment were as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Ice systems machinery and equipment $11,634,671 $ 6,089,241
Furniture and fixtures 32,278 29,114
Computer equipment 65,725 48,082
Autos/trucks 25,492
Leasehold improvements 16,526 14,695
----------- -----------
Total property and equipment 11,774,692 6,181,132
Less accumulated depreciation 1,887,005 739,652
----------- -----------
Total $ 9,887,687 $ 5,441,480
=========== ===========
</TABLE>
Depreciation expense for the three years ended December 31, 1996 was
$1,147,540, $502,161 and $187,047, respectively.
5. ACQUISITION OF SOUTHCO, INC. CONTRACTS
On November 21, 1994, the Company entered into a purchase agreement
(the "Purchase Agreement") with Southco, Inc. ("Southco") to purchase certain
of its assets, primarily the right to operate ice systems at 133 locations and
firm orders to operate ice systems in the future at 85 additional locations.
The cost was approximately $1,072,000 and was partially financed by a $574,092
note payable (see Note 6). The purchase price and related note are subject to
reduction (as defined) for a three-year period for cancellations/ terminations
of any existing locations or in the event that any of the identified firm order
locations do not become customers.
F-8
<PAGE> 98
Since the acquisition date seven existing locations have terminated and 31 firm
orders have canceled. Such activity has reduced the value of the rights
acquired to operate ice systems and the related note by approximately $153,000
plus interest previously paid. The assigned value of the right to operate the
ice systems has been recorded within other assets and is being amortized over
five years. The accumulated amortization related to this asset was $366,492 and
$228,910, at December 31, 1996 and 1995, respectively.
6. LONG-TERM DEBT
In March 1996 the Company executed a $10 million credit facility (the
"Facility") with a bank to replace an existing $4.5 million credit facility on
which no borrowings were outstanding at December 31, 1995. Funds available for
borrowing under this Facility are limited to the lesser of the Asset Value
Borrowing Base (as defined) or the Cash Flow Borrowing Base (as defined). The
Facility is secured by all ice systems, accounts receivable, inventory and all
material assets of the Company. In addition the Facility also contains
restrictive covenants which, among other things, require the attainment of
certain financial ratios and a minimum tangible net worth. The Facility bears
interest at the Company's option at either the prime rate or the London
Interbank Offered Rate plus an applicable margin based upon the Company's
financial condition (as defined) with outstanding interest due monthly through
March 1997. The applicable interest rate was 8.75% at December 31, 1996.
Beginning in April 1997, the Facility will convert to a 36-month term loan. In
October 1996 the Company notified the bank that it was in violation of certain
of the Facility's covenants and undertook negotiations to amend the Facility.
In December 1996 the Company and the bank amended the Facility with the
principal changes being to reduce the borrowing base to $4.0 million, amend
certain financial ratio covenants, and revise the term loan payments so that
they are calculated on a 48-month amortization with a final balloon payment due
at the end of three years.
In November 1994 the Company entered into a note payable (the "Southco Note")
to finance a portion of the Southco acquisition (see Note 5). The Southco Note
bears interest at an annual rate of prime plus 2% (10.25% at December 31, 1996)
and is secured by the shares of Southco Ice, Inc., as well as by certain
contracts to operate ice systems. The Southco Note required interest-only
payments for the first six months and thereafter 36 monthly payments of $19,136
plus accrued interest. At the note holder's option, the Southco Note is
convertible into shares of the Company's common stock at a conversion price of
$8 per share.
At December 31, 1996 and 1995, long-term debt consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Bank credit facility $3,485,000
Southco Note 43,814 $ 440,137
Other 6,218
---------- ----------
Total debt 3,535,032 440,137
Less current maturities 703,077 229,637
---------- ----------
Long-term debt, net $2,831,955 $ 210,500
========== ==========
</TABLE>
F-9
<PAGE> 99
The annual maturities of long-term debt as of December 31, 1996 are as follows:
<TABLE>
<S> <C> <C>
1997 $ 703,077
1998 871,646
1999 871,250
2000 1,089,059
----------
$3,535,032
==========
</TABLE>
7. NOTES PAYABLE
In December 1996 the Company received $750,000 in exchange for demand
notes bearing interest at a 10% annual rate. The notes were issued in
contemplation of converting into a new class of preferred stock, subject to
appropriate shareholder approval. Such approval occurred in January 1997 and
the notes plus accrued interest thereon were converted into Series B
Convertible Preferred Stock (see Note 10) at a conversion price of $6.07 per
share. At December 31, 1996, the demand notes were reflected as noncurrent
liabilities because of the ability and the intent of the note holders and of
the Company to convert the debt into preferred stock.
In September 1995 the Company entered into a note payable with an
investment holding company for $60,000. The balance on the note was paid in
full during 1996.
8. INCOME TAXES
The Company incurred losses for each of the three years in the period
ended December 31, 1996 for both financial reporting and tax return purposes.
Due to the uncertainty of being able to utilize such losses to reduce future
taxes, a valuation allowance has been provided to reduce to zero the net
deferred tax assets resulting primarily from the loss carryforwards available.
At December 31, 1996 and 1995, the cumulative effect of operating loss
carryforwards and differences in the carrying bases of assets and liabilities
for financial reporting purposes versus tax purposes resulted in the following
deferred tax balances, net of the valuation allowance:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets $ 1,786,259 $ 1,012,020
Valuation allowance (1,005,655) (716,661)
Deferred tax liabilities (780,604) (295,359)
----------- -----------
Net deferred tax liabilities $ 0 $ 0
=========== ===========
</TABLE>
The total valuation allowance increased by $288,994 in 1996 and
$240,000 in 1995.
Deferred tax assets resulted from the recognition of net operating
losses and from temporary differences related to amortization of intangible
assets. Deferred tax liabilities resulted from temporary differences related to
depreciation.
At December 31, 1996, the Company had approximately $4,900,000 of tax
loss carryforwards that expire between 2006 and 2011.
9. RELATED PARTIES
A customer, who is also a shareholder, represented approximately 16%,
16% and 32%, respectively, of the Company's revenues for the three years ended
December 31, 1996. At December 31, 1996 and 1995, the customer owed the Company
$56,880 and $109,000, respectively.
Certain affiliates of Company shareholders sell equipment and
inventory to the Company. Total expenditures incurred related to these entities
were $4,058,656 in 1996, $2,527,000 in 1995 and $2,205,000 in 1994. At December
31, 1996 and 1995, accrued liabilities to these entities totaled $605,336 and
$163,000, respectively.
Law firms associated with certain Company shareholders provided
services totaling $67,768 in 1996, $109,000 in 1995 and $52,000 in 1994.
A shareholder of the Company performed investment banking services in
1992 in exchange for $60,000 and a stock warrant to purchase up to 43,296
shares of the Company's common stock for $5.78 per share, subject to
antidilution adjustments. The warrant expires on April 15, 1997.
F-10
<PAGE> 100
The Company entered into a distributor agreement (the "Distributor
Agreement") to sell ice systems machinery and equipment to Southwest Texas
Packaged Ice, Inc., an entity owned by certain Company shareholders. This
entity has exclusive distributor rights in certain Texas counties for a period
of ten years effective May 19, 1994. The distributor purchases each ice system
at an agreed upon price and pays a royalty, as defined. The Company has the
right to repurchase all of the ice systems at a price defined in the
Distributor Agreement. The distributor purchased machinery and equipment for
$147,613 in 1996, $192,000 in 1995 and $176,000 in 1994. At December 31, 1996
and 1995, the distributor owed the Company $0 and $60,000, respectively.
The Company granted a stock option to a shareholder that gives the
option holder the right to purchase up to 80,358 shares of common stock at an
exercise price of $6.22 per share. The stock option expired December 31, 1996.
During 1996, the Company and Southwestern Ice, Inc. ("SWI") entered
into equipment lease and service agreements. Under the equipment lease, the
Company leased certain of its existing retail ice system locations and
additional ice systems to be installed within SWI's market area. The term of
the agreement is for five years with a five-year option and is accounted for as
an operating lease. Monthly rentals are variable depending on the number of
locations and ice systems subject to the lease agreement. For the year ended
December 31, 1996, the Company recorded $93,885 in rent revenue of which
approximately $34,000 was receivable at December 31, 1996. Under the service
agreement, SWI pays the Company a monthly management fee of $10,000 for the
Company to have primary responsibility for marketing the ice systems and
oversight responsibility for installing, operating, managing and servicing the
ice systems. In addition, SWI is required to reimburse the Company for certain
costs relating to activities under the agreement. The minimum monthly fee is
$5,000 per month plus certain expenses incurred by the Company. The term of
this agreement is for ten years or the termination of the equipment lease
agreement. The Company recorded approximately $129,000 in management fees and
reimbursed expenses during 1996 of which approximately $28,000 is receivable at
December 31, 1996.
Also during 1996 the Company entered into a consulting arrangement
with an individual affiliated through ownership with SWI. Under the terms of
this arrangement this individual would be paid $10,000 per month. At December
31, 1996, the Company has accrued $30,000 for these services.
10. CAPITAL STOCK
Preferred Stock--During September 1995, the Company's Board of
Directors authorized the designation of 450,000 shares of $.01 par value Series
A convertible preferred stock ("Series A"). Series A has no rights of
redemption or sinking fund provisions, but upon liquidation of the Company, the
Company must pay the Series A holders $5.56 per share (aggregate of $2,502,000)
before any amounts may be paid to the holders of common stock. Series A holders
are entitled to vote on all matters upon which the holders of common stock have
the right to vote and are generally entitled to vote as a class on any matters
adversely affecting their rights as holders of this series of preferred stock.
Each Series A holder is entitled to vote the number of equivalent common shares
that underlie their respective Series A investment. Each Series A share is
convertible into common stock without payment of additional consideration at a
conversion price of $5.56 per share, subject to antidilution adjustments.
On September 20, 1995, the Company received net proceeds of
approximately $5.8 million from a private placement offering and, in exchange,
issued 700,000 shares of common stock and 450,000 shares of Series A
convertible preferred stock. The proceeds from the offering were used (i) to
repurchase and retire 420,000 shares of common stock from an unrelated
shareholder for $2.5 million, (ii) to finance the purchase and installation of
ice systems in additional customer locations, and (iii) for working capital and
general corporate purposes. The Company also repurchased and retired 80,000
shares of common stock for $800.
During January 1997, the Company's board of directors authorized and
the shareholders approved the designation of 200,000 shares of $.01 par value
Series B convertible preferred stock ("Series B"). The Company issued 124,831
Series B shares in full satisfaction of the 10% convertible demand notes (see
Note 7). Series B has no rights of redemption or sinking fund provisions, but
upon liquidation of the Company, the Company must pay the Series B holders
$6.07 per share (aggregate $757,724) before any amounts may be paid to the
holders of common stock. Series B holders are entitled to vote on all matters
upon which the holders of common stock have the right to vote and are generally
entitled to vote as a class on any matters adversely affecting their rights as
holders of this series of preferred stock. Each Series B holder is entitled to
vote the number of equivalent common shares that underlie their respective
Series B investment. Each Series B share is convertible into common stock
without payment of additional consideration at a conversion price of $6.07 per
share, subject to antidilution adjustments.
Common Stock--Holders of the Company's common stock are entitled to
one vote per share on all matters to be voted on by shareholders and are
entitled to receive dividends, if any, as may be declared from time to time by
the Board of Directors of the Company. Upon any liquidation or dissolution of
the Company, the holders of common stock are entitled, subject to any
preferential rights of the holders of preferred stock, to receive a pro rata
share of all of the assets remaining available for distribution to shareholders
after payment of all liabilities.
F-11
<PAGE> 101
On January 4, 1994, the Company issued 1,066,750 shares of common
stock for $4,837,000 in a private placement offering.
In 1993 the Company sold 16,077 common shares at $6.22 per share to an
entity that produces packaging components used in the Company's ice systems.
The $99,999 consideration to be received from this entity was shown as an
offset to shareholders' equity and was reduced by a sales discount on the price
charged for the packaging component of the ice system for each of the first 500
packaging components delivered. At December 31, 1996, full consideration for
the stock subscription had been received.
In connection with the Southco acquisition (see Note 5), two
individuals are eligible to receive stock options to purchase a total of 20,000
shares of common stock. The exercise price will be the fair market value as
determined by the Board of Directors on the grant date. At December 31, 1996,
no options had been granted under this agreement.
11. EMPLOYEE BENEFIT PLAN
During 1996 the Company established a 401(k) defined contribution
savings plan for the benefit of all employees who have completed one year of
service and have met the eligibility requirements to participate. Employees may
contribute up to the maximum amount allowed by the Internal Revenue Service,
while Company contributions are made at the discretion of the Board of
Directors. The Company contributed approximately $20,000 to the plan during
1996.
During 1994 the Company adopted a nonqualified stock option plan (the
"Plan"), which reserved for issuance 130,000 shares of common stock under the
terms of the Plan. At December 31, 1996, 66,500 shares were available for
future grants. Stock option activity for the three years ended December 31,
1996 is summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE EXERCISE
NUMBER OF PRICE PRICE
OPTIONS SHARES PER SHARE PER SHARE
- ------- ------ --------- ---------
<S> <C> <C> <C>
Granted during 1994 35,000 $6.22 $6.22
Granted during 1995 22,500 6.75 6.75
Granted during 1996 6,000 7.50 7.50
------
Outstanding at December 31, 1996 63,500 6.53
====== =====
</TABLE>
Such options vest ratably over five years and expire ten years from
the date of grant. Exercisable stock options at December 31, 1996 and 1995 were
18,500 and 7,000, respectively.
The Company measures compensation cost for this Plan using the
intrinsic value method of accounting prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no
compensation cost has been recognized. Had compensation cost for the Plan been
determined using the fair value method of accounting as set forth in SFAS No.
123, "Accounting for Stock--Based Compensation," there would have been no
material difference in the Company's net loss for 1996 or 1995.
12. SUBSIDIARIES
The Company has two wholly owned subsidiaries, Southco Ice, Inc.
("SII") which began operations in November 1994 and Packaged Ice Leasing, Inc.
("PILI") which began operations in October 1993. SII operates ice systems at
the locations acquired from Southco (see Note 5), while PILI owns certain ice
systems that are leased to the Company. The following table sets forth the
condensed combined financial information for the Company's subsidiaries.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Operating Data:
Revenues $2,403,516 $2,123,701 $305,909
Net loss (235,960) (848,779) (122,125)
<CAPTION>
AS OF DECEMBER 31,
-------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Balance Sheet Data:
Current assets $ 184,434 $ 356,179
Property and equipment, net 5,422,595 3,198,724
Total assets 6,099,388 4,343,677
Long-term debt 43,814 440,137
Total shareholder's equity (1,195,995) (940,035)
</TABLE>
F-12
<PAGE> 102
13. COMMITMENTS AND CONTINGENCIES
In April 1993 the Company entered into an agreement to purchase all of
the ice system packaging components from a shareholder for a period of three
years or until a minimum of 3,600 components had been purchased. At December
31, 1996, the Company had purchased 811 components.
The Company has agreed to purchase all of the merchandiser portions of
the ice systems from an unaffiliated company for a period of two years or until
a minimum of 2,400 merchandisers are purchased. At December 31, 1996, the
Company had purchased 658 merchandisers.
Relating to the Purchase Agreement with Southco, the Company's
subsidiary leased and subleased certain ice systems from Southco for a
five-year period. Rental payments are $110 per month per ice system. Payments
will be reduced for any leased ice systems removed from Company locations.
On March 22, 1994, the Company entered into a five-year building
operating lease. Future minimum lease payments will be approximately $45,000 in
1997, $47,000 in 1998 and $16,000 in 1999. In addition, the Company has a
year-to-year building operating lease for its Dallas facility. Future minimum
lease payments will be approximately $9,000 in 1997.
The Company could be involved in various claims, lawsuits and
proceedings arising in the ordinary course of business. While there are
uncertainties inherent in the ultimate outcome of such matters and it is
impossible to presently determine the ultimate costs that may be incurred,
management believes the resolution of such uncertainties and the incurrence of
such costs should not have a material adverse effect on the Company's
consolidated financial position or results of operations.
14. SUBSEQUENT EVENTS (UNAUDITED)
On April 17, 1997 the Company completed the sale of $50,000,000 senior
unsecured debt (the "Notes") in connection with a private placement offering
which was prepared in compliance with Rule 144A and Regulation D under the
Securities Act. Concurrent with the sale of the Notes, the Company consummated
agreements with Mission Party Ice, Inc. and Southwest Texas Packaged Ice, Inc.
(the "Mission Acquisition" and "STPI Acquisition", respectively) and SWI (the
Southwestern Acquisition"). The Mission Acquisition and STPI Acquisition
companies are controlled by an existing shareholder of the Company and operate
separate and distinct ice manufacturing facilities primarily in South Texas. SWI
operates ice manufacturing facilities in Arizona, New Mexico, California, Texas
and Tennessee. Total combined consideration for the Mission and STPI
Acquisitions was $10.4 million, consisting of $3.4 million in cash, $3.4 million
in the assumption and repayment of seller debt and $3.6 million in shares of the
Company's common stock. Total consideration for the SWI Acquisition was $18.8
million, consisting of $3.5 million in cash, $9.3 million in the assumption and
repayment of seller debt and $6.0 million in shares of the Company's common
stock. Each acquisition is being accounted for under the purchase method.
Results of operations and cash flows of the acquired businesses will be included
in the consolidated financial statements for the periods subsequent to the
respective dates of acquisition. The Company has not completed an assessment of
the fair value of the net assets acquired for purposes of allocating the
purchase price. Accordingly, the approximate $14.5 million excess of the
purchase price over the net book value of the acquired businesses has been
allocated entirely to goodwill at this time.
The Company sold the Notes at a price of 96% of the par value, or
$48,000,000, which was used to finance the cash portion of the purchase price
for the acquisitions and to pay certain related expenses, repay outstanding
indebtedness, make capital expenditures and provide additional working capital.
In June 1997, the Company was in the process of exchanging the Notes
with new debt (the "Exchange Notes"). The Exchange Notes will be identical in
all material respects to the form and terms of the Notes except that the
Exchange Notes will be registered under the 1933 Securities Act and will not
contain certain transfer restrictions.
F-13
<PAGE> 103
INDEPENDENT AUDITORS' REPORT
To the Stockholder of Mission Party Ice, Inc. and
Stockholders of Southwest Texas Packaged Ice, Inc.:
We have audited the accompanying combined balance sheet of Mission
Party Ice, Inc. (a S corporation) and Southwest Texas Packaged Ice, Inc. (an
affiliated S corporation) (collectively, the "Companies"), both of which are
under common ownership and common management, as of December 31, 1996, and the
related combined statements of operations and retained earnings and of cash
flows for the year then ended. These combined financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the combined financial position of the Companies at December
31, 1996, and the combined results of their operations and their cash flows for
the year then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Houston, Texas
March 21, 1997
F-14
<PAGE> 104
MISSION PARTY ICE, INC. (A S CORPORATION) AND
SOUTHWEST TEXAS PACKAGED ICE, INC. (A S CORPORATION)
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
March 31, 1997 December 31, 1996
--------------- -----------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 46,094 46,468
Accounts receivable:
Trade, net 521,095 556,925
Affiliates 282,743 379,619
Inventories 142,706 164,013
Prepaid expenses 24,673 47,180
----------- -----------
Total current assets 1,017,311 1,194,205
PROPERTY, NET 4,518,417 4,547,978
OTHER ASSETS, NET 269,634 274,352
NET ASSETS FROM DISCONTINUED OPERATIONS 312,994 316,520
----------- -----------
TOTAL 6,118,356 $ 6,333,055
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt 1,906,633 $ 1,483,228
Accounts payable:
Trade 496,571 621,562
Payable to affiliates 162,436 155,408
Accrued expenses 118,779 82,707
----------- -----------
Total current liabilities 2,684,419 2,342,905
----------- -----------
LONG-TERM DEBT, NET 1,704,378 1,692,620
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS' EQUITY:
Common stock (Mission: 1,000,000 shares authorized, $.01 par
value, 1,000 shares issued and outstanding; STPI: 1,000,000
shares authorized, $1 par value; 1,250 shares issued) 1,260 1,260
Additional paid-in capital 1,538,026 1,538,026
Retained earnings 200,273 768,244
Less 25 shares of STPI treasury stock at cost (10,000) (10,000)
----------- -----------
Total shareholders' equity 1,729,559 2,297,530
----------- -----------
TOTAL $ 6,118,356 6,333,055
----------- -----------
</TABLE>
See notes to combined financial statements.
F-15
<PAGE> 105
MISSION PARTY ICE, INC. (A S CORPORATION) AND
SOUTHWEST TEXAS PACKAGED ICE, INC. (A S CORPORATION)
COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
(UNAUDITED)
<S> <C> <C>
Revenues $ 998,702 $7,704,514
Costs of sales 813,665 4,683,307
--------- ----------
Gross profit 185,037 3,021,207
Selling, general and administrative expenses 418,728 1,498,622
Depreciation and amortization expense 254,138 973,712
--------- ----------
Income (loss) from operations (487,829) 548,873
Other income, net 9,592 64,432
Interest expense (89,734) (271,535)
--------- ----------
Income (loss) from continuing operations
before income taxes (567,971) 341,770
Income taxes 0
--------- ----------
Income (loss) from continuing operations (567,971) 341,770
Income from discontinued operations 0 83,133
--------- ----------
Net income (loss) (567,971) 424,903
Retained earnings, Beginning of period 768,244 343,341
--------- ----------
Retained earnings, End of period $ 200,273 $ 768,244
========= ==========
</TABLE>
See notes to combined financial statements.
F-16
<PAGE> 106
MISSION PARTY ICE, INC. (A S CORPORATION) AND
SOUTHWEST TEXAS PACKAGED ICE, INC. (A S CORPORATION)
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $ (567,971) $ 341,770
Adjustments to reconcile income (loss) from continuing operations
to net cash provided by (used in) operating activities:
Depreciation and amortization 254,138 973,712
Gain from disposal of assets (29,529)
Changes in assets and liabilities:
Accounts receivable 132,706 (406,564)
Inventories 21,307 (23,559)
Prepaid expenses 22,507 37,160
Accounts payable (114,437) 175,410
Accrued expenses 36,072 1,377
Net cash flows provided by operating activities of discontinued
operations 0 447,319
----------- -----------
Net cash provided by used in operating activities (215,678) 1,517,096
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (219,859) (1,731,607)
Proceeds from disposition of property 77,023
Net cash flows used in investing activities of discontinued
operations (413,390)
----------- -----------
Net cash used in investing activities (219,859) (2,067,974)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance 600,000 1,647,500
Repayment of debt (164,837) (1,055,657)
Treasury stock purchases (10,000)
Net cash flows from financing activities of discontinued
operations 0 4,347
---------- -----------
Net cash provided by financing activities 435,163 586,190
---------- -----------
NET DECREASE IN CASH AND EQUIVALENTS (374 35,312
CASH AND EQUIVALENTS, DECEMBER 31, 1996 46,468 11,156
---------- -----------
CASH AND EQUIVALENTS, MARCH 31, 1997 $ 46,094 $ 46,468
========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash payments for interest $ 20,641 $ 272,849
========== ===========
</TABLE>
See notes to combined financial statements.
F-17
<PAGE> 107
MISSION PARTY ICE, INC. (A S CORPORATION) AND
SOUTHWEST TEXAS PACKAGED ICE, INCC. (A S CORPORATION)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION
Mission Party Ice, Inc. ("Mission") and Southwest Texas Packaged Ice,
Inc. ("STPI") (collectively, the "Company" or "Companies") were incorporated to
do business in Texas in 1988 and 1991, respectively. Mission owns and operates
ice manufacturing facilities in San Antonio, Corpus Christi and Gonzales,
Texas. STPI owns and operates stand-alone automated merchandising ice systems
("ice systems") installed primarily in retail grocery locations. These ice
systems produce and package bags of cubed ice at the customer's location. The
Company operates in the South Texas region.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination--Both Mission and STPI are controlled through
ownership by the same stockholder and are under common management. As a result
the 1996 financial statements and related footnote disclosures are presented on
a combined basis. All significant intercompany accounts and transactions have
been eliminated upon combination.
Presentation of Unaudited Interim Financial Information--The combined
financial statements presented herein at March 31, 1997 and for the three-month
periods ended March 31, 1997 are unaudited; however, all adjustments which are,
in the opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods covered have been
made and are of a normal, recurring nature. Accounting measurements at interim
dates inherently involve greater reliance on estimates than at year end. The
results of the interim periods are not necessarily indicative of results to
expect for the full year.
Inventories--Inventories are valued at the lower of first-in first-out
cost or market basis and consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Manufactured ice $ 33,547
Ice packaging bags 75,804
Parts and supplies 54,662
--------
Total inventory $164,013
========
</TABLE>
Property--Property is carried at cost and is being depreciated on a
straight-line basis over estimated lives of five to seven years. Maintenance
and repairs are charged to expense as incurred, while capital improvements
which extend the useful lives of the underlying assets are capitalized.
Other Assets--Other assets, consisting primarily of costs associated
with the acquisition of competitors' ice manufacturing facilities and ice
system location contracts, are being amortized over three to five years (see
Note 5). Accumulated amortization was $210,398 at December 31, 1996.
Impairment of Long-Lived Assets--In 1996 the Companies adopted
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which requires that long-lived assets be reviewed for impairment whenever
events or circumstances indicate that the carrying amount of an asset may not
be recoverable. The adoption of SFAS No. 121 did not result in a charge to
earnings in the accompanying combined financial statements.
Income Taxes--Mission and STPI are not subject to income taxes as both
have elected, under applicable provisions of the Internal Revenue Code, to be
treated as a Subchapter S corporation. Accordingly, the proportionate share of
each Company's taxable income or loss is reported in the respective
stockholder's individual tax return. Therefore, no liability for federal income
taxes has been recorded in the accompanying combined financial statements.
Revenue Recognition--Mission's revenues are recognized upon the
delivery and acceptance of ice products to customer locations. Revenue is
recognized by STPI in accordance with contracted terms based upon the number of
ice packaging bags delivered to and accepted by customers. Once accepted, there
is no right of return with respect to the bags delivered.
Cash Flows--The Company considers all highly liquid investments
purchased with a remaining maturity of three months or less to be cash
equivalents.
Fair Values of Financial Instruments--The Company's financial
instruments include certain current assets and liabilities where carrying value
approximates fair value. In addition, the carrying value of financial
instruments related to long-term debt approximate fair value based on
management's opinion that stated interest rates are representative of rates
currently available to the Companies for comparable borrowings. It is not
practicable to estimate the fair value of the related party balances due to the
instruments nature.
F-18
<PAGE> 108
Use of Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
3. DISCONTINUED OPERATIONS
In December 1996, Mission entered into formal negotiations to sell
Mission Ice Equipment Company ("MIECO"), a division of Mission, to Southwest
Texas Equipment Distributors ("STED"). STED is affiliated with Mission through
common ownership. MIECO's business involves the sale or lease of commercial
food service equipment to retail establishments. The net assets of MIECO were
sold on January 2, 1997 for a price of $316,520, which equaled their net book
value at this date. No gain or loss was recorded on the disposal. Costs and
expenses directly associated with the disposition were paid by STED.
4. PROPERTY AND EQUIPMENT
Property and equipment were as follows at December 31, 1996:
<TABLE>
<S> <C>
Ice systems machinery and equipment $ 6,250,893
Furniture and fixtures 122,068
Auto/truck 1,480,184
Computer equipment 246,204
Leasehold improvements 12,967
Land 35,095
-----------
Total property and equipment 8,147,411
Less accumulated depreciation (3,599,433)
-----------
Total $ 4,547,978
===========
</TABLE>
Depreciation expense for the year ended December 31, 1996 was
$893,485.
5. CURRENT ACQUISITIONS
McGehee--Neutze, Inc. ("MNI")--In May 1996 Mission acquired certain
assets of MNI including ice merchandising equipment and a vehicle for $77,500.
The acquisition was funded through Mission's bank credit facility. As part of
the acquisition, MNI agreed to perform sales and customer relations work within
the MNI market area, primarily Webb County, Texas in exchange for approximately
$170,000 to be paid over a three year term. Such purchase consideration was
recorded in other assets with an offsetting amount in accounts payable. Payment
of amounts under this service agreement are guaranteed by Mission's sole
stockholder. The assigned value of this agreement is being amortized over the
agreement term with accumulated amortization of approximately $23,000 at
December 31, 1996.
Southco, Inc. ("Southco") Contracts--On November 21, 1994, STPI
entered into a purchase agreement (the "Purchase Agreement") with Southco to
purchase certain of its assets, primarily the right to operate ice systems at
33 locations and firm orders to operate ice systems in the future at seven
additional locations. The cost was approximately $188,000 and was partially
financed by a $105,620 note payable (see Note 6). The purchase price and
related note are subject to reduction (as defined) for a three year period for
cancellations/terminations of any existing locations or in the event that any
of the identified firm order locations do not become customers.
The assigned value of the right to operate ice systems and associated
costs has been recorded within other assets and is being amortized over five
years. The accumulated amortization related to this asset was approximately
$80,000 at December 31, 1996.
6. LONG-TERM DEBT AND NOTES PAYABLE
At December 31, 1996, long-term debt of the Companies consisted of the
following:
<TABLE>
<S> <C>
Frost National Bank $2,612,616
Jefferson State Bank 523,249
Southco Note 33,958
Other 6,025
----------
Total debt 3,175,848
Less current maturities 1,483,228
----------
Long-term debt, net $1,692,620
==========
</TABLE>
F-19
<PAGE> 109
Frost National Bank--The Company and Frost National Bank have entered
into a secured loan agreement (the "Bank Loan Agreement"), as last amended
January 1997, to finance capital expenditures and seasonal working capital
needs. Under the provisions of the Bank Loan Agreement, available financing
consists of a term loan (the "Term Loan"), a working capital line of credit and
an equipment purchase line of credit (collectively, the "Lines of Credit").
Borrowings under the Bank Loan Agreement are secured by Mission's machinery and
equipment, accounts receivable, the pledge of Mission's common stock and the
personal guarantee of Mission's sole shareholder as well as the guarantees of
STPI and STED. The Bank Loan Agreement contains restrictive covenants which,
among other things, requires the Company to maintain a minimum tangible net
worth (as defined) and a specific ratio of cash flow to current maturities of
long-term debt. The terms of the Bank Loan Agreement also prohibit the payment
of dividends, limit annual capital expenditures and limit the Companies'
ability to incur additional debt. The maximum combined credit under the Lines
of Credit is $1,475,000, subject to borrowing base limitations which are
generally computed as a percentage of various classes of eligible accounts
receivable, qualifying inventory and fixed assets (as defined) of Mission, STPI
and STED. The Company pays no annual facility fee related to the Lines of
Credit.
The balance of the Term Loan was $904,155 at December 31, 1996. The
Term Loan bears interest at prime plus 1% (9.25% at December 31, 1996) and is
payable in monthly installments of $21,840 through July 2000. The balance of
the Lines of Credit was $425,000 at December 31, 1996. The Lines of Credit
mature on May 31, 1997 and bear interest at prime plus 1% (9.25% at December
31, 1996).
In addition, the Companies enter into secured promissory note
agreements with Frost National Bank from time to time in order to finance the
purchase of equipment, which is in turn used as collateral for the notes. At
December 31, 1996, borrowings under such notes were $1,283,461. These notes
bear interest at prime plus 1% (9.25% at December 31, 1996) and require
principal and interest payments in equal monthly installments ranging from
three to five years.
Jefferson State Bank--The Companies enter into secured promissory note
agreements ("Promissory Notes") with Jefferson State Bank at various dates in
order to finance the purchase of ice merchandisers and/or transportation
vehicles, which are in turn used as collateral for the Promissory Notes. The
notes outstanding at December 31, 1996 bear interest at a fixed rate ranging
from 6.5% to 9.0%. The Promissory Notes require principal and interest payments
in equal monthly installments ranging from two to four years.
Southco Note--In November 1994 STPI issued a note (the "Southco Note")
to finance a portion of the Southco acquisition (see Note 5). The Southco Note
bears interest at an annual rate of prime plus 2% (10.25% at December 31, 1996)
and is secured by the contracts to operate ice systems. The Southco Note
required interest-only payments for the first six months and thereafter 36
monthly payments of $3,521 plus accrued interest.
The weighted average interest rate for the Companies was 9.27% for the
year ended December 31, 1996.
The Companies long-term debt maturities are as follows:
<TABLE>
<C> <C>
1997 $1,483,228
1998 782,292
1999 584,820
2000 317,328
2001 8,180
----------
$3,175,848
==========
</TABLE>
7. RELATED PARTIES
STPI entered into a distributor agreement (the "Distributor
Agreement") to purchase ice systems machinery and equipment from Packaged Ice,
Inc. ("Packaged Ice"), an entity affiliated through common ownership. Under
provisions of the Distributor Agreement, STPI has exclusive purchasing rights
in certain Texas counties for a period of ten years effective May 19, 1994.
STPI purchases each ice system at an agreed upon price and pays a royalty, as
defined. Packaged Ice has the right to repurchase all of the ice systems at a
price defined in the Distributor Agreement. STPI's purchases under the
Distributor Agreement were $147,613 for the year ended December 31, 1996. No
amounts were payable related to these transactions at December 31, 1996.
Certain affiliates of the Companies' shareholders sell ice
merchandisers to Mission. During 1996, Mission incurred approximately $100,000
of capital expenditures related to these entities.
The Companies, from time to time, advance and receive funds from
affiliates in the normal course of operations for working capital purposes.
Such transactions are reflected in accounts receivable-affiliates and accounts
payable-affiliates on the combined balance sheet in the respective amounts of
$360,589 and $49,856 at December 31, 1996. In addition, Mission has $105,552 of
8.75% interest bearing demand notes due affiliates and $19,030 of employee
receivables at December 31, 1996.
F-20
<PAGE> 110
The Companies lease certain property from individuals affiliated
through ownership. Total payments under these leases were $87,600 in 1996. See
Note 9 for additional information regarding noncancellable lease commitments.
8. CAPITAL STOCK
Common Stock--Respective holders of Mission and STPI's common stock
are entitled to one vote per share on all matters to be voted on by
shareholders and are entitled to receive dividends, if any, as may be declared
from time to time by the respective Board of Directors of the Companies. Upon
any liquidation or dissolution of either Company, the holders of common stock
are entitled to receive a pro rata share of all of the assets remaining
available for distribution to shareholders after payment of all liabilities.
In 1993, STPI entered into a Stock Purchase and Restriction Agreement
(the "Agreement") with certain employees of STPI. The Agreement allowed these
employees to purchase up to a 20% interest in STPI's $1 par value common stock
for a purchase price of $50,000. The Agreement gave the new shareholders a put
option whereby STPI would repurchase the shares at a price equal to the greater
of the original purchase price or the then adjusted book value (as defined).
Upon termination of employment or death, STPI has the option to repurchase such
shares in accordance with the put option formula. The Agreement restricts such
shares from being sold, pledged, gifted or otherwise disposed of without
offering such shares to the majority stockholder. During 1996 STPI repurchased
and placed in treasury 25 shares of common stock from minority shareholders for
$10,000.
9. COMMITMENTS AND CONTINGENCIES
Relating to the Purchase Agreement with Southco, STPI leased certain
ice systems from Southco for a five year period. Rental payments are $110 per
month per ice system.
The Companies have entered into various noncancellable operating
leases for buildings and other property. The Company subleases some of the
property included under these leases. The annual future minimum lease payments
under these leases, and the related sublease amounts, are as follows:
<TABLE>
<CAPTION>
PAYMENT SUBLEASE NET
------- -------- ---------
<C> <C> <C> <C>
1997 $330,000 $12,000 $318,000
1998 74,000 2,000 72,000
1999 16,000 16,000
</TABLE>
The Companies may be involved in various claims, lawsuits and
proceedings arising in the ordinary course of business. While there are
uncertainties inherent in the ultimate outcome of such matters and it is
impossible to presently determine the ultimate costs that may be incurred,
management believes the resolution of such uncertainties and the incurrence of
such costs should not have a material adverse effect on the Companies's
combined financial position or results of operations.
10. EMPLOYEE BENEFIT PLANS
On January 1, 1994, the Company, in conjunction with affiliated
companies controlled through ownership by the same stockholder established a
401(k) defined contribution savings plan (the "Plan") covering substantially
all of the affiliates' employees. Employees may elect to contribute on a
pre-tax basis up to 15% of their eligible compensation to the Plan. For those
participants who have elected to make voluntary contributions to the Plan, the
Company's matching contributions consist of an amount of up to 2% of the
eligible compensation of the participants. An additional matching contribution
may be made by the Company at the discretion of the Board of Directors. Such
contributions vest ratably over a period of five years. The Company contributed
approximately $30,000 to the Plan for the year ended December 31, 1996.
11. SUBSEQUENT EVENTS (UNAUDITED)
On April 17, 1997, the Companies consummated an agreement with Packaged
Ice to merge into wholly owned subsidiaries of Packaged Ice. The total combined
consideration for those acquisitions was $10.4 million, consisting of $3.4
million in cash, $3.4 million in the assumption and repayment of seller debt and
$3.6 million in shares of Packaged Ice common stock payable to the Companies'
shareholders.
F-21
<PAGE> 111
INDEPENDENT AUDITORS' REPORT
ON ADDITIONAL INFORMATION
To the Stockholder of Mission Party Ice, Inc. and
Stockholders of Southwest Texas Packaged Ice, Inc.:
Our audit was conducted for the purpose of forming an opinion on the
basic combined financial statements taken as a whole. The additional combined
balance sheet with combining information as of December 31, 1996 and the
combined statement of operations with combining information for the year ended
December 31, 1996 are presented for the purpose of additional analysis of the
basic combined financial statements rather than to present the financial
position and results of operations of the individual companies and are not a
required part of the basic combined financial statements. This additional
combining information is the responsibility of the Companies' management. Such
combining information has been subjected to the auditing procedures applied in
our audit of the basic combined financial statements and, in our opinion, is
fairly stated in all material respects when considered in relation to the basic
combined financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Houston, Texas
March 21, 1997
F-22
<PAGE> 112
MISSION PARTY ICE, INC. (A S CORPORATION) AND
SOUTHWEST TEXAS PACKAGED ICE, INC. (A S CORPORATION)
COMBINED BALANCE SHEET WITH COMBINING INFORMATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
SOUTHWEST
MISSION TEXAS
PARTY ICE PACKAGED COMBINING COMBINED
INC. ICE, INC. ADJUSTMENTS BALANCE
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 36,149 $ 10,319 $ 46,468
Accounts receivable:
Trade 477,480 79,445 556,925
Affiliates 491,394 4,778 $ (116,553) 379,619
Inventories 146,278 17,735 164,013
Prepaid expenses 45,468 1,712 47,180
----------- ----------- ---------- -----------
Total current assets 1,196,769 113,989 (116,553) 1,194,205
PROPERTY, NET 3,591,511 956,467 4,547,978
OTHER ASSETS, NET 161,740 112,612 274,352
NET ASSETS FROM DISCONTINUED OPERATIONS 374,282 (57,762) 316,520
----------- ----------- ---------- -----------
TOTAL $ 5,324,302 $ 1,183,068 $ (174,315) $ 6,333,055
=========== =========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,161,544 $ 321,684 $ 1,483,228
Accounts payable 509,689 111,873 621,562
Payable to affiliates 105,522 224,201 $ (174,315) 155,408
Accrued expenses 63,473 19,234 82,707
----------- ----------- ---------- -----------
Total current liabilities 1,840,228 676,992 (174,315) 2,342,905
----------- ----------- ---------- -----------
LONG-TERM DEBT, NET 1,178,618 514,002 1,692,620
----------- ----------- ---------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, 2,000,000 shares authorized;
(1,000,000 shares, $.01 par value,
authorized for Mission, 1,000 shares
issued and outstanding; 1,000,000
shares, $1 par value; authorized for
STPI, 1,250 shares issued) 10 1,250 1,260
Additional paid-in capital 1,514,513 23,513 1,538,026
Retained earnings 790,933 (22,689) 768,244
Less 25 shares of STPI treasury stock
at cost (10,000) (10,000)
----------- ----------- ---------- -----------
Total shareholders' equity 2,305,456 (7,926) 2,297,530
----------- ----------- ---------- -----------
TOTAL $ 5,324,302 $ 1,183,068 $ (174,315) $ 6,333,055
=========== =========== ========== ===========
</TABLE>
See notes to combined financial statements.
F-23
<PAGE> 113
MISSION PARTY ICE, INC. (A S CORPORATION) AND
SOUTHWEST TEXAS PACKAGED ICE, INC. (A S CORPORATION)
COMBINED STATEMENT OF OPERATIONS WITH COMBINING INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SOUTHWEST
MISSION TEXAS
PARTY ICE PACKAGED COMBINING COMBINED
INC. ICE, INC. ADJUSTMENTS BALANCE
---------- ---------- ----------- ----------
<S> <C> <C> <C>
Revenues $6,853,645 $850,869 $7,704,514
Costs of sales 4,327,267 356,040 4,683,307
---------- -------- ------- ----------
Gross profit 2,526,378 494,829 3,021,207
Selling, general and administrative
expenses 1,387,837 110,785 1,498,622
Depreciation and amortization expense 698,136 275,576 973,712
---------- -------- ------- ----------
Income from operations 440,405 108,468 548,873
Other income, net 68,448 560 $(4,576) 64,432
Interest expense (182,179) (93,932) 4,576 (271,535)
---------- -------- ------- ----------
Income from continuing operations
before income taxes 326,674 15,096 341,770
Income taxes
---------- -------- ------- ----------
Income from continuing operations 326,674 15,096 341,770
Income from discontinued operations 83,133 83,133
---------- -------- ------- ----------
Net income $ 409,807 $ 15,096 $ $ 424,903
========== ======== ======= ==========
</TABLE>
See notes to combined financial statements.
F-24
<PAGE> 114
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Southwestern Ice, Inc.:
We have audited the accompanying balance sheets of SOUTHWESTERN ICE, INC. (an
Arizona corporation) as of December 31, 1996 and 1995, and the related
statements of operations and changes in retained earnings and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southwestern Ice, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
January 27, 1997.
F-25
<PAGE> 115
SOUTHWESTERN ICE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996 1995
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 32,595 $ 39,821 $ 135,289
Short-term investments 50,000 95,000 --
Accounts receivable, less allowance for doubtful
accounts of $27,000 at both December 31, 1996
and 1995 (Note 1) 1,379,319 1,204,745 1,352,607
Inventories 427,362 371,433 370,300
Prepaid expenses and other current assets 55,664 89,599 103,216
----------- ----------- -----------
Total current assets 1,944,940 1,800,598 1,961,412
PROPERTY, PLANT AND EQUIPMENT, net (Notes 2 and 3) 9,782,141 10,168,279 10,591,579
ASSETS HELD FOR SALE (Note 1) 265,655 265,655 --
OTHER ASSETS, net 170,202 173,292 199,689
----------- ----------- -----------
$12,162,938 $12,407,824 $12,752,680
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current portion of debt and obligations under
capital leases (Note 3) $ 1,043,137 $ 1,068,181 $ 1,868,159
Operating line of credit (Note 3) 600,000 600,000 --
Accounts payable 1,168,779 733,799 1,096,257
Accrued liabilities 521,669 475,513 565,430
Other liabilities (Note 4) -- -- 500,000
----------- ----------- -----------
Total current liabilities 3,333,585 2,877,493 4,029,846
----------- ----------- -----------
DEBT AND OBLIGATIONS UNDER CAPITAL LEASES, less
current portion (Note 3) 7,757,550 7,856,134 8,112,280
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)
STOCKHOLDERS' INVESTMENT:
Capital stock; no par value, 1,000,000 shares
authorized, 1,110 shares issued and outstanding
at both December 31, 1996 and 1995 1,110 1,110 1,110
Retained earnings 1,070,693 1,673,087 609,444
----------- ----------- -----------
Total stockholders' investment 1,071,803 1,674,197 610,554
----------- ----------- -----------
$12,162,938 $12,407,824 $12,752,680
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-26
<PAGE> 116
SOUTHWESTERN ICE, INC.
STATEMENTS OF OPERATIONS AND
CHANGES IN RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
1997 1996 1996 1995
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
SALES $ 2,206,840 $ 2,350,481 $ 14,050,305 $ 13,933,266
COST OF SALES 2,066,527 2,053,176 10,270,979 10,414,557
------------ ------------ ------------ ------------
Gross profit 140,313 297,305 3,779,326 3,518,709
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 688,063 579,291 2,640,271 2,464,654
------------ ------------ ------------ ------------
Income (loss) from operations (547,750) (281,986) 1,139,055 1,054,055
------------ ------------ ------------ ------------
OTHER (INCOME) EXPENSE:
Interest expense 226,730 194,952 920,136 798,316
Other (income) expense (172,086) 9,034 (14,682) (238,406)
------------ ------------ ------------ ------------
Total other expense, net 54,644 203,986 905,454 559,910
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM (602,394) (485,972) 233,601 494,145
EXTRAORDINARY ITEM:
Gain from extinguishment of debt - - 830,042 -
------------ ------------ ------------ ------------
NET (LOSS) INCOME (602,394) (485,972) 1,063,643 494,145
RETAINED EARNINGS, beginning balance 1,673,087 609,444 609,444 115,299
------------ ------------ ------------ ------------
RETAINED EARNINGS, ending balance $ 1,070,693 $ 123,472 $ 1,673,087 $ 609,444
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 117
SOUTHWESTERN ICE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
------------------ ------------------------
MARCH 31,
---------
1997 1996 1996 1995
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (602,394) $ (485,972) $ 1,063,643 $ 494,145
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities--
Depreciation and amortization 298,852 269,313 1,124,380 1,020,393
Debt discount amortization 2,343 3,446 12,127 51,311
Gain on sale of property, plant and equipment (172,085) - (198,601) (207,986)
Gain on extinguishment of debt - - (830,042) -
(Increase) decrease in assets:
Accounts receivable (174,574) 71,206 147,862 (65,800)
Inventories (55,929) 35,687 (1,133) 80,332
Prepaid expenses and other current assets 33,935 21,598 13,617 (26,188)
Other assets (1,231) (8,188) (9,470) (19,607)
Increase (decrease) in liabilities:
Accounts payable 434,980 (156,480) (362,458) 184,151
Accrued liabilities 46,156 115,838 88,309 (348,244)
----------- ----------- ----------- -----------
Net cash (used in) provided by operating activities (189,947) (133,552) 1,048,234 1,162,507
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment
and assets held for sale 328,495 - 525,000 1,611,285
Purchase of property, plant and equipment (64,803) (125,609) (631,526) (417,292)
Proceeds from (purchase of) short-term investments 45,000 - (95,000) -
Disposition costs of assets held for sale - - - (553,374)
----------- ----------- ----------- -----------
Net cash (used in) provided by investing
activities 308,692 (125,609) (201,526) 640,619
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - 19,441 8,041,542 -
Principal payments on long-term debt (125,971) (372,731) (9,583,718) (1,842,841)
Proceeds from line of credit - 500,000 1,311,950 200,000
Payments on line of credit - - (711,950) (200,000)
----------- ----------- ----------- -----------
Net cash used in financing activities (125,971) 146,710 (942,176) (1,842,841)
NET DECREASE IN CASH (7,226) (112,451) (95,468) (39,715)
CASH, beginning balance 39,821 135,289 135,289 175,004
----------- ----------- ----------- -----------
CASH, ending balance $ 32,595 $ 22,838 $ 39,821 $ 135,289
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 229,140 $ 179,348 $ 951,991 $ 713,853
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
FINANCING ACTIVITIES:
Capital lease obligations of $803,307 and $116,312 were incurred
during 1996 and 1995, respectively
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 118
SOUTHWESTERN ICE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Operations
Southwestern Ice, Inc. (the Company) was incorporated in the State of
Arizona on February 25, 1992. The Company's primary business activity is the
production, marketing, and distribution of ice products in Arizona, southern
Texas, Memphis, Tennessee, Albuquerque, New Mexico and El Centro, California.
The Company has elected to be organized as an S corporation and therefore, is
not subject to income taxes. Accordingly, there is no provision for income
taxes reflected in the accompanying financial statements.
In 1994, the Company's program for market penetration culminated with
the acquisition of the national ice operations of Southeastern Public Service
Company (SEPSCO). During the following two years the Company disposed of
unprofitable segments of the SEPSCO operations; additionally it made three
strategic acquisitions of small operations in order to strengthen the Company's
primary markets. See specific discussion on acquisition/disposal activity
below.
During the summer of 1996, new technology was introduced into the
Company's primary market. Specifically, this technology produces and bags ice
within the ice merchandiser located at the customer site. Realizing the
opportunities for increased sales volume and market penetration while allowing
the Company to reduce its production and shipping costs, the Company entered
into a Master Equipment Lease Agreement with the owner of the technology. The
Company also believes the addition of this new technology will compliment its
traditional ice operations by increasing its production capacity during periods
of the year in which demand has typically exceeded the Company's production
capacity. Pursuant to the lease agreement, the Company granted the technology
owner an option to purchase the Company, exercisable within five years from the
date of the Master Equipment Lease Agreement at a price based on an agreed-upon
formula (see Note 4).
During 1996, the Company sold certain assets related to its Corpus
Christi, Texas ice production and distribution facility and certain mobile
refrigerated vacuum equipment. The Company recognized a gain of approximately
$145,000 on proceeds of approximately $525,000. The Company has classified the
assets still located in Corpus Christi as assets held for sale and is actively
marketing these assets. No depreciation expense has been recorded since the
date the assets were taken out of production and made available for sale. The
assets held for sale at December 31, 1996, consist of the following:
<TABLE>
<S> <C>
Land $155,506
Buildings 110,149
--------
$265,655
========
</TABLE>
F-29
<PAGE> 119
The following unaudited pro forma information has been prepared
assuming the disposal of the Corpus Christi assets and discontinuance of those
operations occurred at the beginning of 1996.
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
Revenues $13,839,730
Gross profit 3,793,418
Income from operations 1,204,780
</TABLE>
The unaudited pro forma combined financial data is provided for
illustrative purposes only and is not necessarily indicative of the results of
operations that would have been reported had the disposition of these
operations occurred on January 1, 1996, nor does it represent a forecast of the
results of operations for any future period.
During 1995, the Company sold for aggregate proceeds of approximately
$1,408,000 certain assets located in Florida and certain assets related to its
Albuquerque water operations, all of which were originally acquired in the
SEPSCO acquisition discussed below. No gain or loss resulted from these sales
as the assets were recorded at their net realizable value. Also, during 1995,
the Company sold certain assets related to its Phoenix dry ice operations. The
sale of these assets resulted in a gain of approximately $208,000 on proceeds
of approximately $250,000.
During 1995, the Company acquired certain assets of three ice
distributors for a total purchase price of approximately $246,000. The excess
cost over the net assets acquired of approximately $38,000 is included in other
assets in the accompanying financial statements and is being amortized over 15
years. In accordance with APB No. 16, Accounting for Business Combinations, the
acquisitions were accounted for as purchases and, accordingly the purchase
price was allocated to the assets acquired based on their respective estimated
fair values at the date of acquisition.
Effective April 8, 1994, the Company, pursuant to a Purchase Agreement
with Southeastern Public Service Company (SEPSCO), acquired substantially all
of the assets, subject to certain liabilities (see Note 4) of an ice
manufacturing and distribution company for approximately $9,295,000. Funding
was provided by the issuance of a note payable to SEPSCO in the amount of
$4,295,000 and $5,000,000 obtained on the issuance of a note payable to a bank
(see Note 3).
The acquisition was accounted for as a purchase and, accordingly,
the purchase price was allocated to the assets and liabilities acquired based
on their respective estimated fair values at the date of acquisition. The
allocation is summarized as follows:
<TABLE>
<S> <C>
Accounts receivable $ 1,044,868
Inventories 468,478
Property, plant and equipment 9,362,494
Assets held for sale 506,226
Accounts payable (546,014)
Accrued liabilities (541,052)
Other liabilities (1,000,000)
-----------
$ 9,295,000
===========
</TABLE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-30
<PAGE> 120
Short-Term Investments
Short-term investments consist of certificates of deposits with a
financial institution which have original maturities in excess of three months
and are carried at cost, which approximate market.
Inventories
Inventories are stated at the lower of cost (first-in, first-out
basis) or market. The Company's inventory consists of wet ice and bags for the
transportation and storage of ice.
Other Assets
The cost of customer lists, trade name and other identifiable
intangible assets acquired in connection with business acquisitions are
amortized on a straight-line basis over 15 years. Amortization expense totaled
to $18,000 and $17,000 for the years ended December 31, 1996 and 1995.
Accumulated amortization was $47,700 and $34,200 as of December 31, 1996 and
1995, respectively.
Other Liabilities
At December 31, 1995, other liabilities consisted of the remediation
costs associated with SEPSCO acquisition (see Note 4). These remediation costs
were fully paid in conjunction with the debt refinancing discussed in Note 3.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit
risk consist principally of trade receivables. The Company earns approximately
76% of its revenues from Arizona with the remaining portion earned from Texas,
Tennessee, New Mexico and California. Also, approximately 44% of the Company's
sales are to major supermarket chains.
Recently Issued Pronouncements
During 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. This statement requires companies
to review long-lived assets and certain identifiable intangibles for impairment
whenever events or changes in circumstances indicate that the carrying amount
of such assets may not be recoverable and provides guidance to be considered in
performing such reviews. The adoption of SFAS No. 121 did not have an impact on
the Company's financial position or results of operations.
(2) PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is recorded at cost. Property and
equipment held under capital leases is stated at the present value of minimum
lease payments, net of accumulated amortization. These assets are amortized
over the lesser of the lease term or the estimated useful life of the
underlying assets using the straight-line method. Additions, improvements and
major renewals are capitalized. Maintenance, repairs and minor renewals, which
do not improve or significantly extend the life of assets, are expensed as
incurred. Depreciation is computed on a straight-line basis over the following
estimated useful lives:
F-31
<PAGE> 121
<TABLE>
<CAPTION>
ASSET DESCRIPTION ESTIMATED LIVES
- ----------------- ---------------
<S> <C>
Buildings and improvements 31 years
Machinery and equipment 7--12 years
Furniture and fixtures 7--12 years
Vehicles 5 years
</TABLE>
Property, plant and equipment at December 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 749,361 $ 994,031
Buildings and improvements 3,010,772 3,183,380
Machinery and equipment 7,213,527 6,625,892
Furniture and fixtures 691,394 656,437
Vehicles 1,431,552 1,059,695
----------- -----------
13,096,606 12,519,435
Less- Accumulated depreciation (2,928,327) (1,927,856)
----------- -----------
$10,168,279 $10,591,579
=========== ===========
</TABLE>
(3) DEBT AND OBLIGATIONS UNDER CAPITAL LEASES:
In July 1996, the Company used $8,600,000 in proceeds from borrowings
with a bank to retire approximately $9,083,000 in debt and $500,000 in accrued
remediation liabilities (see Note 4). The new debt consists of a senior term
note, a secondary term note and a revolving line of credit. The retired debt
consisted of three loan agreements and a revolving line of credit with a bank
and a subordinated note payable to SEPSCO. The refinancing resulted in an
extraordinary gain on extinguishment of debt of $830,042.
Debt and obligations under capital leases at December 31 consists of
the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Senior note payable to bank collateralized by
personal property, real estate, capital stock
and a shareholder certificate of deposit,
payable in monthly installments of $65,775
including interest at prime (8.25% at
December 31, 1996), plus 1.5% through June 2006. $ 4,606,854 $ --
Secondary note payable to bank collateralized
by personal property, real estate, capital
stock and a shareholder certificate of
deposit, payable in monthly installments of
interest only at prime plus 1.5% through June 2006. 3,000,000 --
Note payable to bank collateralized by accounts
receivable and equipment, payable in monthly
installments of $106,060 including interest at
8.25% per annum, paid in full in July 1996. -- 4,188,471
Subordinated note payable to SEPSCO, payable
in annual installments of $120,000 plus interest
at 5% per annum, beginning April 1996 and 1995,
paid in full in July 1996, paid in full in July 1996. -- 3,880,767
Installment note payable to bank collateralized
by accounts receivable and equipment and
personally guaranteed by a shareholder,
payable in monthly installments of $13,911 plus
interest at prime plus 2%, paid in full in July 1996.
</TABLE>
F-32
<PAGE> 122
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Obligations under capital leases, net of amounts
representing interest. Interest ranging from 9%
to 13%, maturing through October 2001. 879,035 407,099
Note payable to bank, collateralized by shareholder
certificate of deposit, interest payable in
monthly installments at time deposit rate plus
2% per annum, paid in full in July 1996. -- 495,000
Note payable to shareholder, due in monthly
installments of $6,458 plus interest at 10%
through April 1999. 284,167 322,917
Other 165,804 279,221
----------- -----------
8,935,860 10,004,111
Less--Current portion (1,068,181) (1,868,159)
Unamortized discount (11,545) (23,672)
----------- -----------
$ 7,856,134 $ 8,112,280
=========== ===========
</TABLE>
Pursuant to the refinancing, the Company entered in a revolving line
of credit with a bank which is secured by personal property, real estate,
capital stock and a shareholder certificate of deposit. Interest is payable
monthly at prime plus 1.5% until maturity of the line of credit in May 1997.
The maximum borrowing base is determined by the Company's accounts receivable
balance, as defined, not to exceed $600,000. The line of credit was fully drawn
at the time of refinancing to pay in full the outstanding balance of an
existing line of credit with a bank. Interest on the retired line of credit was
payable monthly at the institution's reference rate plus 2%.
Maturities on long-term debt and obligations under capital leases are
as follows:
<TABLE>
<S> <C>
1997 $1,146,639
1998 979,496
1999 886,543
2000 819,752
2001 832,196
Thereafter 4,428,239
----------
9,092,865
Less--Interest on capital leases (168,550)
----------
$8,924,315
==========
</TABLE>
(4) COMMITMENTS AND CONTINGENCIES:
Pursuant to the Purchase Agreement with SEPSCO, the Company set forth
a remediation plan for all environmental contamination at all real properties
acquired. As a result of the Company refinancing its debt and accrued
liabilities to SEPSCO, the Company was relieved of its remaining remediation
liability by SEPSCO in July 1996. The Company's maximum liability was
$1,500,000. Costs paid by the Company in excess of $500,000 reduced
dollar-for-dollar the principal balance of the note payable to SEPSCO up to a
maximum reduction of $500,000. As of the refinancing date, the Company had paid
approximately $795,000 in remediation costs which resulted in a forgiveness of
$500,000 in accrued remediation liability which is included in the calculation
of the gain from the debt extinguishment.
In September 1996, the Company entered into an option agreement (the
Agreement) with another corporation (the Buyer) whereby the Company granted the
Buyer a five-year option to purchase its assets. The purchase price set forth
in the Agreement is calculated from the Company's earnings before interest,
taxes, depreciation and amortization (EBITDA) with a valuation premium, as
defined in the Agreement. This option may be exercised by the Buyer on or
before September, 2001 by giving written notice to the Company. Payment of the
agreed-upon price must be in the form of a combination of cash and common stock
of the Buyer issued in conjunction with an initial public offering. Certain
personal and real property are excluded from the option. No consideration was
received from the Buyer in exchange for the option.
The Company also entered into a Master Equipment Lease Agreement in
September 1996 with the Buyer to lease various ice manufacturing and
merchandising systems for retail and commercial use. The lease agreement is for
an initial term of five years with an option to renew for an additional
five-year term. The annual per unit lease rate is equal to 25% of the Buyer's
cost to manufacture and install the ice merchandising systems. The Company has
agreed to lease 157 systems as of September 1997 and an additional 100 systems
per year thereafter.
F-33
<PAGE> 123
Future minimum lease payments under the Master Equipment Lease are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
- ------------
<S> <C>
1997 $ 385,314
1998 385,314
1999 385,314
2000 385,314
2001 266,509
----------
Total minimum lease payments $1,807,765
==========
</TABLE>
In connection with the lease agreement, the Company entered into a
service agreement with the Buyer whereby the Company will pay a monthly
management fee of $10,000 for the Buyer to have primary responsibility for
marketing the ice merchandising systems and oversight responsibility for
installing, operating, managing and servicing the systems. In addition, the
Company is required to reimburse the Buyer for all costs relating to activities
under the agreement including all costs associated with the operation, repair
and maintenance of the systems. The Company also must pay directly or through
reimbursement to the Buyer, all salaries, wages and other compensation and
benefits of all personnel employed by the Buyer and involved with the operation
of the Company's leased systems. The term of the agreement is for ten years or
the termination of the Master Equipment Lease Agreement.
Effective September 1994, the Company adopted a 401(k) profit sharing
plan (the "Plan") for all employees who are 21 years of age or older and have
completed one year of service. The Plan provides for a mandatory matching
contribution equal to 25% of the amount of the employee's salary deduction not
to exceed 5% of an employees annual compensation. The Company's matching
contribution was $10,580 and $15,000 for Plan years ending December 31, 1996
and 1995, respectively.
(5) RELATED PARTY TRANSACTIONS:
The Company makes monthly payments of $3,000 to a company owned by a
shareholder to rent an ice manufacturing and storage facility. The Company is
also responsible for the related property taxes on the facility. The
shareholder has an obligation to extend the current lease (which expires
February 1997) for an additional five years. Total lease and tax obligations
paid or accrued to or on behalf of the shareholder were $63,600 and $36,000 for
1996 and 1995, respectively.
The Company has entered into a management consulting agreement with a
shareholder. The management contract is renewable annually. Under the
management contract, the shareholder is entitled to receive monthly payments of
$10,000. Fees paid or accrued to the shareholder were $128,550 and $120,000
during 1996 and 1995, respectively.
(6) EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT:
On March 26, 1997, the Company sold its Albuquerque, New Mexico
facility to a non-related third party and entered into a ten month lease-back
agreement for this facility.
On April 16, 1997, the Company distributed certain property and
buildings with an approximate net book value of $369,000 to SWI, Inc., a
related entity.
On April 17, 1997, the Company consummated an agreement with Packaged
Ice, Inc. to merge into a wholly-owned subsidiary of Packaged Ice, Inc. (SWI
Acquisition). The total consideration for the SWI Acquisition was $18.8
million, consisting of $3.5 million in cash, $9.3 million in repayment of the
Company's debt and $6.0 million in shares of the Company's common stock (valued
at $10.00 per share) payable to the Company's shareholders.
(7) PRESENTATION OF UNAUDITED INTERIM FINANCIAL INFORMATION
The financial statements presented herein at March 31, 1997 and for
the three-month periods ended March 31, 1997 and 1996 are unaudited; however,
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows
for the periods covered have been made and are of a normal, recurring nature.
Accounting measurements at interim dates inherently involve greater reliance on
estimates than at year end. The results of the interim periods are not
necessarily indicative of results to expect for the full year.
F-34
<PAGE> 124
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER WILL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information 4
Prospectus Summary 5
Disclosure Regarding Forward-Looking Statements 14
Risk Factors 20
The Acquisitions 20
Private Placement 20
Use of Proceeds 21
Dividend Policy 21
Capitalization 22
Unaudited Pro Forma Combined Condensed Financial Statements 23
Selected Historical and Unaudited Pro Forma Combined Financial Data 27
Management's Discussion and Analysis of Financial Condition and
Results of Operations 28
Business 35
Management 41
Principal Shareholders 46
Certain Relationships and Related Transactions 48
The Exchange Offer 50
Description of Notes 55
Registration Rights; Additional Interest 75
Book-Entry; Delivery and Form 76
Transfer Restrictions on Old Notes 77
Plan of Distribution 79
Description of Senior Credit Facility 79
Description of Capital Stock and Warrants 80
Certain Federal Income Tax Considerations 82
Legal Matters 85
Experts 85
Index to Financial Statements F-1
</TABLE>
-------------------------
PROSPECTUS
OFFER TO EXCHANGE
$50,000,000 12% SERIES A SENIOR NOTES DUE 2004
FOR
$50,000,000 12% SERIES B SENIOR NOTES DUE 2004
PACKAGED ICE, INC.
________________, 1997
<PAGE> 125
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is empowered by Art. 2.02-1 of the Texas Business
Corporation Act, subject to the procedures and limitations stated therein, to
indemnify any person who was, is or is threatened to be made a named defendant
or respondent in a proceeding because the person is or was a director or
officer against judgments, penalties (including excise and similar taxes),
fines, settlements and reasonable expenses (including court costs and
attorneys' fees) actually incurred by the person in connection with the
proceeding. The Company is required by Art. 2.02-1 to indemnify a director or
officer against reasonable expenses (including court costs and attorneys' fees)
incurred by him in connection with a proceeding in which he is a named
defendant or respondent because he is or was a director or officer if he has
been wholly successful, on the merits or otherwise, in the defense of the
proceeding. The statute provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a
person may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise. The bylaws of the Company provide for
indemnification by the Company of its directors and officers to the fullest
extent permitted by the Texas Business Corporation Act. In addition, the
Company has, pursuant to Article 1302-7.06 of the Texas Miscellaneous
Corporation Laws Act, provided in its articles of incorporation that, to the
fullest extent permitted by applicable law, a director of the Company shall not
be liable to the Company or its shareholders for monetary damages for an act or
omission in a director's capacity as director of the Company.
The Company has obtained an insurance policy providing for
indemnification of officers and directors of the Company and certain other
persons against liabilities and expenses incurred by any of them in certain
stated proceedings and under certain stated conditions. The Company has entered
into separate indemnification agreements with each of its directors which may
require the Company, among other things, to indemnify such directors against
certain liabilities that may arise by reason of their status or service as
directors to the maximum extent permitted under Texas law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
The following instruments and documents are included as Exhibits to
this Registration Statement.
Exhibit No. Description
3.1* Articles of Incorporation of Packaged Ice, Inc. (the "Company")
filed with the Secretary of State of the State of Texas on August
14, 1990.
3.2* Restated Articles of Incorporation of the Company filed with the
Secretary of State of the State of Texas on February 5, 1992.
3.3* Certificate of Designation of Series A Convertible Preferred
Stock of the Company filed with the Secretary of State of the
State of Texas on September 19, 1995.
3.4* Certificate of Designation of Series B Convertible Preferred
Stock of the Company filed with the Secretary of State of the
State of Texas on January 10, 1997.
3.5* Amended and Restated Bylaws of the Company, effective as of
January 20, 1997.
3.6* Articles of Incorporation of Packaged Ice Leasing, Inc. filed
with the Secretary of State of the State of Nevada on December 1,
1992.
II-1
<PAGE> 126
3.7* Amended and Restated Bylaws of Packaged Ice Leasing, Inc.,
effective as of January 20, 1997.
3.8* Articles of Incorporation of Southco Ice, Inc. filed with the
Secretary of State of the State of Texas on November 10, 1994.
3.9* Amended and Restated Bylaws of Southco Ice, Inc., effective as of
January 20, 1997.
3.10* Articles of Incorporation of Packaged Ice Mission, Inc. filed
with the Secretary of State of the State of Texas on March 24,
1997.
3.11* Articles of Merger of Mission Party Ice, Inc., a Texas
corporation, into Packaged Ice Mission, Inc. ("Surviving
Corporation"), with attached Plan of Merger and Articles of
Amendment to the Articles of Incorporation of Surviving
Corporation evidencing name change, filed with the Secretary of
State of the State of Texas on April 17, 1997.
3.12* Bylaws of Mission Party Ice, Inc., effective as of March 24,
1997.
3.13* Articles of Incorporation of Packaged Ice STPI, Inc., Inc. filed
with the Secretary of State of the State of Texas on March 24,
1997.
3.14* Articles of Merger of Southwest Texas Packaged Ice, Inc., a Texas
corporation, into Packaged Ice STPI, Inc. ("Surviving
Corporation"), with attached Plan of Merger and Articles of
Amendment to the Articles of Incorporation of Surviving
Corporation evidencing name change, filed with the Secretary of
State of the State of Texas on April 17, 1997.
3.15* Bylaws of Southwest Texas Packaged Ice, Inc., effective as of
March 24, 1997.
3.16* Articles of Incorporation of Packaged Ice Southwestern, Inc.
filed with the Secretary of State of the State of Texas on March
24, 1997.
3.17* Articles of Merger of Southwestern Ice, Inc., an Arizona
corporation, into Packaged Ice Southwestern, Inc. ("Surviving
Corporation"), with attached Plan of Merger and Articles of
Amendment to the Articles of Incorporation of Surviving
Corporation evidencing name change, filed with the Secretary of
State of the State of Texas on April 17, 1997.
3.18* Bylaws of Southwestern Ice, Inc., effective as of March 24, 1997.
4.1* Indenture, dated April 17, 1997, among the Company, as Issuer,
the guarantors identified therein (the "Guarantors"), and U.S.
Trust Company of Texas, N.A. as Trustee.
4.2* Registration Rights Agreement, dated as of April 17, 1997, among
the Company, the Subsidiary Guarantors, and the purchasers of the
Notes.
4.3* Purchase Agreement, dated April 11, 1997, among the Company, the
Guarantors, and Jefferies & Company , Inc. (the Initial Purchaser
of the Notes).
4.4* Form of the Exchange Note [Series B security].
4.5* Form of the Old Note [Series A security].
4.6* Securityholder's and Registration Rights Agreement, dated as of
April 17, 1997, among the Company and the Initial Purchaser.
II-2
<PAGE> 127
5.1* Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., dated June
16, 1997.
10.1* Agreement and Plan of Merger by and among the Company, Packaged
Ice Mission, Inc., Mission Party Ice, Inc. and A.J. Lewis III,
made as of March 25, 1997.
10.2* Agreement and Plan of Merger by and among the Company, Packaged
Ice STPI, Inc., Southwest Texas Packaged Ice, Inc. and the
Shareholders of Southwest Texas Packaged Ice, Inc., made as of
March 25, 1997.
10.3* Escrow Agreement by and among the Company, Packaged Ice Mission,
Inc., Packaged Ice STPI, Inc., A. J. Lewis III individually and
as a representative of Liza B. Lewis and the Minority
Shareholders, and Texas Commerce Bank National Association as
Escrow Agent, dated as of April 17, 1997.
10.4* Noncompetition Agreement by and among the Company, Packaged Ice
Mission, Inc., Packaged Ice STPI, Inc. and A.J. Lewis III, dated
as of April 17, 1997.
10.5* Registration Rights Agreement by and among the Company, A.J.
Lewis III and Liza B. Lewis, dated as of April 17, 1997.
10.6* Agreement and Plan of Merger by and among the Company, Packaged
Ice Southwestern, Inc., Southwestern Ice, Inc., and the
shareholders of Southwestern Ice, Inc, made as of March 25, 1997.
10.7* Escrow Agreement by and among the Company, Packaged Ice
Southwestern, Inc., and Dale M. Johnson, Robert G. Miller and
Alan Bernstein (collectively, the "Shareholders") and Texas
Commerce Bank National Association as Escrow Agent, dated as of
April 17, 1997.
10.8* Form of Noncompetition Agreement among the Company, Packaged Ice
Southwestern, Inc., and each of Dale Johnson, Alan Bernstein and
Robert Miller individually, dated as of April 17, 1997.
10.9* Registration Rights Agreement by and among the Company, and Dale
Johnson, Alan Bernstein and Robert Miller (collectively the
"Shareholders"), dated as of April 17, 1997.
10.10* Packaged Ice, Inc. Stock Option Plan, dated July 26, 1994
10.11* Form of Stock Option Plan Agreements issued under Stock Option
Plan.
10.12* Warrant Agreement among the Company and U.S. Trust Company of
Texas, N.A., a national banking association, as Warrant Agent,
dated as of April 17, 1997.
10.13* Stock Purchase Agreement among the Company and certain of its
investors, dated December 23, 1993.
10.14* Stock Purchase Agreement among the Company and certain of its
investors (Rosenberg, Jesselson, et al.), dated September 20,
1995.
10.15* Amendment No. 1 to Stock Purchase Agreement of September 20,
1995, and Consent and Waiver of Right to Purchase Additional
Securities, between the Company and certain of its investors
(Rosenberg, Jesselson et al.), dated as of January 10, 1997.
10.16* Amendment No. 2 to Stock Purchase Agreement of September 20,
1995, between the Company and certain of its investors
(Rosenberg, Jesselson et al.), dated as of March 14, 1997.
10.17* Stock Purchase Agreement among the Company and certain of its
investors (Norwest and Food Fund), dated September 20, 1995.
II-3
<PAGE> 128
10.18* Amendment No. 1 to Stock Purchase Agreement of September 20,
1995, and Consent and Waiver of Right to Purchase Additional
Securities, between the Company and certain of its investors
(Norwest, Food Fund), dated as of January 17, 1997.
10.19* Amendment No. 2 to Stock Purchase Agreement of September 20,
1995, between the Company and certain of its investors (Norwest,
Food Fund), dated as of March 14, 1997.
10.20* Stock Purchase Agreement among the Company and certain of its
investors (Norwest, Food Fund and Rosenberg), dated January 17,
1997.
10.21* Registration Rights Agreement between the Company and certain
investors (Norwest and Food Fund), dated September 20, 1995.
10.22* Amendment No. 1 to Registration Rights Agreement between the
Company and certain investors, adding Steven P. Rosenberg as a
party thereto, dated as of January 17, 1997.
10.23* Supplemental Registration Rights Agreement among the Company and
certain investors (Norwest, Food Fund and Rosenberg), dated as of
June 12, 1997.
10.24* Parallel Exit Agreement between the Company, James F. Stuart and
Jack Stazo, dated September 20, 1995.
10.25* Amended and Restated Shareholders Agreement between the Company
and its shareholders, dated September 20, 1995.
10.26* Amendment No. 1 to Amended and Restated Shareholders Agreement,
dated as of January 17, 1997.
10.27* Amendment No. 2 to Amended and Restated Shareholders Agreement,
dated as of March 14, 1997.
10.28* Amended and Restated Voting Agreement, dated September 20, 1995.
10.29* Amendment No. 1 to Amended and Restated Voting Agreement, dated
as of January 17, 1997.
10.30* Amendment No. 2 to Amended and Restated Voting Agreement, dated
as of March 14, 1997.
10.31* Form of Indemnification Agreement entered into by Packaged Ice,
Inc. in favor of members of the Board of Directors.
10.32* Development and Manufacturing Agreement by and between Lancer
Corporation and Packaged Ice, Inc., dated April 13, 1993.
10.33* Lease Agreement by and between Packaged Ice, Inc. and Robert S.
Wilson LLC for facility at 8572 Katy Freeway, Suite 101, Houston,
Texas, dated March 22, 1994.
10.34* Lease Agreement by and between J.K. Neal, Inc. and J. Kenneth
Neal (lessor) and Mission Party Ice, Inc. (lessee), for real
property (land and facilities) located in Bexar, Webb, Tom Green,
Gonzales and Caldwell Counties, Texas, effective March 1, 1988.
10.35* Form of Commercial Lease Agreement, by and between _________
(landlord) and Mission Party Ice, Inc. (tenant) [to be executed].
10.36* Commercial Lease Agreement by and between Robert Grant Miller
(lessor) and Southwestern Ice, Inc. (lessee), for facility at
5925 West Van Buren, Phoenix, Arizona, entered into on March 1,
1992.
II-4
<PAGE> 129
10.37* License Agreement by and among Packaged Ice, Inc., Hoshizaki
Electric Co., Ltd. and Hoshizaki America, Inc., dated May 28,
1993.
11.1* Statement of earnings per share.
12.1* Historical statement of ratio of earnings to fixed charges.
12.2* Proforma statement of ratio of earnings to fixed charges.
21.1* List of subsidiaries.
23.1* Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
the opinion filed as Exhibit 5.1 above).
23.2* Consent of Deloitte & Touche, L.L.P.
23.3* Consent of Arthur Andersen, L.L.P.
24.1* Power of Attorney (included on signature page of Registration
Statement on Form S-4).
25.1* Statement of Eligibility and Qualification on Form T-1 under the
Trust Indenture Act of 1939, made by U.S. Trust Company of Texas,
N.A. as Trustee under the Indenture relating to the 12% Senior
Notes.
25.2* Report of Financial Condition of Trustee (Exhibit T-1.6 to
Statement of Eligibility filed as Exhibit 25.1 above).
27.1* Financial data schedule.
99.1* Form of Letter of Transmittal for Exchange Offer.
* Filed herewith
(b) Financial Statement Schedules
None. All Schedules are omitted because the required information
is not present in amounts sufficient to require submission of the Schedule or
because the information required is included in the financial statements or
notes thereto.
II-5
<PAGE> 130
ITEM 22. UNDERTAKINGS
A. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the company
has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless, in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
B. The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
C. The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-6
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement or Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, the State of Texas, on June 16, 1997.
PACKAGED ICE, INC.
By: /s/ James F. Stuart
-----------------------------------
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James F. Stuart and A.J. Lewis III, and
each of them (with full power to each of them to act alone), his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf individually and in each capacity stated
below any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ James F. Stuart Chairman of the Board and June 16, 1997
- ----------------------------- Chief Executive Officer
James F. Stuart
/s/ A.J. Lewis III Principal Executive Officer, President June 16, 1997
- ----------------------------- Chief Operation Officer
A.J. Lewis III
/s/ Steven P. Rosenberg Vice Chairman of the Board June 16, 1997
- -----------------------------
Steven P. Rosenberg
/s/ Stephen R. Sefton Director June 16, 1997
- -----------------------------
Stephen R. Sefton
/s/ Richard A. Coonrod Director June 16, 1997
- -----------------------------
Richard A. Coonrod
/s/ Robert G. Miller Director June 16, 1997
- -----------------------------
Robert G. Miller
/s/ Diana F. Rice Treasurer, Controller, Secretary June 16, 1997
- -----------------------------
Diana F. Rice
</TABLE>
II-7
<PAGE> 132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement or Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, the State of Texas, on June 16, 1997.
PACKAGED ICE LEASING, INC.
By: /s/ James F. Stuart
-----------------------------------
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James F. Stuart and A.J. Lewis III, and
each of them (with full power to each of them to act alone), his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf individually and in each capacity stated
below any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ James F. Stuart Chairman of the Board and June 16, 1997
- ----------------------------- Chief Executive Officer
James F. Stuart
/s/ A.J. Lewis III Principal Executive Officer, President June 16, 1997
- ----------------------------- Chief Operation Officer
A.J. Lewis III
/s/ Steven P. Rosenberg Vice Chairman of the Board June 16, 1997
- -----------------------------
Steven P. Rosenberg
/s/ Stephen R. Sefton Director June 16, 1997
- -----------------------------
Stephen R. Sefton
/s/ Richard A. Coonrod Director June 16, 1997
- -----------------------------
Richard A. Coonrod
/s/ Robert G. Miller Director June 16, 1997
- -----------------------------
Robert G. Miller
/s/ Diana F. Rice Treasurer, Controller, Secretary June 16, 1997
- -----------------------------
Diana F. Rice
</TABLE>
II-8
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement or Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, the State of Texas, on June 16, 1997.
SOUTHCO ICE, INC.
By: /s/ James F. Stuart
-----------------------------------
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James F. Stuart and A.J. Lewis III, and
each of them (with full power to each of them to act alone), his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf individually and in each capacity stated
below any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ James F. Stuart Chairman of the Board and June 16, 1997
- ------------------------------- Chief Executive Officer
James F. Stuart
/s/ A.J. Lewis III Principal Executive Officer, President June 16, 1997
- ------------------------------- Chief Operation Officer
A.J. Lewis III
/s/ Steven P. Rosenberg Vice Chairman of the Board June 16, 1997
- -------------------------------
Steven P. Rosenberg
/s/ Stephen R. Sefton Director June 16, 1997
- -------------------------------
Stephen R. Sefton
/s/ Richard A. Coonrod Director June 16, 1997
- -------------------------------
Richard A. Coonrod
/s/ Robert G. Miller Director June 16, 1997
- -------------------------------
Robert G. Miller
/s/ Diana F. Rice Treasurer, Controller, Secretary June 16, 1997
- -------------------------------
Diana F. Rice
</TABLE>
II-9
<PAGE> 134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement or Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, the State of Texas, on June 16, 1997.
SOUTHWESTERN ICE, INC.
By: /s/ James F. Stuart
-----------------------------------
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James F. Stuart and A.J. Lewis III, and
each of them (with full power to each of them to act alone), his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf individually and in each capacity stated
below any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ James F. Stuart Chairman of the Board and June 16, 1997
- ------------------------------ Chief Executive Officer
James F. Stuart
/s/ A.J. Lewis III Principal Executive Officer, President June 16, 1997
- ------------------------------ Chief Operation Officer
A.J. Lewis III
/s/ Steven P. Rosenberg Vice Chairman of the Board June 16, 1997
- ------------------------------
Steven P. Rosenberg
/s/ Stephen R. Sefton Director June 16, 1997
- ------------------------------
Stephen R. Sefton
/s/ Richard A. Coonrod Director June 16, 1997
- ------------------------------
Richard A. Coonrod
/s/ Robert G. Miller Director June 16, 1997
- ------------------------------
Robert G. Miller
/s/ Diana F. Rice Treasurer, Controller, Secretary June 16, 1997
- ------------------------------
Diana F. Rice
</TABLE>
II-10
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement or Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, the State of Texas, on June 16, 1997.
MISSION PARTY ICE, INC.
By: /s/ James F. Stuart
-----------------------------------
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James F. Stuart and A.J. Lewis III, and
each of them (with full power to each of them to act alone), his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf individually and in each capacity stated
below any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ James F. Stuart Chairman of the Board and June 16, 1997
- -------------------------------- Chief Executive Officer
James F. Stuart
/s/ A.J. Lewis III Principal Executive Officer, President June 16, 1997
- -------------------------------- Chief Operation Officer
A.J. Lewis III
/s/ Steven P. Rosenberg Vice Chairman of the Board June 16, 1997
- --------------------------------
Steven P. Rosenberg
/s/ Stephen R. Sefton Director June 16, 1997
- --------------------------------
Stephen R. Sefton
/s/ Richard A. Coonrod Director June 16, 1997
- --------------------------------
Richard A. Coonrod
/s/ Robert G. Miller Director June 16, 1997
- --------------------------------
Robert G. Miller
/s/ Diana F. Rice Treasurer, Controller, Secretary June 16, 1997
- --------------------------------
Diana F. Rice
</TABLE>
II-11
<PAGE> 136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement or Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, the State of Texas, on June 16, 1997.
SOUTHWEST TEXAS PACKAGED ICE, INC.
By: /s/ James F. Stuart
-----------------------------------
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James F. Stuart and A.J. Lewis III, and
each of them (with full power to each of them to act alone), his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf individually and in each capacity stated
below any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ James F. Stuart Chairman of the Board and June 16, 1997
- ------------------------------- Chief Executive Officer
James F. Stuart
/s/ A.J. Lewis III Principal Executive Officer, President June 16, 1997
- ------------------------------- Chief Operation Officer
A.J. Lewis III
/s/ Steven P. Rosenberg Vice Chairman of the Board June 16, 1997
- -------------------------------
Steven P. Rosenberg
/s/ Stephen R. Sefton Director June 16, 1997
- -------------------------------
Stephen R. Sefton
/s/ Richard A. Coonrod Director June 16, 1997
- -------------------------------
Richard A. Coonrod
/s/ Robert G. Miller Director June 16, 1997
- -------------------------------
Robert G. Miller
/s/ Diana F. Rice Treasurer, Controller, Secretary June 16, 1997
- -------------------------------
Diana F. Rice
</TABLE>
II-12
<PAGE> 137
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<S> <C>
3.1* Articles of Incorporation of Packaged Ice, Inc. (the "Company")
filed with the Secretary of State of the State of Texas on August
14, 1990.
3.2* Restated Articles of Incorporation of the Company filed with the
Secretary of State of the State of Texas on February 5, 1992.
3.3* Certificate of Designation of Series A Convertible Preferred
Stock of the Company filed with the Secretary of State of the
State of Texas on September 19, 1995.
3.4* Certificate of Designation of Series B Convertible Preferred
Stock of the Company filed with the Secretary of State of the
State of Texas on January 10, 1997.
3.5* Amended and Restated Bylaws of the Company, effective as of
January 20, 1997.
3.6* Articles of Incorporation of Packaged Ice Leasing, Inc. filed
with the Secretary of State of the State of Nevada on December 1,
1992.
3.7* Amended and Restated Bylaws of Packaged Ice Leasing, Inc.,
effective as of January 20, 1997.
3.8* Articles of Incorporation of Southco Ice, Inc. filed with the
Secretary of State of the State of Texas on November 10, 1994.
3.9* Amended and Restated Bylaws of Southco Ice, Inc., effective as of
January 20, 1997.
3.10* Articles of Incorporation of Packaged Ice Mission, Inc. filed
with the Secretary of State of the State of Texas on March 24,
1997.
3.11* Articles of Merger of Mission Party Ice, Inc., a Texas
corporation, into Packaged Ice Mission, Inc. ("Surviving
Corporation"), with attached Plan of Merger and Articles of
Amendment to the Articles of Incorporation of Surviving
Corporation evidencing name change, filed with the Secretary of
State of the State of Texas on April 17, 1997.
3.12* Bylaws of Mission Party Ice, Inc., effective as of March 24,
1997.
3.13* Articles of Incorporation of Packaged Ice STPI, Inc., Inc. filed
with the Secretary of State of the State of Texas on March 24,
1997.
3.14* Articles of Merger of Southwest Texas Packaged Ice, Inc., a Texas
corporation, into Packaged Ice STPI, Inc. ("Surviving
Corporation"), with attached Plan of Merger and Articles of
Amendment to the Articles of Incorporation of Surviving
Corporation evidencing name change, filed with the Secretary of
State of the State of Texas on April 17, 1997.
3.15* Bylaws of Southwest Texas Packaged Ice, Inc., effective as of
March 24, 1997.
3.16* Articles of Incorporation of Packaged Ice Southwestern, Inc.
filed with the Secretary of State of the State of Texas on March
24, 1997.
3.17* Articles of Merger of Southwestern Ice, Inc., an Arizona
corporation, into Packaged Ice Southwestern, Inc. ("Surviving
Corporation"), with attached Plan of Merger and Articles of
Amendment to the Articles of Incorporation of Surviving
Corporation evidencing name change, filed with the Secretary of
State of the State of Texas on April 17, 1997.
</TABLE>
<PAGE> 138
<TABLE>
<S> <C>
3.18* Bylaws of Southwestern Ice, Inc., effective as of March 24, 1997.
4.1* Indenture, dated April 17, 1997, among the Company, as Issuer,
the guarantors identified therein (the "Guarantors"), and U.S.
Trust Company of Texas, N.A. as Trustee.
4.2* Registration Rights Agreement, dated as of April 17, 1997, among
the Company, the Subsidiary Guarantors, and the purchasers of the
Notes.
4.3* Purchase Agreement, dated April 11, 1997, among the Company, the
Guarantors, and Jefferies & Company , Inc. (the Initial Purchaser
of the Notes).
4.4* Form of the Exchange Note [Series B security]
4.5* Form of the Old Note [Series A security].
4.6* Securityholder's and Registration Rights Agreement, dated as of
April 17, 1997, among the Company and the Initial Purchaser.
5.1* Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., dated June
16, 1997.
10.1* Agreement and Plan of Merger by and among the Company, Packaged
Ice Mission, Inc., Mission Party Ice, Inc. and A.J. Lewis III,
made as of March 25, 1997.
10.2* Agreement and Plan of Merger by and among the Company, Packaged
Ice STPI, Inc., Southwest Texas Packaged Ice, Inc. and the
Shareholders of Southwest Texas Packaged Ice, Inc., made as of
March 25, 1997.
10.3* Escrow Agreement by and among the Company, Packaged Ice Mission,
Inc., Packaged Ice STPI, Inc., A. J. Lewis III individually and
as a representative of Liza B. Lewis and the Minority
Shareholders, and Texas Commerce Bank National Association as
Escrow Agent, dated as of April 17, 1997.
10.4* Noncompetition Agreement by and among the Company, Packaged Ice
Mission, Inc., Packaged Ice STPI, Inc. and A.J. Lewis III, dated
as of April 17, 1997.
10.5* Registration Rights Agreement by and among the Company, A.J.
Lewis III and Liza B. Lewis, dated as of April 17, 1997.
10.6* Agreement and Plan of Merger by and among the Company, Packaged
Ice Southwestern, Inc., Southwestern Ice, Inc., and the
shareholders of Southwestern Ice, Inc, made as of March 25, 1997.
10.7* Escrow Agreement by and among the Company, Packaged Ice
Southwestern, Inc., and Dale M. Johnson, Robert G. Miller and
Alan Bernstein (collectively, the "Shareholders") and Texas
Commerce Bank National Association as Escrow Agent, dated as of
April 17, 1997.
10.8* Form of Noncompetition Agreement among the Company, Packaged Ice
Southwestern, Inc., and each of Dale Johnson, Alan Bernstein and
Robert Miller individually, dated as of April 17, 1997.
10.9* Registration Rights Agreement by and among the Company, and Dale
Johnson, Alan Bernstein and Robert Miller (collectively the
"Shareholders"), dated as of April 17, 1997.
10.10* Packaged Ice, Inc. Stock Option Plan, dated July 26, 1994
</TABLE>
<PAGE> 139
<TABLE>
<S> <C>
10.11* Form of Stock Option Plan Agreements issued under Stock Option
Plan.
10.12* Warrant Agreement among the Company and U.S. Trust Company of
Texas, N.A., a national banking association, as Warrant Agent,
dated as of April 17, 1997.
10.13* Stock Purchase Agreement among the Company and certain of its
investors, dated December 23, 1993.
10.14* Stock Purchase Agreement among the Company and certain of its
investors (Rosenberg, Jesselson, et al.), dated September 20,
1995.
10.15* Amendment No. 1 to Stock Purchase Agreement of September 20,
1995, and Consent and Waiver of Right to Purchase Additional
Securities, between the Company and certain of its investors
(Rosenberg, Jesselson et al.), dated as of January 10, 1997.
10.16* Amendment No. 2 to Stock Purchase Agreement of September 20,
1995, between the Company and certain of its investors
(Rosenberg, Jesselson et al.), dated as of March 14, 1997.
10.17* Stock Purchase Agreement among the Company and certain of its
investors (Norwest and Food Fund), dated September 20, 1995.
10.18* Amendment No. 1 to Stock Purchase Agreement of September 20,
1995, and Consent and Waiver of Right to Purchase Additional
Securities, between the Company and certain of its investors
(Norwest, Food Fund), dated as of January 17, 1997.
10.19* Amendment No. 2 to Stock Purchase Agreement of September 20,
1995, between the Company and certain of its investors (Norwest,
Food Fund), dated as of March 14, 1997.
10.20* Stock Purchase Agreement among the Company and certain of its
investors (Norwest, Food Fund and Rosenberg), dated January 17,
1997.
10.21* Registration Rights Agreement between the Company and certain
investors (Norwest and Food Fund), dated September 20, 1995.
10.22* Amendment No. 1 to Registration Rights Agreement between the
Company and certain investors, adding Steven P. Rosenberg as a
party thereto, dated as of January 17, 1997.
10.23* Supplemental Registration Rights Agreement among the Company and
certain investors (Norwest, Food Fund and Rosenberg), dated as of
June 12, 1997.
10.24* Parallel Exit Agreement between the Company, James F. Stuart and
Jack Stazo, dated September 20, 1995.
10.25* Amended and Restated Shareholders Agreement between the Company
and its shareholders, dated September 20, 1995.
10.26* Amendment No. 1 to Amended and Restated Shareholders Agreement,
dated as of January 17, 1997.
10.27* Amendment No. 2 to Amended and Restated Shareholders Agreement,
dated as of March 14, 1997.
10.28* Amended and Restated Voting Agreement, dated September 20, 1995.
10.29* Amendment No. 1 to Amended and Restated Voting Agreement, dated
as of January 17, 1997.
</TABLE>
<PAGE> 140
<TABLE>
<S> <C>
10.30* Amendment No. 2 to Amended and Restated Voting Agreement, dated
as of March 14, 1997.
10.31* Form of Indemnification Agreement entered into by Packaged Ice,
Inc. in favor of members of the Board of Directors.
10.32* Development and Manufacturing Agreement by and between Lancer
Corporation and Packaged Ice, Inc., dated April 13, 1993.
10.33* Lease Agreement by and between Packaged Ice, Inc. and Robert S.
Wilson LLC for facility at 8572 Katy Freeway, Suite 101, Houston,
Texas, dated March 22, 1994.
10.34* Lease Agreement by and between J.K. Neal, Inc. and J. Kenneth
Neal (lessor) and Mission Party Ice, Inc. (lessee), for real
property (land and facilities) located in Bexar, Webb, Tom Green,
Gonzales and Caldwell Counties, Texas, effective March 1, 1988.
10.35* Form of Commercial Lease Agreement, by and between _________
(landlord) and Mission Party Ice, Inc. (tenant) [to be executed].
10.36* Commercial Lease Agreement by and between Robert Grant Miller
(lessor) and Southwestern Ice, Inc. (lessee), for facility at
5925 West Van Buren, Phoenix, Arizona, entered into on March 1,
1992.
10.37* License Agreement by and among Packaged Ice, Inc., Hoshizaki
Electric Co., Ltd. and Hoshizaki America, Inc., dated May 28,
1993.
11.1* Statement of earnings per share.
12.1* Historical statement of ratio of earnings to fixed charges.
12.2* Proforma statement of ratio of earnings to fixed charges.
21.1* List of subsidiaries.
23.1* Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
the opinion filed as Exhibit 5.1 above).
23.2* Consent of Deloitte & Touche, L.L.P.
23.3* Consent of Arthur Andersen, L.L.P.
24.1* Power of Attorney (included on signature page of Registration
Statement on Form S-4).
25.1* Statement of Eligibility and Qualification on Form T-1 under the
Trust Indenture Act of 1939, made by U.S. Trust Company of Texas,
N.A. as Trustee under the Indenture relating to the 12% Senior
Notes.
25.2* Report of Financial Condition of Trustee (Exhibit T-1.6 to
Statement of Eligibility filed as Exhibit 25.1 above).
27.1* Financial data schedule.
99.1* Form of Letter of Transmittal for Exchange Offer.
</TABLE>
* Filed herewith.
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
PACKAGED ICE, INC.
The undersigned person acting as incorporator of a corporation herein-
after referred to as "corporation", adopts the following Articles of
Incorporation:
ARTICLE I
The name of the corporation is PACKAGED ICE, INC.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purposes for which the corporation is organized are:
a) To purchase and sell goods;
b) To perform services;
c) To transact any manufacturing business;
d) To engage in any mercantile or trading business;
e) To erect or repair any building or improvement;
f) To engage in the oil and gas business;
g) To transact any or all lawful business for which a corporation
may be incorporated under the Texas Business Corporation Act;
h) To purchase, sell, acquire by lease, grant by lease, rent
sublease and subdivide real property in towns, cities, and
villages and their suburbs not extending more than two miles
beyond their limits; and
i) To do everything necessary, proper, advisable or convenient for
the accomplishment or furtherance of such purposes.
Page 1 of 3
<PAGE> 2
ARTICLE IV
The aggregate number of shares which the corporation shall have
authority to issue is TEN MILLION (10,000,000) shares with par value of $0.01
per share.
ARTICLE V
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of ONE THOUSAND AND NO/100
DOLLARS (1,000.00), consisting of money, labor done or property actually
received.
ARTICLE VI
No shareholder or other person shall have any pre-emptive right
whatsoever.
ARTICLE VII
The corporation may purchase or acquire its own shares and may reissue
such shares as provided by law.
ARTICLE VIII
Directors shall be elected by plurality vote. Cumulative voting shall
not be permitted.
ARTICLE IX
The corporation may enter into contracts or transact business with one
or more of its directors, officers or stockholders, or with any firm of which
one or more of its directors, officers or stockholders are members, or with any
corporation, association, trust company, organization or entity in which any
one or more of its directors, officers of stockholders are directors, officers,
trustees, shareholders or beneficiaries, or are otherwise interested, and in
the absence of fraud such contract or transaction shall not be invalidated or
in any way affected by the fact that such directors, officers or stockholders
of the corporation have or may have interest which are or might be adverse to
the interest of the corporation even though the vote or action of the
directors, officers or stockholders having such adverse interests may have been
necessary to obligate the corporation upon such contract or transaction. In
the absence of fraud, no directors, officer or stockholder having such adverse
interest shall be liable to the corporation or to any stockholder or creditor
thereof, or to any other person, for any loss incurred pursuant to or by reason
of any such contract or transaction, nor shall any such director, officer or
stockholder be accountable for any gains or profits realized thereon.
Page 2 of 3
<PAGE> 3
ARTICLE X
The post office address of the initial registered office of the
corporation is 11 Greenway Plaza, Suite 2121, Houston, Texas 77046, and the
name of its initial registered agent at such address is TED WU.
ARTICLE XI
The number of directors constituting the initial board of directors
is/are one (1), and the name(s) and address(es) of the person(s) who is/are to
serve as director(s) until the first annual meeting of the shareholders, or
until his/hers/their successor(s) is/are elected and qualified is/are:
Name Address
---- -------
TED WU 11 Greenway Plaza
Suite 2121
Houston, Texas 77046
ARTICLE XII
The name and address of the incorporator is:
TED WU
11 Greenway Plaza, Suite 2121
Houston, Texas 77046
-------------------------------------
TED WU, INCORPORATOR
SWORN TO AND SUBSCRIBED before me by TED WU on this the 10th day of
August, 1990.
------------------------------
Notary Public, State of Texas
Page 3 of 3
<PAGE> 1
EXHIBIT 3.2
RESTATED ARTICLES OF INCORPORATION
OF
PACKAGED ICE, INC.
* * *
ARTICLE I
PACKAGED ICE, INC. (the "Corporation"), pursuant to the provisions of
Article 4.07 of the Texas Business Corporation Act, hereby adopts Restated
Articles of Incorporation which accurately copy the Articles of Incorporation
and all amendments thereto that are in effect to date and as further amended by
such Restated Articles of Incorporation as hereinafter set forth and which
contain no other change in any provision thereof.
ARTICLE II
The Articles of Incorporation of the Corporation are amended by the
Restated Articles of Incorporation as follows:
A. All Articles, formerly numbered with roman numerals, are
now numbered with numerical words spelled out in english.
B. Article Three, which relates to the purposes for which the
Corporation is organized, is simplified.
C. Article Four is amended to increase the number of
authorized common shares from 10,000,000 to 50,000,000 and to authorize the
issuance of 5,000,000 shares of preferred stock with a par value of $.01 per
share, and to vest the Board of Directors with the authority to establish
series of unissued shares of any class.
D. Article Six is amended to clarify the Corporation's denial
of preemptive rights.
E. Article Seven is deleted and replaced by a provision
prohibiting cumulative voting for directors.
F. Article Eight is deleted and replaced by a provision
limiting a director's liability to the Corporation or the shareholders to the
fullest extent permitted by law.
G. Article Nine is deleted and replaced with a provision
which sets forth the current registered agent and registered office.
<PAGE> 2
H. Article Ten is deleted and replaced with a provision which
sets forth the names and addresses of the current directors of the Corporation.
I. Article Eleven, listing the initial directors, is deleted.
J. Article Twelve, containing the name and address of the
incorporator, is deleted.
ARTICLE III
Each such amendment made by the Restated Articles of Incorporation has
been effected in conformity with the provisions of the Texas Business
Corporation Act, and such Restated Articles of Incorporation and each such
amendment made by the Restated Articles of Incorporation were duly adopted by
the shareholders of the Corporation on the 21st day of January, 1992.
ARTICLE IV
The number of shares outstanding was 1,460,158; the number of shares
entitled to vote on the Restated Articles of Incorporation as so amended was
1,460,158; the number of shares voted for such Restated Articles as so amended
was 1,429,148; and the number of shares voted against such Restated Articles as
so amended was zero (0).
ARTICLE V
The Articles of Incorporation and all amendments and supplements thereto
are hereby superseded by the Restated Articles of Incorporation attached hereto
as Exhibit A and incorporated herein by reference which accurately copy the
entire text thereof and as amended as set forth above.
Dated this 28th day of January, 1992
PACKAGED ICE, INC.
BY:
----------------------------------
JAMES F. STUART, President
2
<PAGE> 3
Exhibit A
RESTATED ARTICLES OF INCORPORATION
OF
PACKAGED ICE, INC.
* * *
ARTICLE ONE
The name of the Corporation is PACKAGED ICE, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is to transact any or
all lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE FOUR
The Corporation is authorized to issue an aggregate of 55,000,000 shares
of stock, consisting of 50,000,000 shares of common stock ("Common Stock"), par
value $.01 per share, and 5,000,000 shares of preferred stock ("Preferred
Stock"), par value $.01 per share.
The Board of Directors is vested with authority to establish, from time
to time, series of unissued shares of any class, to determine and fix the
designation and the relative rights, preferences and limitations of the shares
of each series so established, and to increase or decrease the number of shares
within each such series. The relative rights and preferences of shares may
vary in any respect between series, but all shares of the same series shall be
identical in all respects.
ARTICLE FIVE
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00), consisting of money, labor done, or property actually received.
1
<PAGE> 4
ARTICLE SIX
No shareholder or other person shall have the preemptive right to
subscribe for or acquire shares or other securities of any kind of the
Corporation.
ARTICLE SEVEN
Cumulative voting by the shareholders of the Corporation at elections of
directors is expressly prohibited.
ARTICLE EIGHT
A director of the Corporation shall not be liable to the Corporation or
its security holders for monetary damages for any act or omission in the
director's capacity as a director. This Article does not eliminate or limit
the liability of a director for (i) a breach of the director's duty of loyalty
to the Corporation or its shareholders, (ii) an act or omission not in good
faith that constitutes a breach of duty of the director to the Corporation or
an act or omission that involves intentional misconduct or a knowing violation
of the law, (iii) a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action taken within the
scope of the director's office, or (iv) an act or omission for which the
liability of a director is expressly provided by an applicable statute.
This Article is intended to limit the liability of a director of the
Corporation to the fullest extent permitted by law. In the event that the
Texas Miscellaneous Corporation Laws Act or the Texas Business Corporation Act
is amended to authorize corporate action further limiting or eliminating
liability of directors, then the liability of a director of the Corporation
shall be limited or eliminated to the fullest extent permitted by either of
such Acts, as so amended, without any further action. The limitation of
liability contained in this Article shall not be deemed exclusive of any rights
or limitations of liability or indemnity to which a director may otherwise be
entitled. Any repeal or modification of this Article by the shareholders of
the Corporation or otherwise shall not adversely affect any right or protection
of a director of the Corporation existing at the time of such repeal or
modification.
ARTICLE NINE
The street address of the Corporation's registered office and the name
of its initial registered agent at such address are:
Name Address
---- -------
James F. Stuart 180 Town & Country
Houston, Texas 77024
2
<PAGE> 5
ARTICLE TEN
The current board of directors consists of five (5) members who shall
serve as directors until the next annual meeting of shareholders or until their
successors are elected and qualified, and whose names and addresses are:
Name Address
---- -------
James F. Stuart 180 Town & Country
Houston, Texas 77024
Hobert H. Joe 180 Town & Country
Houston, Texas 77024
Jack Stazo 180 Town & Country
Houston, Texas 77024
Steven P. Rosenberg 12124 Madeleine Circle
Dallas, Texas 75230
A. J. Lewis, III 1120 E. Durango
San Antonio, Texas 78210
* * *
PACKAGED ICE, INC.
BY:
----------------------------------
President
3
<PAGE> 1
EXHIBIT 3.3
PREFERRED STOCK SERIES DESIGNATION
PACKAGED ICE, INC., A TEXAS CORPORATION
CERTIFICATE OF RESOLUTION
Providing for the Issuance of
Series A Convertible 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, at a special
meeting held on September 18, 1995, 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:
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,"
none of which shares are currently issued and outstanding), the Board of
Directors hereby provides for the issuance of a series of 450,000 shares of
Preferred Stock, par value $.01 per share, as follows:
1. Designation. There is hereby created a series of Preferred Stock
of the Corporation to be designated "Series A Convertible Preferred Stock"
(hereinafter referred to as the "Series A Preferred Stock") consisting of
450,000 shares, which shares shall be convertible into fully paid and
nonassessable shares of Common Stock, $.01 par value, of the Corporation (the
"Common Stock"), and to the extent that the designations, preferences,
limitations and relative rights of the Series A 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. In the event the Board of Directors of the
Corporation elects to make a distribution or dividend on the shares of Common
Stock of the Corporation (whether in cash, capital stock or other property),
the distribution or dividend must be made equally and ratably to all
outstanding shares of the Corporation's Series A Preferred Stock as if the
Series A Preferred Stock had been converted into Common Stock.
<PAGE> 2
3. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series A Preferred Stock shall be entitled to be paid out of
the assets of the Corporation available for distribution to its shareholders,
before any payment or declaration and setting apart for payment of any amount
shall be made in respect to the Common Stock, or stock of any other class
ranking junior as to the assets in liquidation to the Series A Preferred Stock
(collectively, "Junior Stock"), FIVE AND 56/100 DOLLARS ($5.56) per share (the
"Preferred Stock Price"), appropriately adjusted to reflect stock splits, stock
dividends (unless distributed pursuant to Section 2), reorganizations,
consolidations and similar changes hereafter effected, plus dividends unpaid
thereon, if any. If upon the occurrence of such event the assets distributable
among the holders of the Series A Preferred Stock and stock ranking on a parity
with the Series A Preferred Stock as to assets in liquidation (collectively,
"Parity Stock") shall be insufficient to permit the payment of the full
preferential amounts for the Series A Preferred Stock and Parity Stock then the
entire assets and funds of the Corporation legally available for distribution
to its shareholders shall be distributed among the holders of the Series A
Preferred Stock and Parity Stock then outstanding ratably per share in
proportion to the full preferential amounts per share to which they are
respectively entitled.
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
distributions of 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 A 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 Series A Preferred Stock and the holders of the Common Stock, to be a
liquidation or dissolution of the Corporation if the holders of a majority of
the outstanding shares of Series A Preferred Stock so elect by giving written
notice thereof to the Corporation at least two (2) days before the effective
date of such transaction. If no such notice is given, the provisions of
Section 4(j) hereof apply. The Corporation shall give each holder of record of
Series A 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 A 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 the Series A Preferred
Stock, voting together as a single class.
2
<PAGE> 3
Nothing hereinabove set forth shall affect in any way the right
of each holder of shares of Series A Preferred Stock to convert such shares at
any time and from time to time in accordance with Section 4 below.
4. Conversion.
(a) Optional Conversion. Subject to and upon compliance with
the provisions of this paragraph, shares of the Series A Preferred Stock may,
at the sole option of the holder, be converted at any time, in whole or in
part, after the date of issuance into shares of Common Stock of the Corporation
at the Conversion Rate set out below calculated to the nearest 1/100th of a
share. However, in the event of a liquidation of the Corporation, any
conversion rights shall terminate at the close of business on the first full
day preceding the date fixed for the payment of any amounts distributable on
liquidation to the holders of Series A Preferred Stock.
(b) Automatic Conversion. Upon the closing of a Public
Offering (as defined below) pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock of the Corporation, all outstanding shares of the Series A
Preferred Stock shall be converted automatically into shares of Common Stock of
the Corporation at the Conversion Rate then in effect without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent. For purposes of this Certificate of Designation, "Public Offering"
shall mean a firm commitment underwritten initial public offering by the
Company of its Common Stock resulting in aggregate net proceeds to the Company
of $7,500,000 or more.
(c) Exercise. In order to exercise the conversion right
pursuant to Section 4(a), a holder of shares of the Series A Preferred Stock
shall surrender his certificate or certificates representing such shares to the
Corporation or to an agent of the Corporation designated by it for that
purpose, together with written notice to the Corporation that the holder elects
to convert the number of shares represented by such certificate or
certificates, or a specified number thereof ("Converted Shares"). Such notice
shall also state the name or names (with address) in which the certificate or
certificates for the shares of Common Stock which shall be issuable on such
conversion shall be issued; and if more than one certificate is to be issued
the number of shares to be represented by each. As promptly as practicable
after the receipt of such notice and surrender of such certificate or
certificates of the Series A Preferred Stock as aforesaid, the Corporation
shall issue and deliver to such holder, or to his written order, a certificate
or certificates for the full number of shares of Common Stock issuable on
conversion of the Converted Shares. Such conversion shall be deemed to have
been effected on the date ("Conversion Date") on which such notice shall have
been received by the Corporation or its agent and such certificate or
certificates of the Series A Preferred Stock shall have been surrendered as
aforesaid and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of such shares of Common
Stock on said Conversion Date. In case any certificate or certificates for
shares of the Series A Preferred Stock shall be surrendered for conversion of
only a part of the shares represented thereby, the Corporation shall at the
time of issuing the shares of Common Stock issue a new Series A Preferred Stock
certificate or certificates representing the number of shares of the Series A
Preferred Stock
3
<PAGE> 4
represented by the surrendered certificate or certificates and not converted,
dated the Conversion Date. The Corporation shall be obligated to pay any
dividends which shall have been declared payable to the holders of record of
shares of the Series A Preferred Stock, or dividends payable to the holders of
Common Stock to which the holders of the Series A Preferred Stock are entitled
to share ratably, as of a date preceding the Conversion Date which shall not
have been paid as of the Conversion Date. If more than one certificate
representing shares of the Series A Preferred Stock shall be surrendered for
conversion at one time by the same holder thereof, the number of full shares of
Common Stock which shall be issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of the Series A Preferred Stock
(or a specified number thereof) so surrendered. Fractional shares of Common
Stock may not be issued upon conversion of the Series A Preferred Stock and a
cash payment will be paid in lieu of any fractional share in an amount equal to
the same fraction of the market value of a share of Common Stock determined in
good faith by the Board of Directors of the Company.
(d) Conversion Price and Adjustment of Number of Shares. The
conversion price at which shares of Common Stock shall be deliverable upon
conversion of the Series A Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") shall initially be
$5.56. Such Conversion Price shall be subject to adjustment as provided below.
Upon each adjustment of the Conversion Price, each holder of shares of Series A
Preferred Stock shall thereafter be entitled to receive, without the payment of
additional consideration, the number of shares of Common Stock of the
Corporation obtained by multiplying the Conversion Price in effect immediately
prior to such adjustment by the number of shares issuable upon conversion
immediately prior to such adjustment and dividing the product thereof by the
Conversion Price resulting from such adjustment.
(e) Issuance of Additional Shares of Common Stock. For the
purposes of this Certificate of Designation, "Additional Shares of Common
Stock" shall mean all shares of Common Stock issued or deemed to be issued by
the Company after the Original Issue Date, other than Excluded Shares (as
defined below) and "Original Issue Date" shall mean the date upon which the
shares of the Series A Preferred Stock are originally issued.
If the Company at any time, or from time to time, after
the Original Issue Date shall issue any subscriptions, warrants, options,
rights, calls or other commitments entitling any person to purchase or acquire
any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for shares of Common Stock, including without limitation,
preferred stock convertible into Common Stock (all such rights to acquire
Common Stock are collectively referred to hereinafter as the "Rights") 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 Rights, shall be deemed to be Additional Shares of Common
Stock.
Except as provided in Section 4(g)(iv), for purposes of
this Certificate of Designation the term "Issuance Date" shall mean (i) with
respect to Additional Shares of Common Stock deemed to have ben issued in
connection with the issuance of a Right, the date such Right is issued and (ii)
in all other cases, the actual date Additional Shares of Common Stock are
issued.
4
<PAGE> 5
For the purposes of this Certificate of Designation,
"Excluded Shares" shall mean: (i) shares for which the consideration per share
as determined pursuant to Section 4(g) would be equal to or more than the
applicable Conversion Price determined on the day prior to the Issuance Date;
(ii) shares of Common Stock issuable upon the exercise of Rights existing as of
the Original Issue 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 Original Issue Date pursuant to the Company's
Stock Option Plan adopted July 26, 1994, as may be amended from time to time by
the affirmative vote of two-thirds of the members of the Company's Board of
Directors, provided that in no event shall more than 130,000 shares of Common
Stock subject to such options constitute Excluded Shares. The issuance of
Excluded Shares shall not be an issuance of Additional Shares of Common Stock,
and shall not result in an adjustment of the Conversion Price.
In any such case in which Additional Shares of Common
Stock are deemed to be issued, no further adjustment in the Conversion Price
shall be made upon the subsequent issue of shares of Common Stock upon the
exercise and/or conversion or exchange of such Rights, unless such Rights 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 (in which case appropriate adjustment to the Conversion
Price shall be made upon exercise and/or conversion or exchange to give effect
to such amendment or modification); and upon the expiration or termination of
any unexercised or unconverted Right, the Conversion Price shall not be
readjusted, but the Additional Shares of Common Stock deemed issued as the
result of the original issue of such Right shall not be deemed issued for the
purposes of any subsequent adjustment of the Conversion Price.
(f) Adjustment of Conversion Price upon Issuance of Additional
Shares of Common Stock. If the Corporation has issued or to be deemed issued
Additional Shares of Common Stock the Conversion Price shall be reduced,
concurrently with such issue to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, (a) the
numerator of which shall be (1) the number of shares of Common Stock
outstanding immediately prior to such issue plus (2) the number of shares of
Common Stock which the aggregate consideration received by the Corporation for
the total number of Additional Shares of Common Stock so issued would purchase
at such Conversion Price; and (b) the denominator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of such Additional Shares of Common Stock so issued.
(g) Determination of Consideration. For purposes of this
Section 4(g), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
a. insofar as it consists of cash, be computed
at the aggregate of cash received by the Corporation;
5
<PAGE> 6
b. insofar as it consists of property other
than cash, be computed at the fair market value thereof at the
time of such issue, as determined in good faith by the Board of
Directors irrespective of the accounting treatment of such
consideration without deduction of expenses or underwriter
discounts or commissions; and
c. in the event Additional Shares of Common
Stock are issued together with other shares or securities or
other assets of the Corporation for consideration which covers
both, be the proportion of such consideration so received,
computed as provided in subsections (a) and (b) above, as
determined in good faith by the Board of Directors irrespective
of the accounting treatment of such consideration.
(ii) Rights: The consideration per share received by
the Corporation for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 4(e), relating to Rights, shall be
determined by dividing
a. the total amount, if any, received or
receivable by the Corporation as consideration for the issue of
such Rights, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the
Corporation upon the exercise, conversion and/or exchange of such
Rights, by
b. the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise, conversion and/or
exchange of such Rights.
(iii) Merger or Consolidation, etc. In case any shares
of Common Stock or Rights shall be issued in connection with any merger
or consolidation in which the Corporation is the surviving corporation,
the amount of consideration therefor shall be deemed to be the fair
value as determined by the Board of Directors of the Corporation of such
portion of the assets and business of the non-surviving corporation or
corporations as such Board shall determine to be attributable to such
Common Stock or Rights, as the case may be. In the event of any
consolidation or merger of the Corporation in which the Corporation is
not the surviving corporation or in the event of any sale of all or
substantially all of the assets of the Corporation for stock or other
securities of any other corporation, the Corporation shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated and for a
consideration equal to the fair market value on the date of such
transaction of such stock or securities of the other corporation, and if
any such calculation results in adjustment of the Conversion Price, the
determination of the number of shares of Common Stock issuable upon
conversion immediately prior to such
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<PAGE> 7
merger, conversion or sale, for purposes of Section 4(j) below, shall be
made after giving effect to such adjustment of the Conversion Price.
(iv) Record Date. In case the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling
them (a) to receive a dividend or other distribution payable in Common
Stock or in Rights, or (b) to subscribe for or purchase Common Stock or
Rights, then such record date shall be deemed to be the Issuance Date.
(v) Stock Owned by Corporation. The number of shares
of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purpose of this Section 4.
(h) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original Issue
Date effect a subdivision of the outstanding Common Stock, the Conversion Price
then in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(i) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of the Series A
Preferred Stock shall be changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for below), then and in each such
event the holder of each share of Series A Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock
and other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the number of shares of Common
Stock into which such shares of Series A Preferred Stock might have been
converted immediately prior to such reorganization, reclassification, or
change, all subject to further adjustment as provided herein.
(j) Adjustment for Merger or Reorganization, etc. In case of
any consolidation or merger of the Corporation with or into another corporation
or a sale of all or substantially all of the assets of the Corporation (other
than a consolidation, merger or sale which is treated as a liquidation pursuant
to Section 3), each share of Series A Preferred Stock shall thereafter be
convertible into the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of such Series A Preferred Stock would
have been entitled upon such consolidation, merger or sale; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in this Section 4 set forth
with respect to the rights and interest thereafter of the holders of the Series
A Preferred Stock, to the end that the provisions set forth in this Section 4
(including provisions with respect to changes in and other adjustments of
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<PAGE> 8
the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Series A Preferred Stock; or
The Corporation shall not effect any consolidation, merger
or sale unless prior to the consummation thereof the successor corporation (if
other than the Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument executed
and mailed to the registered holders of Series A Preferred Stock the obligation
to deliver to such holders such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders may be entitled to
receive.
(k) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation 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 hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Series A Preferred Stock against impairment. Without limiting
the generality of the foregoing, the Company (i) will not increase the par
value of any shares of Common Stock above the Conversion Price then in effect;
and (ii) will take all actions as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares
of stock upon the conversion of all Series A Preferred Stock from time to time
outstanding.
(l) Certificate as to Adjustments. On an annual basis, the
Company shall, at its expense, promptly compute such adjustment or readjustment
in the Conversion Price in accordance with the terms hereof and furnish to each
holder, if any, of Series A Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based and shall file a copy of such certificate
with its corporate records. The Corporation shall, upon the written request at
any time of any holder of Series A Preferred Stock, furnish or cause to be
furnished to such holder a similar certificate setting forth (1) such
adjustments and readjustments, (2) the Conversion Price then in effect, and (3)
the number of shares of Common Stock and the amount, if any, of other property
which then would be received upon the conversion of Series A Preferred Stock.
Despite such adjustment or readjustment, the form of each or all Series A
Preferred Stock Certificates, if the same shall reflect the initial or any
subsequent conversion price, need not be changed in order for the adjustments
or readjustments to be valued in accordance with the provisions of this
Certificate of Designation, which shall control.
(m) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any
other distribution) on its Common Stock payable in Common Stock or other
securities of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
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<PAGE> 9
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution
thereon), or of any consolidation or merger of the Corporation into or
with another corporation, or of the sale of all or substantially all of
the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office, and shall
cause to be mailed to the holders of the Series A Preferred Stock at their last
addresses as shown on the records of the Corporation, at least ten days prior
to the record date specified in (v) below or twenty days before the date
specified in (vi) below, a notice stating
(v) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, subdivision or combination are to be determined,
or
(vi) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale,
dissolution or winding up.
(n) Happenings upon Conversion of Series A Preferred Stock.
All shares of Series A Preferred Stock, which shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and
except as provided in Section 4(c), all rights with respect to such shares,
including the rights, if any, to receive dividends, notices and to vote, shall
immediately cease and terminate on the date of conversion, except only the
right of the holders thereof to receive shares of Common Stock in exchange
therefor. Any shares of Series A Preferred Stock so converted shall be retired
and canceled and shall not be reissued, and the Corporation may from time to
time take such appropriate action as may be necessary to reduce the number of
shares of authorized Series A Preferred Stock accordingly.
(o) Underwritten Offering. If the conversion is in connection
with an underwritten public offering of securities registered pursuant to the
Securities Act of 1933, as amended, the conversion may at the option of any
holder tendering Series A Preferred Stock for conversion be conditioned upon
the closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock shall not be
deemed to have converted such Series A Preferred Stock until immediately prior
to the closing of the sale of securities.
(p) Taxes on Conversion. The issue of any stock or other
certificate upon the conversion of any shares of the Series A Preferred Stock
shall be made without charge to the holder
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<PAGE> 10
thereof for any tax (other than any income tax) in respect of the issue of such
certificate. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of any certificate in the name other than that of the holder of the
shares of the Series A Preferred Stock surrendered for conversion.
(q) Reservation of Shares. The Corporation shall at all times
reserve and keep available out of its authorized but unissued stock, for the
purpose of effecting the conversion of the Series A Preferred Stock, such
number of its duly authorized shares of Common Stock as shall from time to time
be sufficient to effect the conversion of the Series A Preferred Stock, and
shall take all such corporate action as may, in the opinion of its counsel, be
necessary to assure that such shares of Common Stock may be validly and legally
issued upon conversion of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of the Series A Preferred Stock at the
Conversion Rate then in effect the Corporation shall take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
5. Voting Rights.
(a) Each holder of outstanding shares of Series A Preferred
Stock shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares of Series A Preferred Stock held
by such holder are convertible (as adjusted from time to time pursuant to
Section 4 hereof), at each meeting of stockholders of the Corporation (and
written actions of stockholders in lieu of meetings) with respect to any and
all matters presented to the stockholders of the Corporation for their action
or consideration including, without limitation, the election of directors.
Except as set forth under subsection (b) below, holders of Series A Preferred
Stock shall vote together with the holders of Common Stock as a single class,
and the holders of the Series A Preferred Stock shall not have the right to
vote as a separate class on any matter submitted to the shareholders of the
Corporation.
(b) The Corporation shall not amend, alter or repeal
preferences, rights, powers or other terms of the Series A Preferred Stock so
as to affect adversely the Series A Preferred Stock, without the unanimous
written consent or affirmative vote of all of the holders of the then
outstanding shares of Series A Preferred Stock, given in writing or by vote at
a meeting, consenting or voting (as the case may be) separately as a class.
For this purpose, without limiting the generality of the foregoing, the
authorization or issuance of any series of Preferred Stock which has preference
or priority over the Series A Preferred Stock as to the right to receive either
dividends or amounts distributable upon liquidation, dissolution or winding up
of the Corporation shall be deemed to affect adversely the Series A Preferred
Stock.
RESOLVED, that, before the Corporation shall issue any shares of the
Series A Preferred Stock, a certificate pursuant to Article 2.13 of the Texas
Business Corporation 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
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which may be necessary or proper in their opinion to carry into effect the
purposes and intent of this and the foregoing resolutions.
IN WITNESS WHEREOF, said PACKAGED ICE, INC. has caused this Certificate
to be duly executed by its President this 18th day of September, 1995.
PACKAGED ICE, INC.
By:
----------------------------------
James F. Stuart, President
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<PAGE> 1
EXHIBIT 3.4
PREFERRED STOCK SERIES DESIGNATION
PACKAGED ICE, INC., A TEXAS CORPORATION
CERTIFICATE OF RESOLUTION
Providing for the Issuance of
Series B Convertible 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, at a special
meeting held on December 18, 1996, 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:
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 450,000 shares have been designated as the Series A Convertible
Preferred Stock (the "Series A Preferred Stock") all of which are issued and
outstanding, the Board of Directors hereby provides for the issuance of a
series of 200,000 shares of Preferred Stock, par value $.01 per share, as
follows:
1. Designation. There is hereby created a series of Preferred Stock
of the Corporation to be designated "Series B Convertible Preferred Stock"
(hereinafter referred to as the "Series B Preferred Stock") consisting of
200,000 shares, which shares shall be convertible into fully paid and
nonassessable shares of Common Stock, $.01 par value, of the Corporation (the
"Common Stock"), and to the extent that the designations, preferences,
limitations and relative rights of the Series B 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. In the event the Board of Directors of the
Corporation elects to make a distribution or dividend on the shares of Common
Stock of the Corporation (whether in cash, capital stock or other property),
the distribution or dividend must be made equally and ratably to all
outstanding shares of the Corporation's Series B Preferred Stock as if the
Series B Preferred Stock had been converted into Common Stock.
<PAGE> 2
3. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series B Preferred Stock shall be entitled to be paid out of
the assets of the Corporation available for distribution to its shareholders,
before any payment or declaration and setting apart for payment of any amount
shall be made in respect to the Common Stock, or stock of any other class
ranking junior as to the assets in liquidation to the Series B Preferred Stock
(collectively, "Junior Stock"), SIX AND 07/100 DOLLARS ($6.07) per share (the
"Preferred Stock Price"), appropriately adjusted to reflect stock splits, stock
dividends (unless distributed pursuant to Section 2), reorganizations,
consolidations and similar changes hereafter effected, plus dividends unpaid
thereon, if any. If upon the occurrence of such event the assets distributable
among the holders of the Series B Preferred Stock and stock ranking on a parity
with the Series B Preferred Stock as to assets in liquidation (collectively,
"Parity Stock") shall be insufficient to permit the payment of the full
preferential amounts for the Series B Preferred Stock and Parity Stock then the
entire assets and funds of the Corporation legally available for distribution
to its shareholders shall be distributed among the holders of the Series B
Preferred Stock and Parity Stock then outstanding ratably per share in
proportion to the full preferential amounts per share to which they are
respectively entitled. The Series B Preferred Stock will rank on a parity with
the Series A Preferred Stock as to assets in liquidation and the Series A
Preferred Stock shall be deemed to be Parity Stock.
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
distributions of 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 B 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 Series B Preferred Stock, the holders of the Series A Preferred Stock, and
the holders of the Common Stock, to be a liquidation or dissolution of the
Corporation if the holders of a majority of the outstanding shares of Series B
Preferred Stock so elect by giving written notice thereof to the Corporation at
least two (2) days before the effective date of such transaction. If no such
notice is given, the provisions of Section 4(j) hereof apply. The Corporation
shall give each holder of record of Series B 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 B 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
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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 the Series B Preferred Stock, voting together as a
single class.
Nothing hereinabove set forth shall affect in any way the right
of each holder of shares of Series B Preferred Stock to convert such shares at
any time and from time to time in accordance with Section 4 below.
4. Conversion.
(a) Optional Conversion. Subject to and upon compliance with
the provisions of this paragraph, shares of the Series B Preferred Stock may,
at the sole option of the holder, be converted at any time, in whole or in
part, after the date of issuance into shares of Common Stock of the Corporation
at the Conversion Price set out below in Section 4(d) calculated to the nearest
1/100th of a share. However, in the event of a liquidation of the Corporation,
any conversion rights shall terminate at the close of business on the first
full day preceding the date fixed for the payment of any amounts distributable
on liquidation to the holders of Series B Preferred Stock.
(b) Automatic Conversion. Upon the closing of a Public
Offering (as defined below) pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock of the Corporation, all outstanding shares of the Series B
Preferred Stock shall be converted automatically into shares of Common Stock of
the Corporation at the Conversion Price then in effect without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent. For purposes of this Certificate of Designation, "Public Offering"
shall mean a firm commitment underwritten initial public offering by the
Corporation of its Common Stock resulting in aggregate net proceeds to the
Corporation of $7,500,000 or more.
(c) Exercise. In order to exercise the conversion right
pursuant to Section 4(a), a holder of shares of the Series B Preferred Stock
shall surrender his certificate or certificates representing such shares to the
Corporation or to an agent of the Corporation designated by it for that
purpose, together with written notice to the Corporation that the holder elects
to convert the number of shares represented by such certificate or
certificates, or a specified number thereof ("Converted Shares"). Such notice
shall also state the name or names (with address) in which the certificate or
certificates for the shares of Common Stock which shall be issuable on such
conversion shall be issued; and if more than one certificate is to be issued
the number of shares to be represented by each. As promptly as practicable
after the receipt of such notice and surrender of such certificate or
certificates of the Series B Preferred Stock as aforesaid, the Corporation
shall issue and deliver to such holder, or to his written order, a certificate
or certificates for the full number of shares of Common Stock issuable on
conversion of the Converted Shares. Such conversion shall be deemed to have
been effected on the date ("Conversion Date") on which such notice shall have
been received by the Corporation or its agent and such certificate or
certificates of the Series B Preferred Stock shall have been surrendered as
aforesaid and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of such shares of Common
Stock on said
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<PAGE> 4
Conversion Date. In case any certificate or certificates for shares of the
Series B Preferred Stock shall be surrendered for conversion of only a part of
the shares represented thereby, the Corporation shall at the time of issuing
the shares of Common Stock issue a new Series B Preferred Stock certificate or
certificates representing the number of shares of the Series B Preferred Stock
represented by the surrendered certificate or certificates and not converted,
dated the Conversion Date. The Corporation shall be obligated to pay any
dividends which shall have been declared payable to the holders of record of
shares of the Series B Preferred Stock, or dividends payable to the holders of
Common Stock to which the holders of the Series B Preferred Stock are entitled
to share ratably, as of a date preceding the Conversion Date which shall not
have been paid as of the Conversion Date. If more than one certificate
representing shares of the Series B Preferred Stock shall be surrendered for
conversion at one time by the same holder thereof, the number of full shares of
Common Stock which shall be issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of the Series B Preferred Stock
(or a specified number thereof) so surrendered. Fractional shares of Common
Stock may not be issued upon conversion of the Series B Preferred Stock and a
cash payment will be paid in lieu of any fractional share in an amount equal to
the same fraction of the market value of a share of Common Stock determined in
good faith by the Board of Directors of the Corporation.
(d) Conversion Price and Adjustment of Number of Shares. The
conversion price at which shares of Common Stock shall be deliverable upon
conversion of the Series B Preferred Stock without the payment of additional
consideration by the holder thereof (the "Conversion Price") shall initially be
$6.07. Such Conversion Price shall be subject to adjustment as provided below.
Upon each adjustment of the Conversion Price, each holder of shares of Series B
Preferred Stock shall thereafter be entitled to receive, without the payment of
additional consideration, the number of shares of Common Stock of the
Corporation obtained by multiplying the Conversion Price in effect immediately
prior to such adjustment by the number of shares issuable upon conversion
immediately prior to such adjustment and dividing the product thereof by the
Conversion Price resulting from such adjustment.
(e) Issuance of Additional Shares of Common Stock. For the
purposes of this Certificate of Designation, "Additional Shares of Common
Stock" shall mean all shares of Common Stock issued or deemed to be issued by
the Corporation after the Original Issue Date, other than Excluded Shares (as
defined below) and "Original Issue Date" shall mean the date upon which the
shares of the Series B Preferred Stock are originally issued.
If the Corporation at any time, or from time to time,
after the Original Issue Date shall issue any subscriptions, warrants, options,
rights, calls or other commitments entitling any person to purchase or acquire
any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for shares of Common Stock, including without limitation,
preferred stock convertible into Common Stock (all such rights to acquire
Common Stock are collectively referred to hereinafter as the "Rights") 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 Rights, shall be deemed to be Additional Shares of Common
Stock.
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<PAGE> 5
Except as provided in Section 4(g)(iv), for purposes of
this Certificate of Designation the term "Issuance Date" shall mean (i) with
respect to Additional Shares of Common Stock deemed to have been issued in
connection with the issuance of a Right, the date such Right is issued and (ii)
in all other cases, the actual date Additional Shares of Common Stock are
issued.
For the purposes of this Certificate of Designation,
"Excluded Shares" shall mean: (i) shares for which the consideration per share
as determined pursuant to Section 4(g) would be equal to or more than the
applicable Conversion Price determined on the day prior to the Issuance Date;
(ii) shares of Common Stock issuable upon the exercise of Rights existing as of
the Original Issue 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 Original Issue Date pursuant to the Corporation's
Stock Option Plan adopted July 26, 1994, as may be amended from time to time by
the affirmative vote of two-thirds of the members of the Corporation's Board of
Directors, provided that in no event shall more than 130,000 shares of Common
Stock subject to such options constitute Excluded Shares. The issuance of
Excluded Shares shall not be an issuance of Additional Shares of Common Stock,
and shall not result in an adjustment of the Conversion Price.
In any such case in which Additional Shares of Common
Stock are deemed to be issued, no further adjustment in the Conversion Price
shall be made upon the subsequent issue of shares of Common Stock upon the
exercise and/or conversion or exchange of such Rights, unless such Rights 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 (in which case appropriate adjustment to the Conversion
Price shall be made upon exercise and/or conversion or exchange to give effect
to such amendment or modification); and upon the expiration or termination of
any unexercised or unconverted Right, the Conversion Price shall not be
readjusted, but the Additional Shares of Common Stock deemed issued as the
result of the original issue of such Right shall not be deemed issued for the
purposes of any subsequent adjustment of the Conversion Price.
(f) Adjustment of Conversion Price upon Issuance of Additional
Shares of Common Stock. If the Corporation has issued or has been deemed to
have issued Additional Shares of Common Stock the Conversion Price shall be
reduced, concurrently with such issue to a price (calculated to the nearest
cent) determined by multiplying such Conversion Price by a fraction, (a) the
numerator of which shall be (1) the number of shares of Common Stock
outstanding immediately prior to such issue plus (2) the number of shares of
Common Stock which the aggregate consideration received by the Corporation for
the total number of Additional Shares of Common Stock so issued would purchase
at such Conversion Price; and (b) the denominator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of such Additional Shares of Common Stock so issued.
(g) Determination of Consideration. For purposes of this
Section 4(g), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
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<PAGE> 6
(i) Cash and Property: Such consideration shall:
a. insofar as it consists of cash, be computed
at the aggregate of cash received by the Corporation;
b. insofar as it consists of property other
than cash, be computed at the fair market value thereof at the
time of such issue, as determined in good faith by the Board of
Directors irrespective of the accounting treatment of such
consideration without deduction of expenses or underwriter
discounts or commissions; and
c. in the event Additional Shares of Common
Stock are issued together with other shares or securities or
other assets of the Corporation for consideration which covers
both, be the proportion of such consideration so received,
computed as provided in subsections (a) and (b) above, as
determined in good faith by the Board of Directors irrespective
of the accounting treatment of such consideration.
(ii) Rights: The consideration per share received by
the Corporation for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 4(e), relating to Rights, shall be
determined by dividing
a. the total amount, if any, received or
receivable by the Corporation as consideration for the issue of
such Rights, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the
Corporation upon the exercise, conversion and/or exchange of such
Rights, by
b. the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise, conversion and/or
exchange of such Rights.
(iii) Merger or Consolidation, etc. In case any shares
of Common Stock or Rights shall be issued in connection with any merger
or consolidation in which the Corporation is the surviving corporation,
the amount of consideration therefor shall be deemed to be the fair
value as determined by the Board of Directors of the Corporation of such
portion of the assets and business of the non-surviving corporation or
corporations as such Board shall determine to be attributable to such
Common Stock or Rights, as the case may be. In the event of any
consolidation or merger of the Corporation in which the Corporation is
not the surviving corporation or in the event of any sale of all or
substantially all of the assets of the Corporation for stock or other
securities of any other corporation, the Corporation shall be deemed to
have issued a number of shares of its Common Stock for stock or
securities of the other corporation computed on the basis of the actual
exchange ratio
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on which the transaction was predicated and for a consideration equal to
the fair market value on the date of such transaction of such stock or
securities of the other corporation, and if any such calculation results
in adjustment of the Conversion Price, the determination of the number
of shares of Common Stock issuable upon conversion immediately prior to
such merger, conversion or sale, for purposes of Section 4(j) below,
shall be made after giving effect to such adjustment of the Conversion
Price.
(iv) Record Date. In case the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling
them (a) to receive a dividend or other distribution payable in Common
Stock or in Rights, or (b) to subscribe for or purchase Common Stock or
Rights, then such record date shall be deemed to be the Issuance Date.
(v) Stock Owned by Corporation. The number of shares
of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purpose of this Section 4.
(h) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original Issue
Date effect a subdivision of the outstanding Common Stock, the Conversion Price
then in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(i) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of the Series B
Preferred Stock shall be changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for below), then and in each such
event the holder of each share of Series B Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock
and other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the number of shares of Common
Stock into which such shares of Series B Preferred Stock might have been
converted immediately prior to such reorganization, reclassification, or
change, all subject to further adjustment as provided herein.
(j) Adjustment for Merger or Reorganization, etc. In case of
any consolidation or merger of the Corporation with or into another corporation
or a sale of all or substantially all of the assets of the Corporation (other
than a consolidation, merger or sale which is treated as a liquidation pursuant
to Section 3), each share of Series B Preferred Stock shall thereafter be
convertible into the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of such Series B Preferred Stock would
have been entitled upon such consolidation, merger or sale;
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<PAGE> 8
and, in such case, appropriate adjustment (as determined in good faith by the
Board of Directors) shall be made in the application of the provisions in this
Section 4 set forth with respect to the rights and interest thereafter of the
holders of the Series B Preferred Stock, to the end that the provisions set
forth in this Section 4 (including provisions with respect to changes in and
other adjustments of the Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
property thereafter deliverable upon the conversion of the Series B Preferred
Stock.
The Corporation shall not effect any consolidation, merger
or sale unless prior to the consummation thereof the successor corporation (if
other than the Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument executed
and mailed to the registered holders of Series B Preferred Stock the obligation
to deliver to such holders such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders may be entitled to
receive.
(k) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation 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 hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Series B Preferred Stock against impairment. Without limiting
the generality of the foregoing, the Corporation (i) will not increase the par
value of any shares of Common Stock above the Conversion Price then in effect;
and (ii) will take all actions as may be necessary or appropriate in order that
the Corporation may validly and legally issue fully paid and nonassessable
shares of stock upon the conversion of all Series B Preferred Stock from time
to time outstanding.
(l) Certificate as to Adjustments. On an annual basis, the
Corporation shall, at its expense, promptly compute such adjustment or
readjustment in the Conversion Price in accordance with the terms hereof and
furnish to each holder, if any, of Series B Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based and shall file a copy of
such certificate with its corporate records. The Corporation shall, upon the
written request at any time of any holder of Series B Preferred Stock, furnish
or cause to be furnished to such holder a similar certificate setting forth (1)
such adjustments and readjustments, (2) the Conversion Price then in effect,
and (3) the number of shares of Common Stock and the amount, if any, of other
property which then would be received upon the conversion of Series B Preferred
Stock. Despite such adjustment or readjustment, the form of each or all Series
B Preferred Stock Certificates, if the same shall reflect the initial or any
subsequent conversion price, need not be changed in order for the adjustments
or readjustments to be valued in accordance with the provisions of this
Certificate of Designation, which shall control.
(m) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any
other distribution) on its Common Stock payable in Common Stock or other
securities of the Corporation;
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(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution
thereon), or of any consolidation or merger of the Corporation into or
with another corporation, or of the sale of all or substantially all of
the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office, and shall
cause to be mailed to the holders of the Series B Preferred Stock at their last
addresses as shown on the records of the Corporation, at least ten days prior
to the record date specified in (v) below or twenty days before the date
specified in (vi) below, a notice stating
(v) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, subdivision or combination are to be determined,
or
(vi) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale,
dissolution or winding up.
(n) Happenings upon Conversion of Series B Preferred Stock.
All shares of Series B Preferred Stock, which shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and
except as provided in Section 4(c), all rights with respect to such shares,
including the rights, if any, to receive dividends, notices and to vote, shall
immediately cease and terminate on the date of conversion, except only the
right of the holders thereof to receive shares of Common Stock in exchange
therefor. Any shares of Series B Preferred Stock so converted shall be retired
and canceled and shall not be reissued, and the Corporation may from time to
time take such appropriate action as may be necessary to reduce the number of
shares of authorized Series B Preferred Stock accordingly.
(o) Underwritten Offering. If the conversion is in connection
with an underwritten public offering of securities registered pursuant to the
Securities Act of 1933, as amended, the conversion may at the option of any
holder tendering Series B Preferred Stock for conversion be conditioned upon
the closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series B Preferred Stock shall not be
deemed to have converted such Series B Preferred Stock until immediately prior
to the closing of the sale of securities.
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<PAGE> 10
(p) Taxes on Conversion. The issue of any stock or other
certificate upon the conversion of any shares of the Series B Preferred Stock
shall be made without charge to the holder thereof for any tax (other than any
income tax) in respect of the issue of such certificate. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in the name
other than that of the holder of the shares of the Series B Preferred Stock
surrendered for conversion.
(q) Reservation of Shares. The Corporation shall at all times
reserve and keep available out of its authorized but unissued stock, for the
purpose of effecting the conversion of the Series B Preferred Stock, such
number of its duly authorized shares of Common Stock as shall from time to time
be sufficient to effect the conversion of the Series B Preferred Stock, and
shall take all such corporate action as may, in the opinion of its counsel, be
necessary to assure that such shares of Common Stock may be validly and legally
issued upon conversion of the Series B Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of the Series B Preferred Stock at the
Conversion Price then in effect the Corporation shall take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
5. Voting Rights.
(a) Each holder of outstanding shares of Series B Preferred
Stock shall be entitled to the number of votes equal to the number of whole
shares of Common Stock into which the shares of Series B Preferred Stock held
by such holder are convertible (as adjusted from time to time pursuant to
Section 4 hereof), at each meeting of stockholders of the Corporation (and
written actions of shareholders in lieu of meetings) with respect to any and
all matters presented to the stockholders of the Corporation for their action
or consideration including, without limitation, the election of directors.
Except as set forth under subsection (b) below, holders of Series B Preferred
Stock shall vote together with the holders of Common Stock and the Series A
Preferred Stock as a single class, and the holders of the Series B Preferred
Stock shall not have the right to vote as a separate class on any matter
submitted to the shareholders of the Corporation.
(b) The Corporation shall not amend, alter or repeal
preferences, rights, powers or other terms of the Series B Preferred Stock so
as to affect adversely the Series B Preferred Stock, without the unanimous
written consent or affirmative vote of all of the holders of the then
outstanding shares of Series B Preferred Stock, given in writing or by vote at
a meeting, consenting or voting (as the case may be) separately as a class.
For this purpose, without limiting the generality of the foregoing, the
authorization or issuance of any series of Preferred Stock which has preference
or priority over the Series B Preferred Stock as to the right to receive either
dividends or amounts distributable upon liquidation, dissolution or winding up
of the Corporation shall be deemed to affect adversely the Series B Preferred
Stock.
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RESOLVED, that, before the Corporation shall issue any shares of the
Series B Preferred Stock, a certificate pursuant to Article 2.13 of the Texas
Business Corporation 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.
IN WITNESS WHEREOF, said PACKAGED ICE, INC. has caused this Certificate
to be duly executed by its President this 31st day of December, 1996.
PACKAGED ICE, INC.
By:
----------------------------------
James F. Stuart, President
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EXHIBIT 3.5
BYLAWS
OF
PACKAGED ICE, INC.
A TEXAS CORPORATION
(THE "CORPORATION")
AMENDED AND RESTATED AS OF JANUARY 20, 1997
ARTICLE I.
OFFICES
Section 1. Registered Office. The Corporation shall have and
continuously maintain a registered office in the State of Texas which may be,
but need not be, the same as its place of business (if located within the State
of Texas). The address of the registered office and the name of the registered
agent at such address shall be as set forth in the Corporation's Articles of
Incorporation.
Section 2. Place of Business. In addition to its registered office,
the Corporation may have offices and places of business at such places, both
within and without the State of Texas, as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. Annual meetings of the shareholders shall
be held at such times as shall be determined by the Board of Directors. At each
annual meeting, the shareholders shall elect a Board of Directors, and shall
transact such other business as may be properly brought before the meeting.
Section 2. Special Meetings. Unless otherwise provided by the
Articles of Incorporation, special meetings of the shareholders may be called
by the President, the Board of Directors or the holders of shares representing
not less than 10% of the votes entitled to be cast on any issue at meetings of
shareholders. A special meeting may be called for any purpose or purposes
though business transacted at a special meeting shall be confined to the
purposes stated in the notice of such meeting.
Section 3. Place of Meetings. Meetings of the shareholders of the
Corporation shall be held at such places within or without the State of Texas
as shall be determined by the Board of Directors or, in the absence of such a
determination, meetings of shareholders shall be held at the principal office
of the Corporation.
Section 4. Notice of Meetings. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called,
<PAGE> 2
shall be delivered not less than ten (10) nor more than sixty (60) days before
the date of the meeting, either personally or by mail, by or at the direction
of the President, the Secretary or the person calling the meeting, to each
shareholder entitled to vote at the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid.
Section 5. Voting List. At least ten (10) days before each meeting of
the shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the residence of each and the
number of voting shares held by each, shall be prepared by the officer or agent
having charge of the stock transfer-books. Such list shall be kept on file at
the registered office or principal place of business of the Corporation for a
period of ten (10) days prior to such meeting, and shall be subject to
inspection by any shareholder who may be present. The original stock transfer
books shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
Failure to comply with the requirements of this Section shall not affect the
validity of any action taken at such meeting.
Section 6. Quorum of Shareholders; Adjournment.
(A) The holders of shares representing a majority of the votes
entitled to be cast at a meeting, present in person or represented by proxy,
shall be requisite to and shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
the Articles of Incorporation or by these Bylaws. Once a quorum is present at a
meeting of shareholders, the shareholders represented in person or by proxy at
the meeting may conduct such business as may be properly brought before the
meeting until it is adjourned, and the subsequent withdrawal from the meeting
of any shareholder or the refusal of any shareholder represented in person or
by proxy to vote shall not affect the presence of a quorum at the meeting. Upon
attainment of representation by a quorum, subsequent to an adjournment of the
meeting, any business may be transacted which might have been transacted at the
meeting as originally notified.
(B) If a quorum is not present or represented at any meeting
of the shareholders, the shareholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
these Bylaws, such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of the share transfer
records and the stated period of closing has expired.
Section 7. Organization; Order of Business. The Chairman of the Board
or such other person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his absence
such person as may be chosen by the holders of shares representing a majority
of the votes which could be cast by those present, in person or by proxy, and
entitled to vote shall call to order any meeting of the shareholders and act as
chairman of the meeting. The Secretary of the Corporation, if present, shall
act as secretary of the meeting, but in his absence, the secretary of the
meeting shall be such person as the chairman of the meeting appoints. The
chairman of any meeting of shareholders shall determine the order of business
and the procedure at
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the meeting, including regulation of the manner of voting and the conduct of
discussion; but the order of business to be followed at any meeting at which a
quorum is present may be changed by the holders of shares of stock present in
person or by proxy and entitled to vote at such meeting (determined by a
majority of the votes cast).
Section 8. Required Vote. With respect to matters other than
elections of directors, except as otherwise required by statute, the Articles
of Incorporation or these Bylaws, the vote of the holders of shares
representing a majority of the votes cast shall decide any question properly
brought before such meeting. Directors shall be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election of
directors.
Section 9. Method of Voting; Proxies. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of the shareholders, except to the extent that the voting
rights of the shares of any class or classes are enhanced or limited by
statute, by the Articles of Incorporation (including amendments thereto) or by
agreement. At any meeting of the shareholders, each shareholder having the
right to vote shall be entitled to vote in person, or by written proxy
appointed by an instrument executed by such shareholder. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. A proxy shall be revocable unless expressly provided
therein to be irrevocable and unless otherwise made irrevocable by law. Each
proxy shall be filed with the Secretary of the Corporation prior to or at the
time of the meeting. Any vote may be taken by voice or by show of hands unless
a shareholder entitled to vote objects, in which case written ballots shall be
used.
Section 10. Action Without Meeting. Any action which must or may be
taken at any annual or special meeting of shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by (i) the holders
of all the shares entitled to vote with respect to the action that is the
subject of the consent, or (ii) if the Articles of Incorporation so provide,
the holders of shares of stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote on the action were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who did not consent in
writing.
Section 11. Telephone Meeting. Shareholders may participate in and
hold a meeting by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
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ARTICLE III.
DIRECTORS
Section 1. Management of the Corporation. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed under the direction of, the
Board of Directors of the Corporation. Except to the extent otherwise limited
by statute, the Articles of Incorporation, or these Bylaws, the Board of
Directors shall have the broadest powers available under Texas law.
Section 2. Number. The number of directors constituting the Board of
Directors shall be determined from time to time by resolution of a majority of
directors then in office, though less than a quorum; provided that at all times
the number of directors shall be at least one (1) and no decrease shall have
the effect of shortening the term of any incumbent director.
Section 3. Qualifications, Election and Term. Directors need not be
residents of Texas or shareholders of the Corporation. The directors
constituting the Board of Directors shall be elected at the annual meeting of
shareholders by a plurality of the votes cast by the shareholders entitled to
vote at such election of directors. Each director, upon election to the Board
of Directors, shall hold office until the next annual meeting of shareholders
and until his or her successor is elected and qualified.
Section 4. Chairman of the Board. The Board of Directors may elect a
member from the Board of Directors to serve as Chairman of the Board. The
Chairman of the Board shall preside at meetings of the Board of Directors and
shareholders.
Section 5. Removal. Any director may be removed either for or without
cause at any special or annual meeting of the shareholders by the affirmative
vote of the holders of shares having a majority of the entire number of votes
entitled to be cast for the election of such director, if notice of the
intention to act upon such matter shall have been given in the notice calling
such meeting.
Section 6. Vacancies. Any vacancies occurring in the Board of
Directors for any reason may be filled by a majority vote of the directors then
in office, though less than a quorum, or by election at an annual meeting of
shareholders or at a special meeting of shareholders called for that purpose;
provided that, during the period between any two (2) successive annual meetings
of shareholders, the Board of Directors may not fill more than two (2)
vacancies resulting from an increase in the number of directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office.
Section 7. Place of Meeting. The directors of the Corporation may
hold their meetings, both regular and special, either within or without the
State of Texas.
Section 8. Annual Meetings. Each newly elected Board of Directors
shall hold an annual meeting without further notice immediately following the
annual meeting of shareholders and at the
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same place, unless such place or time is changed by a majority vote of the
directors then elected and serving.
Section 9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and places as may be fixed
from time to time by resolutions adopted by the Board of Directors and
communicated to all directors at their last known addresses. Except as
otherwise provided by statute, the Articles of Incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any regular
meeting need be specified in the notice or waiver of notice of such meeting.
Section 10. Special Meetings. Special meetings of the Board of
Directors may be called by the President on twenty-four (24) hours' notice to
each director either personally or by mail or by telegram or by facsimile.
Special meetings shall be called by the President in like manner and on like
notice on the written request of two (2) directors. Except as may be otherwise
expressly provided by statute, the Articles of Incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in the notice or waiver of notice of such meeting.
Section 11. Quorum; Majority Vote. At all meetings of the Board of
Directors, the presence of a majority of the number of directors fixed in
accordance with these Bylaws shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically required by
statute, the Articles of Incorporation or these Bylaws. If a quorum is not
present at any meeting of the directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present. Upon attainment of representation by
a quorum, subsequent to an adjournment of the meeting, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 12. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before adjournment thereof or shall
forward such dissent by certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
Section 13. Compensation. The Board of Directors shall have authority
to determine from time to time the amount of compensation, if any, which shall
be paid to its members for their services as directors and as members of
standing or special committees of the Board. The Board shall also have power in
its discretion to provide for and to pay to directors rendering services to the
Corporation not ordinarily rendered by directors as such, special compensation
appropriate to the value of such services as determined by the Board from time
to time. Nothing in these Bylaws shall be construed to preclude any directors
from serving the Corporation in any capacity other than as a director and
receiving compensation therefor.
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Section 14. Procedure. The Board of Directors shall keep regular
minutes of its proceedings. The minutes shall be placed in the minute book of
the Corporation.
Section 15. Action Without Meeting. Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee thereof may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or such
committee, as the case may be. Such consent shall have the same force and
effect as unanimous vote at a meeting, and may be stated as such in any
document or instrument filed with the Secretary of State. The signed consent or
a copy thereof shall be placed in the minute book of the Corporation.
Section 16. Telephone Meeting. Members of the Board of Directors or of
any committee thereof may participate in and hold a meeting of the Board of
Directors of any committee thereof by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other. Participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV.
COMMITTEES OF THE BOARD
Section 1. Designation and Authority. The Board of Directors may, by
resolution adopted by a majority of the full Board of Directors, designate from
among its members one or more committees, each of which, to the extent provided
in such resolution, shall have and may exercise all of the authority of the
Board of Directors in the management of the business and affairs of the
Corporation, except that no such committee shall have the authority of the
Board of Directors to: amend the Articles of Incorporation (other than in
connection with the issuance of shares in series); propose a reduction of the
stated capital of the Corporation; approve a plan of merger or share exchange
of the Corporation; recommend to the shareholders the sale, lease or exchange
of all or substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business; recommend to
the shareholders a voluntary dissolution of the Corporation or a revocation
thereof; amend, alter or repeal the bylaws of the Corporation or adopt new
bylaws of the Corporation; fill vacancies in the Board of Directors; fill
vacancies in or designate alternate members of any committee of the Board of
Directors; fill any directorship to be filled by reason of an increase in the
number of directors; elect or remove officers of the Corporation or members or
alternate members of any committee of the Corporation; fix the compensation of
any member or alternate members of such committee; or alter or repeal any
resolution of the Board of Directors that by its terms provides that it shall
not be so amendable or repealable; and, unless such resolution expressly so
provides, no such committee shall have the authority to authorize a
distribution or to authorize the issuance of shares of the Corporation.
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Section 2. Change in Number. The number of members of any committee
may be increased or decreased from time to time by resolution adopted by the
Board of Directors.
Section 3. Removal and Vacancies. Members of committees may be
removed by the Board of Directors. Vacancies in committees may be filled by the
Board of Directors.
Section 4. Transaction of Business. Committees shall transact
business (at meetings or by unanimous consent) in the same manner as the Board
of Directors.
Section 5. Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed upon it or him
by law.
ARTICLE V.
NOTICE
Section 1. Manner of Giving Notice. Unless otherwise required by
these Bylaws, whenever any notice is required to be given under law, the
Articles of Incorporation or these Bylaws, such notice may be given in writing,
and delivered personally, through the United States mail, by a recognized
express delivery service (such as Federal Express) or by means of telegram,
telex or facsimile transmission, addressed to such director or shareholder at
his address or telex or facsimile transmission number, as the case may be. All
notices shall be deemed to be given on the earlier of receipt or at the time
when the same shall be deposited in the mail or with an express delivery
service or when transmitted, as the case may be, addressed or directed to the
proper destination as it appears on the records of the Corporation, with
postage and fees thereon prepaid. An affidavit of the Secretary or Assistant
Secretary or of the transfer agent of the Corporation that the notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
Section 2. Waiver of Notice. Whenever any notice is required to be
given to any committee member, director or shareholder of the Corporation under
the provisions of the statutes, the Articles of Incorporation or these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated in such notice, shall be deemed
equivalent to the giving of such notice. Attendance at a meeting shall
constitute a waiver of notice of such meeting, except where a person attends
for the expressed purpose of objecting to the transaction of any business on
the ground that the meeting is not lawfully called or convened.
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ARTICLE VI.
OFFICERS, EMPLOYEES AND AGENTS:
POWERS AND DUTIES
Section 1. Appointment of Officers. The officers of the Corporation
shall be appointed by the Board of Directors and shall be a Chairman, a Chief
Executive Officer, a President, a Chief Operating Officer, a Chief Financial
Officer, a Vice President, a Secretary and a Treasurer. The Board of Directors
may also choose additional Vice Presidents and Assistant Secretaries and
Assistant Treasurers and such other officers as the Board of Directors may deem
appropriate. Any two or more offices may be held by the same person.
Additionally, unless expressly prohibited by the Board of Directors, the
President may appoint such assistant officers as the President deems necessary.
Section 2. Qualifications. Officers of the Corporation need not be
directors or shareholders of the Corporation, or residents of the State of
Texas. Any two or more offices may be held by the same person.
Section 3. Term of Office. Each officer of the Corporation shall hold
office for the term specified by the Board of Directors. If no term is
specified, each officer shall hold office until his or her successor is chosen
and qualifies, or until his or her earlier death, resignation or removal from
office. The designation of a specific term of office does not grant to an
officer any contract rights, and the Board of Directors may remove such officer
as provided in these Bylaws.
Section 4. Removal; Filling of Vacancies. Any officer may be removed
at any time, for or without cause, by the Board of Directors or, if appointed
by the President, by the President. Such removal shall be without prejudice to
the contract rights, if any, of the person so removed. A vacancy occurring in
any office for any reason may be filled by the Board of Directors. A vacancy in
any office held by an officer appointed by the President may be filled by the
President unless such authority is limited by the Board of Directors.
Section 5. Compensation. The compensation of all officers of the
Corporation shall be fixed from time to time by the Board of Directors. The
Board of Directors may from time to time delegate to the President the
authority to fix the compensation of any or all of the other officers of the
Corporation.
Section 6. Chairman of the Board. The Chairman of the Board shall be
selected among the members of the Board of Directors and will preside when
present at all meetings of the Board of Directors and of the shareholders. The
Chairman of the Board shall be available to consult with and advise the
officers of the Corporation with respect to the conduct of the business and
affairs of the Corporation and shall have such other powers and duties as
designated in accordance with these Bylaws and as from time to time may be
assigned by the Board of Directors. The Chairman of the Board shall be the
highest officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all business and affairs of
the Corporation.
Section 7. Chief Executive Officer. Subject to the direction and
authority of the Board of Directors, the Chief Executive Officer shall have
general executive charge, management and control
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of the properties, business and operations of the Corporation with all such
powers as may be reasonably incident to such responsibilities and each shall
have such other powers and duties as designated in accordance with these Bylaws
and as from time to time be assigned to him by the Board of Directors. The
Chief Executive Officer may from time to time delegate any of the
aforementioned duties and responsibilities in accordance with these Bylaws to
any officer who directly or indirectly reports to him.
Section 8. President. The President shall have charge of such
properties, business and operations of the Corporation as may be assigned to
him from time to time in accordance with these Bylaws by the Chief Executive
Officer, as well as all such powers as may be reasonably incident to such
charge. Unless the Board of Directors otherwise determines, he shall, in the
absence of the Chairman of the Board and the Chief Executive Officer, preside
at all meetings of the shareholders and the Board of Directors. The President
shall have such other powers and duties as designated in accordance with these
Bylaws and as the Board of Directors shall prescribe. The President shall
report directly to the Chief Executive Officer and the Board of Directors.
Section 9. Chief Operating Officer. The Chief Operating Officer shall
be responsible for the day to day operations of the Corporation and its
subsidiaries, and will have such other powers and duties as designated in
accordance with these Bylaws and as the Chief Executive Officer or the Board of
Directors shall prescribe. The Chief Operating Officer shall report directly to
the Chief Executive Officer and the Board of Directors.
Section 10. Chief Financial Officer. The Chief Financial Officer will
be the principal accounting and financial officer of the Corporation and will
have active control of and shall be responsible for all matters pertaining to
the accounts and finances of the Corporation. The Chief Financial Officer shall
be prepared at all times to give information as to the condition of the
Corporation and shall make a detailed annual report of the entire business and
financial condition of the Corporation. The person holding the office of Chief
Financial Officer shall also perform, under the direction and subject to the
control of the Chief Executive Officer, the President and the Board of
Directors, such other duties as may be assigned by either of such officers.
Section 11. Vice Presidents. Each Vice President shall have only such
powers and perform only such duties as the Board of Directors may from time to
time prescribe or as a Chief Executive Officer or the President may from time
to time delegate to him or her.
Section 12. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose and
shall perform like duties for any committee when required. Except as otherwise
provided herein, the Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it, and, when so affixed,
it shall be attested by his signature or by the signature of the Treasurer or
an Assistant Secretary.
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Section 13. Assistant Secretaries. Each Assistant Secretary shall have
only such powers and perform only such duties as the Board of Directors may
from time to time prescribe or as the President may from time to time delegate.
Section 14. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the Chief
Executive Officer, the President, the Chief Financial Officer and directors, at
the regular meetings of the Board of Directors, or whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation, and shall perform such other duties as the Board
of Directors may prescribe. If required by the Board of Directors, he shall
give the Corporation a bond in such form, in such sum, and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 15. Assistant Treasurers. Each Assistant Treasurer shall have
only such powers and perform only such duties as the Chief Executive Officer,
the President, the Chief Financial Officer or the Board of Directors may from
time to time prescribe.
Section 16. Additional Powers and Duties. In addition to the foregoing
specially enumerated duties, services and powers, the several elected and
appointive officers of the Corporation shall perform such other duties and
services and exercise such further powers as may be provided by statute, the
Articles of Incorporation or these Bylaws, or as the Board of Directors may
from time to time determine or as may be assigned to them by any competent
superior officer.
ARTICLE VII.
STOCK AND TRANSFER OF STOCK
Section 1. Certificates Representing Shares. Certificates in such
form as may be determined by the Board of Directors and as shall conform to the
requirements of the statutes, the Articles of Incorporation and these Bylaws
shall be delivered representing all shares to which shareholders are entitled.
Such certificates shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued. Each certificate shall state on
the face thereof that the Corporation is organized under the laws of the State
of Texas, the holder's name, the number and class of shares and the designation
of the series, if any, which such certificate represents, the par value of such
shares or a statement that such shares are without par value and such other
matters as may be required by law. Each certificate shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary and
may be sealed with the seal of the Corporation or a facsimile thereof. If any
certificate is countersigned by a transfer agent or registered by a registrar,
either of
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which is other than the Corporation or an employee of the Corporation, the
signature of any such officer may be a facsimile.
Section 2. Issuance. Subject to the provisions of the statutes, the
Articles of Incorporation or these Bylaws, shares may be issued for such
consideration and to such persons as the Board of Directors may determine from
time to time. Shares may not be issued until the full amount of the
consideration, fixed as provided by law, has been paid.
Section 3. Payment of Shares. The consideration for the issuance of
shares shall consist of money paid, labor done (including services actually
performed for the Corporation) or property (tangible or intangible) actually
received. Neither promissory notes nor the promise of future services shall
constitute payment for shares. In the absence of fraud in the transaction, the
judgment of the Board of Directors as to the value of consideration received
shall be conclusive. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be considered
fully paid and nonassessable.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors, the President, or such other officer or officers of the Corporation
as the Board of Directors may from time to time designate, in its or his
discretion, may direct a new certificate or certificates representing shares to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate or
certificates to be lost, stolen or destroyed. When authorizing such issuance of
a new certificate or certificates, the Board of Directors, the President, or
any such other officer, in its or his discretion and as a condition precedent
to the issuance thereof, may require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it or he shall require and/or give the
Corporation a bond in such form, in such sum, and with such surety or sureties,
as it or he may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate or certificates alleged to have
been lost, stolen or destroyed.
Section 5. Transfers of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate or certificates representing shares,
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, with all required stock transfer tax stamps affixed
thereto and cancelled or accompanied by sufficient funds to pay such taxes, it
shall be the duty of the Corporation or the transfer agent of the Corporation
to issue a new certificate or certificates to the person entitled thereto,
cancel the old certificate or certificates and record the transaction upon its
books.
Section 6. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
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Section 7. Restriction on Transfer of Shares of Stock. These Bylaws
authorize (but do not require) a restriction on the transfer of the
Corporation's shares which:
(A) maintains the status of the Corporation as an electing
small business corporation under Subchapter S of the United States Internal
Revenue Code;
(B) obligates the holders of the restricted stock to offer to
the other holders of stock of the Corporation a prior opportunity, to be
exercised within a reasonable time, to acquire the restricted stock pursuant to
an agreement respecting the purchase and sale of the restricted stock;
(C) obligates the Corporation to the extent permitted by law
or any holder of stock of the Corporation to purchase the stock which is the
subject of an agreement respecting the purchase and sale of the restricted
stock; or
(D) requires the Corporation and the holders of any stock of
the Corporation to consent to any proposed transfer of the restricted stock for
the purpose of preventing violations of federal or state law.
The Corporation will furnish to the holder of a certificate of stock in
the Corporation, without charge, upon written request to the Corporation at its
principal place of business or registered office, a copy of the Bylaws and the
Agreement, if any, restricting the transfer of stock.
ARTICLE VIII.
MISCELLANEOUS
Section 1. Fixing Record Dates. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive a distribution by the
Corporation (other than a distribution involving a purchase or redemption by
the Corporation of any of its shares) or a share dividend, or in order to make
a determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may (i)
fix in advance the record date for any such determination of shareholders,
though such record date shall not be more than sixty (60) days and, for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, shall not be less than ten (10) days, prior to the
date on which the particular action requiring such determination of
shareholders is to be taken, or (ii) close the share transfer records for a
period of not more than sixty (60) days and, for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, for
a period of not less than ten (10) days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
In the absence of any such action by the Board of Directors, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such distribution or share dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. The record date for the purpose of
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determining shareholders entitled to consent to an action shall be fixed in
accordance with applicable statutes.
Section 2. Reserves. There may be created from time to time by
resolution of the Board of Directors, out of the earned surplus of the
Corporation, such reserve or reserves as the directors from time to time, in
their discretion, think proper to provide for contingencies, or to equalize
dividends, or to repair or maintain any property of the Corporation or for such
other purpose as the directors shall think beneficial to the Corporation. The
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 3. Signature of Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officer, officers, agent or agents and in such manner as
are permitted by these Bylaws and/or as, from time to time, may be prescribed
by resolution (whether general or special) of the Board of Directors.
Section 4. Fiscal Year. The business of the Corporation shall be
conducted on either a fiscal year or calendar year basis, and the selection of
the basis to be used shall be, and is hereby delegated to the discretion of the
Board of Directors.
Section 5. Seal. The Corporation's seal, if obtained, shall be in
such form as shall be adopted and approved from time to time by the Board of
Directors. The seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed, imprinted or in any manner reproduced. Except as expressly
required by law, no action shall be invalid or unenforceable for failure to use
the corporate seal in connection therewith.
Section 6. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and Board of Directors and shall keep at its registered
office or principal place of business, or at the office of its transfer agent
or registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of the shares held by each.
Section 7. Resignation. Unless otherwise expressly provided, any
director, committee member, officer or agent may resign by giving written
notice to the President or the Secretary. The resignation shall take effect at
the time specified therein, or immediately if no time is specified. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 8. Surety Bonds. Such officers and agents of the Corporation
(if any) as the President, or the Board of Directors may direct, from time to
time, shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation,
retirement, disqualification or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in their possession or
under their control belonging to the Corporation, in such amounts and by such
surety companies as the President or the Board of Directors may determine. The
premiums on such bonds shall be paid by the Corporation, and the bonds so
furnished shall be in the custody of the Secretary.
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Section 9. Interested Directors, Officers and Security Holders. No
contract or transaction between the Corporation and one or more of its
directors, officers or security holders, or between the Corporation and any
other corporation, partnership, association, trust, plan or other organization
or enterprise in which one or more of the Corporation's directors, officers or
security holders are directors, officers, security holders, members or
employees, or have a direct or indirect financial interest, shall be void or
voidable solely because of such position or interest, solely because the
director, officer or security holder is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(a) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the Board of Directors or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
(b) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the shareholders entitled to
vote thereon, and the contract or transaction is specifically approved in good
faith by a vote of the shareholders; or
(c) the contract or transaction is fair to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction. No director shall be liable to
account to the Corporation for any profits realized by, from or through any
such contract or transaction by reason of an interest therein when such
contract or transaction has been authorized or ratified in accordance with the
foregoing. This section shall not be construed to invalidate any contract or
transaction which would otherwise be valid in the absence of this provision.
Section 10. Indemnification. Any person who was, is, or is threatened
to be made, a named defendant or respondent in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrative,
investigative or administrative, any appeal in such action suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding (collectively, a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation, or, while a director or
officer of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise, shall be indemnified by the Corporation to the fullest
extent authorized by the Texas Business Corporation Act, as the same exists or
may hereafter be amended (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, court costs, fines, penalties, excise taxes, and
amounts paid in settlement) reasonably incurred or suffered in connection
therewith and such indemnification shall continue as to any such person who has
ceased to be a director or officer and shall inure to the benefit of such
persons' heirs,
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executors and administrators. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses (court costs and attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition; provided, the
applicable requirements of the Texas Business Corporation Act are met prior to
such advancement.
The right to indemnification and to the advancement of expenses
conferred in this Section shall not be exclusive of, nor shall it be construed
to limit, any other right which any person may have or hereafter acquire under
any statute, the Articles of Incorporation, these Bylaws, agreement, vote of
shareholders or otherwise.
ARTICLE IX.
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any meeting of the Board of Directors at which a quorum is present
by the affirmative vote of a majority of the directors present at such meeting.
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CERTIFICATE
I, JAMES F. STUART, the undersigned Secretary of PACKAGED ICE, INC., do
hereby certify that the foregoing is a true and correct copy of the Bylaws of
said Corporation as duly approved at the organizational meeting of the Board of
Directors of the Corporation and as duly amended by action of the Board of
Directors through the date hereof.
WITNESS my hand and the seal of the Corporation this the 20th day of
January, 1997.
-------------------------------------
JAMES F. STUART, SECRETARY
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EXHIBIT 3.6
ARTICLES OF INCORPORATION
OF
PACKAGED ICE LEASING, INC.
FIRST: The name of the Corporation is PACKAGED ICE LEASING, INC.
SECOND: The Corporation's principal or statutory office in the State
of Nevada is located at 1280 Terminal Way, Suite 15, Reno, Nevada 89502,
located in Washoe County, State of Nevada. The name of the Corporation's
resident agent at that address is Corporate Service Center, Inc. The
Corporation may maintain an office, or offices, in such other place or places
within or without the State of Nevada as may be from time to time designated by
the Board of Directors, or by the bylaws of the Corporation, and the
Corporation may conduct all corporate business of every kind and nature,
including the holding of all meetings of directors and stockholders, outside
the State of Nevada as well as within the State of Nevada.
THIRD: The objects for which the Corporation is formed are to engage
in any lawful activity for which corporations may be organized under the laws
of the State of Nevada.
FOURTH: The total number of shares of capital stock which the
Corporation is authorized to issue is One Thousand (1,000) shares of common
stock of the par value of One Cent ($.01) each.
FIFTH: The governing board of the Corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the bylaws of this
Corporation, provided that the number of directors shall not be reduced to less
than one (1). The initial Board of Directors shall be one (1) in number.
The name and post office address of the initial member of the Board of
Directors is as follows:
NAME ADDRESS
James F. Stuart 342 Town & Country Village
Houston, Texas 77024
SIXTH: The capital stock, after the amount of the subscription price,
or par value, has been paid in, shall not be subject to assessment to pay the
debts of the Corporation.
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SEVENTH: The name and address of the incorporator signing the
articles of incorporation is as follows:
NAME ADDRESS
Alan Schoenbaum 1500 NationsBank Plaza
300 Convent Street
San Antonio, Texas 78205
EIGHTH: The Corporation is to have perpetual existence.
NINTH: No director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer or for any act or omission of any such
director or officer; however, the foregoing provision shall not eliminate or
limit the liability of a director or officer for (a) acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law; or (b) the
payment of dividends in violation of Section 78.300 of the Nevada Revised
Statutes. Any repeal or modification of this Article by the stockholders of
the Corporation shall be prospective only and shall not adversely affect any
limitation on the personal liability of a director or officer of the
Corporation for acts or omissions prior to such repeal or modification.
TENTH: The Corporation shall indemnify each director or officer of the
Corporation who may be indemnified, to the fullest extent permitted by Section
78.751 of the Nevada Revised Statutes ("Section 78.751"), as it may be amended
from time to time, in each and every situation where the Corporation is
obligated to make such indemnification pursuant to Section 78.751. In addi-
tion, the Corporation shall indemnify each of the Corporation's directors and
officers in each and every situation where, under Section 78.751, the
Corporation is not obligated, but is permitted or empowered, to make such
indemnification. The Corporation may, in the sole discretion of the Board of
Directors, indemnify any other person who may be indemnified pursuant to
Section 78.751 to the extent the Board of Directors deems advisable, as
permitted by such section. The Corporation shall promptly make or cause to be
made any determination which Section 78.751 requires.
ELEVENTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors of the Corporation shall have the power to
adopt, amend or repeal the bylaws of the Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in the Articles of Incorporation, in the manner
now or hereafter prescribed by statute, or by the Articles of Incorporation,
and all rights
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conferred upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Laws of
the State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 25th day of November, 1992.
-------------------------------------
ALAN SCHOENBAUM
THE STATE OF TEXAS )
COUNTY OF BEXAR )
On this 25th day of November, 1992, before me, a Notary Public,
personally appeared ALAN SCHOENBAUM, who acknowledged that he executed the
foregoing instrument.
-------------------------------------
Notary Public - State of Texas
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT
BY RESIDENT AGENT
Corporate Service Center, Inc. hereby accepts the appointment as
Resident Agent of Packaged Ice Leasing, Inc.
Corporate Service Center, Inc.
Date By:
--------------- ----------------------------------
Signature of Resident Agent
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EXHIBIT 3.7
BYLAWS
OF
PACKAGED ICE LEASING, INC.
A NEVADA CORPORATION
(THE "CORPORATION")
AMENDED AND RESTATED AS OF JANUARY 20, 1997
ARTICLE I.
OFFICES
Section 1. Registered Office. The Corporation shall have and
continuously maintain a registered office in the State of Nevada which may be,
but need not be, the same as its place of business (if located within the State
of Nevada). The address of the registered office and the name of the registered
agent at such address shall be as set forth in the Corporation's Articles of
Incorporation.
Section 2. Place of Business. In addition to its registered office,
the Corporation may have offices and places of business at such places, both
within and without the State of Nevada, as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. Annual meetings of the shareholders shall
be held at such times as shall be determined by the Board of Directors. At each
annual meeting, the shareholders shall elect a Board of Directors, and shall
transact such other business as may be properly brought before the meeting.
Section 2. Special Meetings. Unless otherwise provided by the
Articles of Incorporation, special meetings of the shareholders may be called
by the President, the Board of Directors or the holders of shares representing
not less than 10% of the votes entitled to be cast on any issue at meetings of
shareholders. A special meeting may be called for any purpose or purposes
though business transacted at a special meeting shall be confined to the
purposes stated in the notice of such meeting.
Section 3. Place of Meetings. Meetings of the shareholders of the
Corporation shall be held at such places within or without the State of Nevada
as shall be determined by the Board of Directors or, in the absence of such a
determination, meetings of shareholders shall be held at the principal office
of the Corporation.
Section 4. Notice of Meetings. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called,
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shall be delivered not less than ten (10) nor more than sixty (60) days before
the date of the meeting, either personally or by mail, by or at the direction
of the President, the Secretary or the person calling the meeting, to each
shareholder entitled to vote at the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid.
Section 5. Voting List. At least ten (10) days before each meeting of
the shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the residence of each and the
number of voting shares held by each, shall be prepared by the officer or agent
having charge of the stock transfer-books. Such list shall be kept on file at
the registered office or principal place of business of the Corporation for a
period of ten (10) days prior to such meeting, and shall be subject to
inspection by any shareholder who may be present. The original stock transfer
books shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
Failure to comply with the requirements of this Section shall not affect the
validity of any action taken at such meeting.
Section 6. Quorum of Shareholders; Adjournment.
(A) The holders of shares representing a majority of the votes
entitled to be cast at a meeting, present in person or represented by proxy,
shall be requisite to and shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
the Articles of Incorporation or by these Bylaws. Once a quorum is present at a
meeting of shareholders, the shareholders represented in person or by proxy at
the meeting may conduct such business as may be properly brought before the
meeting until it is adjourned, and the subsequent withdrawal from the meeting
of any shareholder or the refusal of any shareholder represented in person or
by proxy to vote shall not affect the presence of a quorum at the meeting. Upon
attainment of representation by a quorum, subsequent to an adjournment of the
meeting, any business may be transacted which might have been transacted at the
meeting as originally notified.
(B) If a quorum is not present or represented at any meeting
of the shareholders, the shareholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
these Bylaws, such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of the share transfer
records and the stated period of closing has expired.
Section 7. Organization; Order of Business. The Chairman of the Board
or such other person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his absence
such person as may be chosen by the holders of shares representing a majority
of the votes which could be cast by those present, in person or by proxy, and
entitled to vote shall call to order any meeting of the shareholders and act as
chairman of the meeting. The Secretary of the Corporation, if present, shall
act as secretary of the meeting, but in his absence, the secretary of the
meeting shall be such person as the chairman of the meeting appoints. The
chairman of any meeting of shareholders shall determine the order of business
and the procedure at
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the meeting, including regulation of the manner of voting and the conduct of
discussion; but the order of business to be followed at any meeting at which a
quorum is present may be changed by the holders of shares of stock present in
person or by proxy and entitled to vote at such meeting (determined by a
majority of the votes cast).
Section 8. Required Vote. With respect to matters other than
elections of directors, except as otherwise required by statute, the Articles
of Incorporation or these Bylaws, the vote of the holders of shares
representing a majority of the votes cast shall decide any question properly
brought before such meeting. Directors shall be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election of
directors.
Section 9. Method of Voting; Proxies. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of the shareholders, except to the extent that the voting
rights of the shares of any class or classes are enhanced or limited by
statute, by the Articles of Incorporation (including amendments thereto) or by
agreement. At any meeting of the shareholders, each shareholder having the
right to vote shall be entitled to vote in person, or by written proxy
appointed by an instrument executed by such shareholder. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. A proxy shall be revocable unless expressly provided
therein to be irrevocable and unless otherwise made irrevocable by law. Each
proxy shall be filed with the Secretary of the Corporation prior to or at the
time of the meeting. Any vote may be taken by voice or by show of hands unless
a shareholder entitled to vote objects, in which case written ballots shall be
used.
Section 10. Action Without Meeting. Any action which must or may be
taken at any annual or special meeting of shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by (I) the holders
of all the shares entitled to vote with respect to the action that is the
subject of the consent, or (ii) if the Articles of Incorporation so provide,
the holders of shares of stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote on the action were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who did not consent in
writing.
Section 11. Telephone Meeting. Shareholders may participate in and
hold a meeting by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
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ARTICLE III.
DIRECTORS
Section 1. Management of the Corporation. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed under the direction of, the
Board of Directors of the Corporation. Except to the extent otherwise limited
by statute, the Articles of Incorporation, or these Bylaws, the Board of
Directors shall have the broadest powers available under Nevada law.
Section 2. Number. The number of directors constituting the Board of
Directors shall be determined from time to time by resolution of a majority of
directors then in office, though less than a quorum; provided that at all times
the number of directors shall be at least one (1) and no decrease shall have
the effect of shortening the term of any incumbent director.
Section 3. Qualifications, Election and Term. Directors need not be
residents of Nevada or shareholders of the Corporation. The directors
constituting the Board of Directors shall be elected at the annual meeting of
shareholders by a plurality of the votes cast by the shareholders entitled to
vote at such election of directors. Each director, upon election to the Board
of Directors, shall hold office until the next annual meeting of shareholders
and until his or her successor is elected and qualified.
Section 4. Chairman of the Board. The Board of Directors may elect a
member from the Board of Directors to serve as Chairman of the Board. The
Chairman of the Board shall preside at meetings of the Board of Directors and
shareholders.
Section 5. Removal. Any director may be removed either for or without
cause at any special or annual meeting of the shareholders by the affirmative
vote of the holders of shares having a majority of the entire number of votes
entitled to be cast for the election of such director, if notice of the
intention to act upon such matter shall have been given in the notice calling
such meeting.
Section 6. Vacancies. Any vacancies occurring in the Board of
Directors for any reason may be filled by a majority vote of the directors then
in office, though less than a quorum, or by election at an annual meeting of
shareholders or at a special meeting of shareholders called for that purpose;
provided that, during the period between any two (2) successive annual meetings
of shareholders, the Board of Directors may not fill more than two (2)
vacancies resulting from an increase in the number of directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office.
Section 7. Place of Meeting. The directors of the Corporation may
hold their meetings, both regular and special, either within or without the
State of Nevada.
Section 8. Annual Meetings. Each newly elected Board of Directors
shall hold an annual meeting without further notice immediately following the
annual meeting of shareholders and at the
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same place, unless such place or time is changed by a majority vote of the
directors then elected and serving.
Section 9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and places as may be fixed
from time to time by resolutions adopted by the Board of Directors and
communicated to all directors at their last known addresses. Except as
otherwise provided by statute, the Articles of Incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any regular
meeting need be specified in the notice or waiver of notice of such meeting.
Section 10. Special Meetings. Special meetings of the Board of
Directors may be called by the President on twenty-four (24) hours' notice to
each director either personally or by mail or by telegram or by facsimile.
Special meetings shall be called by the President in like manner and on like
notice on the written request of two (2) directors. Except as may be otherwise
expressly provided by statute, the Articles of Incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in the notice or waiver of notice of such meeting.
Section 11. Quorum; Majority Vote. At all meetings of the Board of
Directors, the presence of a majority of the number of directors fixed in
accordance with these Bylaws shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically required by
statute, the Articles of Incorporation or these Bylaws. If a quorum is not
present at any meeting of the directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present. Upon attainment of representation by
a quorum, subsequent to an adjournment of the meeting, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 12. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before adjournment thereof or shall
forward such dissent by certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
Section 13. Compensation. The Board of Directors shall have authority
to determine from time to time the amount of compensation, if any, which shall
be paid to its members for their services as directors and as members of
standing or special committees of the Board. The Board shall also have power in
its discretion to provide for and to pay to directors rendering services to the
Corporation not ordinarily rendered by directors as such, special compensation
appropriate to the value of such services as determined by the Board from time
to time. Nothing in these Bylaws shall be construed to preclude any directors
from serving the Corporation in any capacity other than as a director and
receiving compensation therefor.
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Section 14. Procedure. The Board of Directors shall keep regular
minutes of its proceedings. The minutes shall be placed in the minute book of
the Corporation.
Section 15. Action Without Meeting. Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee thereof may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or such
committee, as the case may be. Such consent shall have the same force and
effect as unanimous vote at a meeting, and may be stated as such in any
document or instrument filed with the Secretary of State. The signed consent or
a copy thereof shall be placed in the minute book of the Corporation.
Section 16. Telephone Meeting. Members of the Board of Directors or of
any committee thereof may participate in and hold a meeting of the Board of
Directors of any committee thereof by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other. Participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV.
COMMITTEES OF THE BOARD
Section 1. Designation and Authority. The Board of Directors may, by
resolution adopted by a majority of the full Board of Directors, designate from
among its members one or more committees, each of which, to the extent provided
in such resolution, shall have and may exercise all of the authority of the
Board of Directors in the management of the business and affairs of the
Corporation, except that no such committee shall have the authority of the
Board of Directors to: amend the Articles of Incorporation (other than in
connection with the issuance of shares in series); propose a reduction of the
stated capital of the Corporation; approve a plan of merger or share exchange
of the Corporation; recommend to the shareholders the sale, lease or exchange
of all or substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business; recommend to
the shareholders a voluntary dissolution of the Corporation or a revocation
thereof; amend, alter or repeal the bylaws of the Corporation or adopt new
bylaws of the Corporation; fill vacancies in the Board of Directors; fill
vacancies in or designate alternate members of any committee of the Board of
Directors; fill any directorship to be filled by reason of an increase in the
number of directors; elect or remove officers of the Corporation or members or
alternate members of any committee of the Corporation; fix the compensation of
any member or alternate members of such committee; or alter or repeal any
resolution of the Board of Directors that by its terms provides that it shall
not be so amendable or repealable; and, unless such resolution expressly so
provides, no such committee shall have the authority to authorize a
distribution or to authorize the issuance of shares of the Corporation.
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Section 2. Change in Number. The number of members of any committee
may be increased or decreased from time to time by resolution adopted by the
Board of Directors.
Section 3. Removal and Vacancies. Members of committees may be
removed by the Board of Directors. Vacancies in committees may be filled by the
Board of Directors.
Section 4. Transaction of Business. Committees shall transact
business (at meetings or by unanimous consent) in the same manner as the Board
of Directors.
Section 5. Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed upon it or him
by law.
ARTICLE V.
NOTICE
Section 1. Manner of Giving Notice. Unless otherwise required by
these Bylaws, whenever any notice is required to be given under law, the
Articles of Incorporation or these Bylaws, such notice may be given in writing,
and delivered personally, through the United States mail, by a recognized
express delivery service (such as Federal Express) or by means of telegram,
telex or facsimile transmission, addressed to such director or shareholder at
his address or telex or facsimile transmission number, as the case may be. All
notices shall be deemed to be given on the earlier of receipt or at the time
when the same shall be deposited in the mail or with an express delivery
service or when transmitted, as the case may be, addressed or directed to the
proper destination as it appears on the records of the Corporation, with
postage and fees thereon prepaid. An affidavit of the Secretary or Assistant
Secretary or of the transfer agent of the Corporation that the notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
Section 2. Waiver of Notice. Whenever any notice is required to be
given to any committee member, director or shareholder of the Corporation under
the provisions of the statutes, the Articles of Incorporation or these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated in such notice, shall be deemed
equivalent to the giving of such notice. Attendance at a meeting shall
constitute a waiver of notice of such meeting, except where a person attends
for the expressed purpose of objecting to the transaction of any business on
the ground that the meeting is not lawfully called or convened.
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ARTICLE VI.
OFFICERS, EMPLOYEES AND AGENTS:
POWERS AND DUTIES
Section 1. Appointment of Officers. The officers of the Corporation
shall be appointed by the Board of Directors and shall be a Chairman, a Chief
Executive Officer, a President, a Chief Operating Officer, a Chief Financial
Officer, a Vice President, a Secretary and a Treasurer. The Board of Directors
may also choose additional Vice Presidents and Assistant Secretaries and
Assistant Treasurers and such other officers as the Board of Directors may deem
appropriate. Any two or more offices may be held by the same person.
Additionally, unless expressly prohibited by the Board of Directors, the
President may appoint such assistant officers as the President deems necessary.
Section 2. Qualifications. Officers of the Corporation need not be
directors or shareholders of the Corporation, or residents of the State of
Nevada. Any two or more offices may be held by the same person.
Section 3. Term of Office. Each officer of the Corporation shall hold
office for the term specified by the Board of Directors. If no term is
specified, each officer shall hold office until his or her successor is chosen
and qualifies, or until his or her earlier death, resignation or removal from
office. The designation of a specific term of office does not grant to an
officer any contract rights, and the Board of Directors may remove such officer
as provided in these Bylaws.
Section 4. Removal; Filling of Vacancies. Any officer may be removed
at any time, for or without cause, by the Board of Directors or, if appointed
by the President, by the President. Such removal shall be without prejudice to
the contract rights, if any, of the person so removed. A vacancy occurring in
any office for any reason may be filled by the Board of Directors. A vacancy in
any office held by an officer appointed by the President may be filled by the
President unless such authority is limited by the Board of Directors.
Section 5. Compensation. The compensation of all officers of the
Corporation shall be fixed from time to time by the Board of Directors. The
Board of Directors may from time to time delegate to the President the
authority to fix the compensation of any or all of the other officers of the
Corporation.
Section 6. Chairman of the Board. The Chairman of the Board shall be
selected among the members of the Board of Directors and will preside when
present at all meetings of the Board of Directors and of the shareholders. The
Chairman of the Board shall be available to consult with and advise the
officers of the Corporation with respect to the conduct of the business and
affairs of the Corporation and shall have such other powers and duties as
designated in accordance with these Bylaws and as from time to time may be
assigned by the Board of Directors. The Chairman of the Board shall be the
highest officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all business and affairs of
the Corporation.
Section 7. Chief Executive Officer. Subject to the direction and
authority of the Board of Directors, the Chief Executive Officer shall have
general executive charge, management and control
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of the properties, business and operations of the Corporation with all such
powers as may be reasonably incident to such responsibilities and each shall
have such other powers and duties as designated in accordance with these Bylaws
and as from time to time be assigned to him by the Board of Directors. The
Chief Executive Officer may from time to time delegate any of the
aforementioned duties and responsibilities in accordance with these Bylaws to
any officer who directly or indirectly reports to him.
Section 8. President. The President shall have charge of such
properties, business and operations of the Corporation as may be assigned to
him from time to time in accordance with these Bylaws by the Chief Executive
Officer, as well as all such powers as may be reasonably incident to such
charge. Unless the Board of Directors otherwise determines, he shall, in the
absence of the Chairman of the Board and the Chief Executive Officer, preside
at all meetings of the shareholders and the Board of Directors. The President
shall have such other powers and duties as designated in accordance with these
Bylaws and as the Board of Directors shall prescribe. The President shall
report directly to the Chief Executive Officer and the Board of Directors.
Section 9. Chief Operating Officer. The Chief Operating Officer shall
be responsible for the day to day operations of the Corporation and its
subsidiaries, and will have such other powers and duties as designated in
accordance with these Bylaws and as the Chief Executive Officer or the Board of
Directors shall prescribe. The Chief Operating Officer shall report directly to
the Chief Executive Officer and the Board of Directors.
Section 10. Chief Financial Officer. The Chief Financial Officer will
be the principal accounting and financial officer of the Corporation and will
have active control of and shall be responsible for all matters pertaining to
the accounts and finances of the Corporation. The Chief Financial Officer shall
be prepared at all times to give information as to the condition of the
Corporation and shall make a detailed annual report of the entire business and
financial condition of the Corporation. The person holding the office of Chief
Financial Officer shall also perform, under the direction and subject to the
control of the Chief Executive Officer, the President and the Board of
Directors, such other duties as may be assigned by either of such officers.
Section 11. Vice Presidents. Each Vice President shall have only such
powers and perform only such duties as the Board of Directors may from time to
time prescribe or as a Chief Executive Officer or the President may from time
to time delegate to him or her.
Section 12. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose and
shall perform like duties for any committee when required. Except as otherwise
provided herein, the Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it, and, when so affixed,
it shall be attested by his signature or by the signature of the Treasurer or
an Assistant Secretary.
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Section 13. Assistant Secretaries. Each Assistant Secretary shall have
only such powers and perform only such duties as the Board of Directors may
from time to time prescribe or as the President may from time to time delegate.
Section 14. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the Chief
Executive Officer, the President, the Chief Financial Officer and directors, at
the regular meetings of the Board of Directors, or whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation, and shall perform such other duties as the Board
of Directors may prescribe. If required by the Board of Directors, he shall
give the Corporation a bond in such form, in such sum, and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 15. Assistant Treasurers. Each Assistant Treasurer shall have
only such powers and perform only such duties as the Chief Executive Officer,
the President, the Chief Financial Officer or the Board of Directors may from
time to time prescribe.
Section 16. Additional Powers and Duties. In addition to the foregoing
specially enumerated duties, services and powers, the several elected and
appointive officers of the Corporation shall perform such other duties and
services and exercise such further powers as may be provided by statute, the
Articles of Incorporation or these Bylaws, or as the Board of Directors may
from time to time determine or as may be assigned to them by any competent
superior officer.
ARTICLE VII.
STOCK AND TRANSFER OF STOCK
Section 1. Certificates Representing Shares. Certificates in such
form as may be determined by the Board of Directors and as shall conform to the
requirements of the statutes, the Articles of Incorporation and these Bylaws
shall be delivered representing all shares to which shareholders are entitled.
Such certificates shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued. Each certificate shall state on
the face thereof that the Corporation is organized under the laws of the State
of Nevada, the holder's name, the number and class of shares and the
designation of the series, if any, which such certificate represents, the par
value of such shares or a statement that such shares are without par value and
such other matters as may be required by law. Each certificate shall be signed
by the President or a Vice President and the Secretary or an Assistant
Secretary and may be sealed with the seal of the Corporation or a facsimile
thereof. If any certificate is countersigned by a transfer agent or registered
by a registrar, either of
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which is other than the Corporation or an employee of the Corporation, the
signature of any such officer may be a facsimile.
Section 2. Issuance. Subject to the provisions of the statutes, the
Articles of Incorporation or these Bylaws, shares may be issued for such
consideration and to such persons as the Board of Directors may determine from
time to time. Shares may not be issued until the full amount of the
consideration, fixed as provided by law, has been paid.
Section 3. Payment of Shares. The consideration for the issuance of
shares shall consist of money paid, labor done (including services actually
performed for the Corporation) or property (tangible or intangible) actually
received. Neither promissory notes nor the promise of future services shall
constitute payment for shares. In the absence of fraud in the transaction, the
judgment of the Board of Directors as to the value of consideration received
shall be conclusive. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be considered
fully paid and nonassessable.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors, the President, or such other officer or officers of the Corporation
as the Board of Directors may from time to time designate, in its or his
discretion, may direct a new certificate or certificates representing shares to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate or
certificates to be lost, stolen or destroyed. When authorizing such issuance of
a new certificate or certificates, the Board of Directors, the President, or
any such other officer, in its or his discretion and as a condition precedent
to the issuance thereof, may require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it or he shall require and/or give the
Corporation a bond in such form, in such sum, and with such surety or sureties,
as it or he may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate or certificates alleged to have
been lost, stolen or destroyed.
Section 5. Transfers of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate or certificates representing shares,
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, with all required stock transfer tax stamps affixed
thereto and canceled or accompanied by sufficient funds to pay such taxes, it
shall be the duty of the Corporation or the transfer agent of the Corporation
to issue a new certificate or certificates to the person entitled thereto,
cancel the old certificate or certificates and record the transaction upon its
books.
Section 6. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
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Section 7. Restriction on Transfer of Shares of Stock. These Bylaws
authorize (but do not require) a restriction on the transfer of the
Corporation's shares which:
(A) maintains the status of the Corporation as an electing
small business corporation under Subchapter S of the United States Internal
Revenue Code;
(B) obligates the holders of the restricted stock to offer to
the other holders of stock of the Corporation a prior opportunity, to be
exercised within a reasonable time, to acquire the restricted stock pursuant to
an agreement respecting the purchase and sale of the restricted stock;
(C) obligates the Corporation to the extent permitted by law
or any holder of stock of the Corporation to purchase the stock which is the
subject of an agreement respecting the purchase and sale of the restricted
stock; or
(D) requires the Corporation and the holders of any stock of
the Corporation to consent to any proposed transfer of the restricted stock for
the purpose of preventing violations of federal or state law.
The Corporation will furnish to the holder of a certificate of stock in
the Corporation, without charge, upon written request to the Corporation at its
principal place of business or registered office, a copy of the Bylaws and the
Agreement, if any, restricting the transfer of stock.
ARTICLE VIII.
MISCELLANEOUS
Section 1. Fixing Record Dates. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive a distribution by the
Corporation (other than a distribution involving a purchase or redemption by
the Corporation of any of its shares) or a share dividend, or in order to make
a determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may (i)
fix in advance the record date for any such determination of shareholders,
though such record date shall not be more than sixty (60) days and, for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, shall not be less than ten (10) days, prior to the
date on which the particular action requiring such determination of
shareholders is to be taken, or (ii) close the share transfer records for a
period of not more than sixty (60) days and, for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, for
a period of not less than ten (10) days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
In the absence of any such action by the Board of Directors, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such distribution or share dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. The record date for the purpose of
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determining shareholders entitled to consent to an action shall be fixed in
accordance with applicable statutes.
Section 2. Reserves. There may be created from time to time by
resolution of the Board of Directors, out of the earned surplus of the
Corporation, such reserve or reserves as the directors from time to time, in
their discretion, think proper to provide for contingencies, or to equalize
dividends, or to repair or maintain any property of the Corporation or for such
other purpose as the directors shall think beneficial to the Corporation. The
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 3. Signature of Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officer, officers, agent or agents and in such manner as
are permitted by these Bylaws and/or as, from time to time, may be prescribed
by resolution (whether general or special) of the Board of Directors.
Section 4. Fiscal Year. The business of the Corporation shall be
conducted on either a fiscal year or calendar year basis, and the selection of
the basis to be used shall be, and is hereby delegated to the discretion of the
Board of Directors.
Section 5. Seal. The Corporation's seal, if obtained, shall be in
such form as shall be adopted and approved from time to time by the Board of
Directors. The seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed, imprinted or in any manner reproduced. Except as expressly
required by law, no action shall be invalid or unenforceable for failure to use
the corporate seal in connection therewith.
Section 6. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and Board of Directors and shall keep at its registered
office or principal place of business, or at the office of its transfer agent
or registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of the shares held by each.
Section 7. Resignation. Unless otherwise expressly provided, any
director, committee member, officer or agent may resign by giving written
notice to the President or the Secretary. The resignation shall take effect at
the time specified therein, or immediately if no time is specified. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 8. Surety Bonds. Such officers and agents of the Corporation
(if any) as the President, or the Board of Directors may direct, from time to
time, shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation,
retirement, disqualification or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in their possession or
under their control belonging to the Corporation, in such amounts and by such
surety companies as the President or the Board of Directors may determine. The
premiums on such bonds shall be paid by the Corporation, and the bonds so
furnished shall be in the custody of the Secretary.
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Section 9. Interested Directors, Officers and Security Holders. No
contract or transaction between the Corporation and one or more of its
directors, officers or security holders, or between the Corporation and any
other corporation, partnership, association, trust, plan or other organization
or enterprise in which one or more of the Corporation's directors, officers or
security holders are directors, officers, security holders, members or
employees, or have a direct or indirect financial interest, shall be void or
voidable solely because of such position or interest, solely because the
director, officer or security holder is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(a) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the Board of Directors or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
(b) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the shareholders entitled to
vote thereon, and the contract or transaction is specifically approved in good
faith by a vote of the shareholders; or
(c) the contract or transaction is fair to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction. No director shall be liable to
account to the Corporation for any profits realized by, from or through any
such contract or transaction by reason of an interest therein when such
contract or transaction has been authorized or ratified in accordance with the
foregoing. This section shall not be construed to invalidate any contract or
transaction which would otherwise be valid in the absence of this provision.
Section 10. Indemnification. Any person who was, is, or is threatened
to be made, a named defendant or respondent in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrative,
investigative or administrative, any appeal in such action suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding (collectively, a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation, or, while a director or
officer of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise, shall be indemnified by the Corporation to the fullest
extent authorized by the Nevada Revised Statutes, as the same exists or may
hereafter be amended (but in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, court costs, fines, penalties, excise taxes, and amounts paid in
settlement) reasonably incurred or suffered in connection therewith and such
indemnification shall continue as to any such person who has ceased to be a
director or officer and shall inure to the benefit of such persons' heirs,
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executors and administrators. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses (court costs and attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition; provided,
the applicable requirements of the Nevada Revised Statutes are met prior to
such advancement.
The right to indemnification and to the advancement of expenses
conferred in this Section shall not be exclusive of, nor shall it be construed
to limit, any other right which any person may have or hereafter acquire under
any statute, the Articles of Incorporation, these Bylaws, agreement, vote of
shareholders or otherwise.
ARTICLE IX.
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any meeting of the Board of Directors at which a quorum is present
by the affirmative vote of a majority of the directors present at such meeting.
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CERTIFICATE
I, A.J. LEWIS III, the undersigned President of PACKAGED ICE LEASING,
INC., do hereby certify that the foregoing is a true and correct copy of the
Bylaws of said Corporation as duly approved at the organizational meeting of
the Board of Directors of the Corporation and as duly amended by action of the
Board of Directors through the date hereof.
WITNESS my hand and the seal of the Corporation this the 20th day of
January, 1997.
-------------------------------------
A.J. LEWIS III, PRESIDENT
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<PAGE> 1
EXHIBIT 3.8
ARTICLES OF INCORPORATION
OF
SOUTHCO ICE, INC.
* * *
ARTICLE ONE
The name of the Corporation is SOUTHCO ICE, INC.
ARTICLE TWO
The period of duration of the Corporation is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is to transact any or
all lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE FOUR
The Corporation is authorized to issue an aggregate of 1,000 shares of
stock, consisting of only one class (designated "Common Stock"), having a par
value of $.01 per share. The shares of stock shall have identical rights and
privileges in every respect.
The Board of Directors is vested with authority to establish, from time
to time, series of unissued shares of any class, to determine and fix the
designation, preferences, limitations and relative rights, including voting
rights, of the shares of each series so established. The preferences,
limitations and relative rights of shares of the same class may vary in any
respect between series, but all shares of the same series shall be identical in
all respects.
ARTICLE FIVE
No security holder shall have the preemptive right to subscribe for or
acquire shares or other securities of any kind of the Corporation, except to
the extent such right is expressly granted in writing by the Corporation.
ARTICLE SIX
Cumulative voting by the shareholders of the Corporation at elections of
directors is expressly prohibited.
<PAGE> 2
ARTICLE SEVEN
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of at least One Thousand
Dollars ($1,000.00), consisting of money, labor done, property actually
received or such other consideration as may be authorized by law.
ARTICLE EIGHT
The initial board of directors consists of one (1) member who shall
serve as director until the first annual meeting of shareholders or until
his/her successor is elected and qualified, and whose name and address is:
Name Address
---- -------
James F. Stuart 8572 Katy Freeway, Suite 101
Houston, Texas 77024
The number of directors constituting the board of directors (other than
the initial board of directors) shall be fixed by, or in the manner provided
in, the bylaws of the Corporation.
ARTICLE NINE
A director of the Corporation shall not be liable to the Corporation or
its security holders for monetary damages for any act or omission in the
director's capacity as a director. This Article does not eliminate or limit
the liability of a director for (i) a breach of the director's duty of loyalty
to the Corporation or its shareholders, (ii) an act or omission not in good
faith that constitutes a breach of duty of the director to the Corporation or
an act or omission that involves intentional misconduct or a knowing violation
of the law, (iii) a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action taken within the
scope of the director's office, or (iv) an act or omission for which the
liability of a director is expressly provided by an applicable statute.
This Article is intended to limit the liability of a director of the
Corporation to the fullest extent permitted by law. In the event that the
Texas Miscellaneous Corporation Laws Act or the Texas Business Corporation Act
is amended to authorize corporate action further limiting or eliminating
liability of directors, then the liability of a director of the Corporation
shall be limited or eliminated to the fullest extent permitted by either of
such Acts, as so amended, without any further action. The limitation of
liability contained in this Article shall not be deemed exclusive of any rights
or limitations of liability or indemnity to which a director may otherwise be
entitled. Any repeal or modification of this Article by the shareholders of
the Corporation or otherwise shall not adversely affect any right or protection
of a director of the Corporation existing at the time of such repeal or
modification.
ARTICLE TEN
The street address of the Corporation's initial registered office and
the name of its initial registered agent at such address are:
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<PAGE> 3
Name Address
---- -------
James F. Stuart 8572 Katy Freeway, Suite 101
Houston, Texas 77024
ARTICLE ELEVEN
The name and address of the incorporator is:
Name Address
---- -------
Paul Schweizer Akin, Gump, Strauss, Hauer & Feld,
L.L.P.
1500 NationsBank Plaza
300 Convent Street
San Antonio, Texas 78205
INCORPORATOR:
-------------------------------------
3
<PAGE> 1
EXHIBIT 3.9
BYLAWS
OF
SOUTHCO ICE, INC.
A TEXAS CORPORATION
(THE "CORPORATION")
AMENDED AND RESTATED AS OF JANUARY 20, 1997
ARTICLE I.
OFFICES
Section 1. Registered Office. The Corporation shall have and
continuously maintain a registered office in the State of Texas which may be,
but need not be, the same as its place of business (if located within the State
of Texas). The address of the registered office and the name of the registered
agent at such address shall be as set forth in the Corporation's Articles of
Incorporation.
Section 2. Place of Business. In addition to its registered office,
the Corporation may have offices and places of business at such places, both
within and without the State of Texas, as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. Annual meetings of the shareholders shall
be held at such times as shall be determined by the Board of Directors. At each
annual meeting, the shareholders shall elect a Board of Directors, and shall
transact such other business as may be properly brought before the meeting.
Section 2. Special Meetings. Unless otherwise provided by the
Articles of Incorporation, special meetings of the shareholders may be called
by the President, the Board of Directors or the holders of shares representing
not less than 10% of the votes entitled to be cast on any issue at meetings of
shareholders. A special meeting may be called for any purpose or purposes
though business transacted at a special meeting shall be confined to the
purposes stated in the notice of such meeting.
Section 3. Place of Meetings. Meetings of the shareholders of the
Corporation shall be held at such places within or without the State of Texas
as shall be determined by the Board of Directors or, in the absence of such a
determination, meetings of shareholders shall be held at the principal office
of the Corporation.
Section 4. Notice of Meetings. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called,
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shall be delivered not less than ten (10) nor more than sixty (60) days before
the date of the meeting, either personally or by mail, by or at the direction
of the President, the Secretary or the person calling the meeting, to each
shareholder entitled to vote at the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid.
Section 5. Voting List. At least ten (10) days before each meeting of
the shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the residence of each and the
number of voting shares held by each, shall be prepared by the officer or agent
having charge of the stock transfer-books. Such list shall be kept on file at
the registered office or principal place of business of the Corporation for a
period of ten (10) days prior to such meeting, and shall be subject to
inspection by any shareholder who may be present. The original stock transfer
books shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
Failure to comply with the requirements of this Section shall not affect the
validity of any action taken at such meeting.
Section 6. Quorum of Shareholders; Adjournment.
(A) The holders of shares representing a majority of the votes
entitled to be cast at a meeting, present in person or represented by proxy,
shall be requisite to and shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
the Articles of Incorporation or by these Bylaws. Once a quorum is present at a
meeting of shareholders, the shareholders represented in person or by proxy at
the meeting may conduct such business as may be properly brought before the
meeting until it is adjourned, and the subsequent withdrawal from the meeting
of any shareholder or the refusal of any shareholder represented in person or
by proxy to vote shall not affect the presence of a quorum at the meeting. Upon
attainment of representation by a quorum, subsequent to an adjournment of the
meeting, any business may be transacted which might have been transacted at the
meeting as originally notified.
(B) If a quorum is not present or represented at any meeting
of the shareholders, the shareholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
these Bylaws, such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of the share transfer
records and the stated period of closing has expired.
Section 7. Organization; Order of Business. The Chairman of the Board
or such other person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his absence
such person as may be chosen by the holders of shares representing a majority
of the votes which could be cast by those present, in person or by proxy, and
entitled to vote shall call to order any meeting of the shareholders and act as
chairman of the meeting. The Secretary of the Corporation, if present, shall
act as secretary of the meeting, but in his absence, the secretary of the
meeting shall be such person as the chairman of the meeting appoints. The
chairman of any meeting of shareholders shall determine the order of business
and the procedure at
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the meeting, including regulation of the manner of voting and the conduct of
discussion; but the order of business to be followed at any meeting at which a
quorum is present may be changed by the holders of shares of stock present in
person or by proxy and entitled to vote at such meeting (determined by a
majority of the votes cast).
Section 8. Required Vote. With respect to matters other than
elections of directors, except as otherwise required by statute, the Articles
of Incorporation or these Bylaws, the vote of the holders of shares
representing a majority of the votes cast shall decide any question properly
brought before such meeting. Directors shall be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election of
directors.
Section 9. Method of Voting; Proxies. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of the shareholders, except to the extent that the voting
rights of the shares of any class or classes are enhanced or limited by
statute, by the Articles of Incorporation (including amendments thereto) or by
agreement. At any meeting of the shareholders, each shareholder having the
right to vote shall be entitled to vote in person, or by written proxy
appointed by an instrument executed by such shareholder. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. A proxy shall be revocable unless expressly provided
therein to be irrevocable and unless otherwise made irrevocable by law. Each
proxy shall be filed with the Secretary of the Corporation prior to or at the
time of the meeting. Any vote may be taken by voice or by show of hands unless
a shareholder entitled to vote objects, in which case written ballots shall be
used.
Section 10. Action Without Meeting. Any action which must or may be
taken at any annual or special meeting of shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by (I) the holders
of all the shares entitled to vote with respect to the action that is the
subject of the consent, or (ii) if the Articles of Incorporation so provide,
the holders of shares of stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote on the action were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who did not consent in
writing.
Section 11. Telephone Meeting. Shareholders may participate in and
hold a meeting by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
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<PAGE> 4
ARTICLE III.
DIRECTORS
Section 1. Management of the Corporation. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed under the direction of, the
Board of Directors of the Corporation. Except to the extent otherwise limited
by statute, the Articles of Incorporation, or these Bylaws, the Board of
Directors shall have the broadest powers available under Texas law.
Section 2. Number. The number of directors constituting the Board of
Directors shall be determined from time to time by resolution of a majority of
directors then in office, though less than a quorum; provided that at all times
the number of directors shall be at least one (1) and no decrease shall have
the effect of shortening the term of any incumbent director.
Section 3. Qualifications, Election and Term. Directors need not be
residents of Texas or shareholders of the Corporation. The directors
constituting the Board of Directors shall be elected at the annual meeting of
shareholders by a plurality of the votes cast by the shareholders entitled to
vote at such election of directors. Each director, upon election to the Board
of Directors, shall hold office until the next annual meeting of shareholders
and until his or her successor is elected and qualified.
Section 4. Chairman of the Board. The Board of Directors may elect a
member from the Board of Directors to serve as Chairman of the Board. The
Chairman of the Board shall preside at meetings of the Board of Directors and
shareholders.
Section 5. Removal. Any director may be removed either for or without
cause at any special or annual meeting of the shareholders by the affirmative
vote of the holders of shares having a majority of the entire number of votes
entitled to be cast for the election of such director, if notice of the
intention to act upon such matter shall have been given in the notice calling
such meeting.
Section 6. Vacancies. Any vacancies occurring in the Board of
Directors for any reason may be filled by a majority vote of the directors then
in office, though less than a quorum, or by election at an annual meeting of
shareholders or at a special meeting of shareholders called for that purpose;
provided that, during the period between any two (2) successive annual meetings
of shareholders, the Board of Directors may not fill more than two (2)
vacancies resulting from an increase in the number of directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office.
Section 7. Place of Meeting. The directors of the Corporation may
hold their meetings, both regular and special, either within or without the
State of Texas.
Section 8. Annual Meetings. Each newly elected Board of Directors
shall hold an annual meeting without further notice immediately following the
annual meeting of shareholders and at the
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same place, unless such place or time is changed by a majority vote of the
directors then elected and serving.
Section 9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and places as may be fixed
from time to time by resolutions adopted by the Board of Directors and
communicated to all directors at their last known addresses. Except as
otherwise provided by statute, the Articles of Incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any regular
meeting need be specified in the notice or waiver of notice of such meeting.
Section 10. Special Meetings. Special meetings of the Board of
Directors may be called by the President on twenty-four (24) hours' notice to
each director either personally or by mail or by telegram or by facsimile.
Special meetings shall be called by the President in like manner and on like
notice on the written request of two (2) directors. Except as may be otherwise
expressly provided by statute, the Articles of Incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in the notice or waiver of notice of such meeting.
Section 11. Quorum; Majority Vote. At all meetings of the Board of
Directors, the presence of a majority of the number of directors fixed in
accordance with these Bylaws shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically required by
statute, the Articles of Incorporation or these Bylaws. If a quorum is not
present at any meeting of the directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present. Upon attainment of representation by
a quorum, subsequent to an adjournment of the meeting, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 12. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before adjournment thereof or shall
forward such dissent by certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
Section 13. Compensation. The Board of Directors shall have authority
to determine from time to time the amount of compensation, if any, which shall
be paid to its members for their services as directors and as members of
standing or special committees of the Board. The Board shall also have power in
its discretion to provide for and to pay to directors rendering services to the
Corporation not ordinarily rendered by directors as such, special compensation
appropriate to the value of such services as determined by the Board from time
to time. Nothing in these Bylaws shall be construed to preclude any directors
from serving the Corporation in any capacity other than as a director and
receiving compensation therefor.
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Section 14. Procedure. The Board of Directors shall keep regular
minutes of its proceedings. The minutes shall be placed in the minute book of
the Corporation.
Section 15. Action Without Meeting. Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee thereof may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or such
committee, as the case may be. Such consent shall have the same force and
effect as unanimous vote at a meeting, and may be stated as such in any
document or instrument filed with the Secretary of State. The signed consent or
a copy thereof shall be placed in the minute book of the Corporation.
Section 16. Telephone Meeting. Members of the Board of Directors or of
any committee thereof may participate in and hold a meeting of the Board of
Directors of any committee thereof by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other. Participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV.
COMMITTEES OF THE BOARD
Section 1. Designation and Authority. The Board of Directors may, by
resolution adopted by a majority of the full Board of Directors, designate from
among its members one or more committees, each of which, to the extent provided
in such resolution, shall have and may exercise all of the authority of the
Board of Directors in the management of the business and affairs of the
Corporation, except that no such committee shall have the authority of the
Board of Directors to: amend the Articles of Incorporation (other than in
connection with the issuance of shares in series); propose a reduction of the
stated capital of the Corporation; approve a plan of merger or share exchange
of the Corporation; recommend to the shareholders the sale, lease or exchange
of all or substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business; recommend to
the shareholders a voluntary dissolution of the Corporation or a revocation
thereof; amend, alter or repeal the bylaws of the Corporation or adopt new
bylaws of the Corporation; fill vacancies in the Board of Directors; fill
vacancies in or designate alternate members of any committee of the Board of
Directors; fill any directorship to be filled by reason of an increase in the
number of directors; elect or remove officers of the Corporation or members or
alternate members of any committee of the Corporation; fix the compensation of
any member or alternate members of such committee; or alter or repeal any
resolution of the Board of Directors that by its terms provides that it shall
not be so amendable or repealable; and, unless such resolution expressly so
provides, no such committee shall have the authority to authorize a
distribution or to authorize the issuance of shares of the Corporation.
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Section 2. Change in Number. The number of members of any committee
may be increased or decreased from time to time by resolution adopted by the
Board of Directors.
Section 3. Removal and Vacancies. Members of committees may be
removed by the Board of Directors. Vacancies in committees may be filled by the
Board of Directors.
Section 4. Transaction of Business. Committees shall transact
business (at meetings or by unanimous consent) in the same manner as the Board
of Directors.
Section 5. Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed upon it or him
by law.
ARTICLE V.
NOTICE
Section 1. Manner of Giving Notice. Unless otherwise required by
these Bylaws, whenever any notice is required to be given under law, the
Articles of Incorporation or these Bylaws, such notice may be given in writing,
and delivered personally, through the United States mail, by a recognized
express delivery service (such as Federal Express) or by means of telegram,
telex or facsimile transmission, addressed to such director or shareholder at
his address or telex or facsimile transmission number, as the case may be. All
notices shall be deemed to be given on the earlier of receipt or at the time
when the same shall be deposited in the mail or with an express delivery
service or when transmitted, as the case may be, addressed or directed to the
proper destination as it appears on the records of the Corporation, with
postage and fees thereon prepaid. An affidavit of the Secretary or Assistant
Secretary or of the transfer agent of the Corporation that the notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
Section 2. Waiver of Notice. Whenever any notice is required to be
given to any committee member, director or shareholder of the Corporation under
the provisions of the statutes, the Articles of Incorporation or these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated in such notice, shall be deemed
equivalent to the giving of such notice. Attendance at a meeting shall
constitute a waiver of notice of such meeting, except where a person attends
for the expressed purpose of objecting to the transaction of any business on
the ground that the meeting is not lawfully called or convened.
7
<PAGE> 8
ARTICLE VI.
OFFICERS, EMPLOYEES AND AGENTS:
POWERS AND DUTIES
Section 1. Appointment of Officers. The officers of the Corporation
shall be appointed by the Board of Directors and shall be a Chairman, a Chief
Executive Officer, a President, a Chief Operating Officer, a Chief Financial
Officer, a Vice President, a Secretary and a Treasurer. The Board of Directors
may also choose additional Vice Presidents and Assistant Secretaries and
Assistant Treasurers and such other officers as the Board of Directors may deem
appropriate. Any two or more offices may be held by the same person.
Additionally, unless expressly prohibited by the Board of Directors, the
President may appoint such assistant officers as the President deems necessary.
Section 2. Qualifications. Officers of the Corporation need not be
directors or shareholders of the Corporation, or residents of the State of
Texas. Any two or more offices may be held by the same person.
Section 3. Term of Office. Each officer of the Corporation shall hold
office for the term specified by the Board of Directors. If no term is
specified, each officer shall hold office until his or her successor is chosen
and qualifies, or until his or her earlier death, resignation or removal from
office. The designation of a specific term of office does not grant to an
officer any contract rights, and the Board of Directors may remove such officer
as provided in these Bylaws.
Section 4. Removal; Filling of Vacancies. Any officer may be removed
at any time, for or without cause, by the Board of Directors or, if appointed
by the President, by the President. Such removal shall be without prejudice to
the contract rights, if any, of the person so removed. A vacancy occurring in
any office for any reason may be filled by the Board of Directors. A vacancy in
any office held by an officer appointed by the President may be filled by the
President unless such authority is limited by the Board of Directors.
Section 5. Compensation. The compensation of all officers of the
Corporation shall be fixed from time to time by the Board of Directors. The
Board of Directors may from time to time delegate to the President the
authority to fix the compensation of any or all of the other officers of the
Corporation.
Section 6. Chairman of the Board. The Chairman of the Board shall be
selected among the members of the Board of Directors and will preside when
present at all meetings of the Board of Directors and of the shareholders. The
Chairman of the Board shall be available to consult with and advise the
officers of the Corporation with respect to the conduct of the business and
affairs of the Corporation and shall have such other powers and duties as
designated in accordance with these Bylaws and as from time to time may be
assigned by the Board of Directors. The Chairman of the Board shall be the
highest officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all business and affairs of
the Corporation.
Section 7. Chief Executive Officer. Subject to the direction and
authority of the Board of Directors, the Chief Executive Officer shall have
general executive charge, management and control
8
<PAGE> 9
of the properties, business and operations of the Corporation with all such
powers as may be reasonably incident to such responsibilities and each shall
have such other powers and duties as designated in accordance with these Bylaws
and as from time to time be assigned to him by the Board of Directors. The
Chief Executive Officer may from time to time delegate any of the
aforementioned duties and responsibilities in accordance with these Bylaws to
any officer who directly or indirectly reports to him.
Section 8. President. The President shall have charge of such
properties, business and operations of the Corporation as may be assigned to
him from time to time in accordance with these Bylaws by the Chief Executive
Officer, as well as all such powers as may be reasonably incident to such
charge. Unless the Board of Directors otherwise determines, he shall, in the
absence of the Chairman of the Board and the Chief Executive Officer, preside
at all meetings of the shareholders and the Board of Directors. The President
shall have such other powers and duties as designated in accordance with these
Bylaws and as the Board of Directors shall prescribe. The President shall
report directly to the Chief Executive Officer and the Board of Directors.
Section 9. Chief Operating Officer. The Chief Operating Officer shall
be responsible for the day to day operations of the Corporation and its
subsidiaries, and will have such other powers and duties as designated in
accordance with these Bylaws and as the Chief Executive Officer or the Board of
Directors shall prescribe. The Chief Operating Officer shall report directly to
the Chief Executive Officer and the Board of Directors.
Section 10. Chief Financial Officer. The Chief Financial Officer will
be the principal accounting and financial officer of the Corporation and will
have active control of and shall be responsible for all matters pertaining to
the accounts and finances of the Corporation. The Chief Financial Officer shall
be prepared at all times to give information as to the condition of the
Corporation and shall make a detailed annual report of the entire business and
financial condition of the Corporation. The person holding the office of Chief
Financial Officer shall also perform, under the direction and subject to the
control of the Chief Executive Officer, the President and the Board of
Directors, such other duties as may be assigned by either of such officers.
Section 11. Vice Presidents. Each Vice President shall have only such
powers and perform only such duties as the Board of Directors may from time to
time prescribe or as a Chief Executive Officer or the President may from time
to time delegate to him or her.
Section 12. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose and
shall perform like duties for any committee when required. Except as otherwise
provided herein, the Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it, and, when so affixed,
it shall be attested by his signature or by the signature of the Treasurer or
an Assistant Secretary.
9
<PAGE> 10
Section 13. Assistant Secretaries. Each Assistant Secretary shall have
only such powers and perform only such duties as the Board of Directors may
from time to time prescribe or as the President may from time to time delegate.
Section 14. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the Chief
Executive Officer, the President, the Chief Financial Officer and directors, at
the regular meetings of the Board of Directors, or whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation, and shall perform such other duties as the Board
of Directors may prescribe. If required by the Board of Directors, he shall
give the Corporation a bond in such form, in such sum, and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 15. Assistant Treasurers. Each Assistant Treasurer shall have
only such powers and perform only such duties as the Chief Executive Officer,
the President, the Chief Financial Officer or the Board of Directors may from
time to time prescribe.
Section 16. Additional Powers and Duties. In addition to the foregoing
specially enumerated duties, services and powers, the several elected and
appointive officers of the Corporation shall perform such other duties and
services and exercise such further powers as may be provided by statute, the
Articles of Incorporation or these Bylaws, or as the Board of Directors may
from time to time determine or as may be assigned to them by any competent
superior officer.
ARTICLE VII.
STOCK AND TRANSFER OF STOCK
Section 1. Certificates Representing Shares. Certificates in such
form as may be determined by the Board of Directors and as shall conform to the
requirements of the statutes, the Articles of Incorporation and these Bylaws
shall be delivered representing all shares to which shareholders are entitled.
Such certificates shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued. Each certificate shall state on
the face thereof that the Corporation is organized under the laws of the State
of Texas, the holder's name, the number and class of shares and the designation
of the series, if any, which such certificate represents, the par value of such
shares or a statement that such shares are without par value and such other
matters as may be required by law. Each certificate shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary and
may be sealed with the seal of the Corporation or a facsimile thereof. If any
certificate is countersigned by a transfer agent or registered by a registrar,
either of
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<PAGE> 11
which is other than the Corporation or an employee of the Corporation, the
signature of any such officer may be a facsimile.
Section 2. Issuance. Subject to the provisions of the statutes, the
Articles of Incorporation or these Bylaws, shares may be issued for such
consideration and to such persons as the Board of Directors may determine from
time to time. Shares may not be issued until the full amount of the
consideration, fixed as provided by law, has been paid.
Section 3. Payment of Shares. The consideration for the issuance of
shares shall consist of money paid, labor done (including services actually
performed for the Corporation) or property (tangible or intangible) actually
received. Neither promissory notes nor the promise of future services shall
constitute payment for shares. In the absence of fraud in the transaction, the
judgment of the Board of Directors as to the value of consideration received
shall be conclusive. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be considered
fully paid and nonassessable.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors, the President, or such other officer or officers of the Corporation
as the Board of Directors may from time to time designate, in its or his
discretion, may direct a new certificate or certificates representing shares to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate or
certificates to be lost, stolen or destroyed. When authorizing such issuance of
a new certificate or certificates, the Board of Directors, the President, or
any such other officer, in its or his discretion and as a condition precedent
to the issuance thereof, may require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it or he shall require and/or give the
Corporation a bond in such form, in such sum, and with such surety or sureties,
as it or he may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate or certificates alleged to have
been lost, stolen or destroyed.
Section 5. Transfers of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate or certificates representing shares,
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, with all required stock transfer tax stamps affixed
thereto and canceled or accompanied by sufficient funds to pay such taxes, it
shall be the duty of the Corporation or the transfer agent of the Corporation
to issue a new certificate or certificates to the person entitled thereto,
cancel the old certificate or certificates and record the transaction upon its
books.
Section 6. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
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<PAGE> 12
Section 7. Restriction on Transfer of Shares of Stock. These Bylaws
authorize (but do not require) a restriction on the transfer of the
Corporation's shares which:
(A) maintains the status of the Corporation as an electing
small business corporation under Subchapter S of the United States Internal
Revenue Code;
(B) obligates the holders of the restricted stock to offer to
the other holders of stock of the Corporation a prior opportunity, to be
exercised within a reasonable time, to acquire the restricted stock pursuant to
an agreement respecting the purchase and sale of the restricted stock;
(C) obligates the Corporation to the extent permitted by law
or any holder of stock of the Corporation to purchase the stock which is the
subject of an agreement respecting the purchase and sale of the restricted
stock; or
(D) requires the Corporation and the holders of any stock of
the Corporation to consent to any proposed transfer of the restricted stock for
the purpose of preventing violations of federal or state law.
The Corporation will furnish to the holder of a certificate of stock in
the Corporation, without charge, upon written request to the Corporation at its
principal place of business or registered office, a copy of the Bylaws and the
Agreement, if any, restricting the transfer of stock.
ARTICLE VIII.
MISCELLANEOUS
Section 1. Fixing Record Dates. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive a distribution by the
Corporation (other than a distribution involving a purchase or redemption by
the Corporation of any of its shares) or a share dividend, or in order to make
a determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may (i)
fix in advance the record date for any such determination of shareholders,
though such record date shall not be more than sixty (60) days and, for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, shall not be less than ten (10) days, prior to the
date on which the particular action requiring such determination of
shareholders is to be taken, or (ii) close the share transfer records for a
period of not more than sixty (60) days and, for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, for
a period of not less than ten (10) days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
In the absence of any such action by the Board of Directors, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such distribution or share dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. The record date for the purpose of
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<PAGE> 13
determining shareholders entitled to consent to an action shall be fixed in
accordance with applicable statutes.
Section 2. Reserves. There may be created from time to time by
resolution of the Board of Directors, out of the earned surplus of the
Corporation, such reserve or reserves as the directors from time to time, in
their discretion, think proper to provide for contingencies, or to equalize
dividends, or to repair or maintain any property of the Corporation or for such
other purpose as the directors shall think beneficial to the Corporation. The
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 3. Signature of Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officer, officers, agent or agents and in such manner as
are permitted by these Bylaws and/or as, from time to time, may be prescribed
by resolution (whether general or special) of the Board of Directors.
Section 4. Fiscal Year. The business of the Corporation shall be
conducted on either a fiscal year or calendar year basis, and the selection of
the basis to be used shall be, and is hereby delegated to the discretion of the
Board of Directors.
Section 5. Seal. The Corporation's seal, if obtained, shall be in
such form as shall be adopted and approved from time to time by the Board of
Directors. The seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed, imprinted or in any manner reproduced. Except as expressly
required by law, no action shall be invalid or unenforceable for failure to use
the corporate seal in connection therewith.
Section 6. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and Board of Directors and shall keep at its registered
office or principal place of business, or at the office of its transfer agent
or registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of the shares held by each.
Section 7. Resignation. Unless otherwise expressly provided, any
director, committee member, officer or agent may resign by giving written
notice to the President or the Secretary. The resignation shall take effect at
the time specified therein, or immediately if no time is specified. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 8. Surety Bonds. Such officers and agents of the Corporation
(if any) as the President, or the Board of Directors may direct, from time to
time, shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation,
retirement, disqualification or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in their possession or
under their control belonging to the Corporation, in such amounts and by such
surety companies as the President or the Board of Directors may determine. The
premiums on such bonds shall be paid by the Corporation, and the bonds so
furnished shall be in the custody of the Secretary.
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<PAGE> 14
Section 9. Interested Directors, Officers and Security Holders. No
contract or transaction between the Corporation and one or more of its
directors, officers or security holders, or between the Corporation and any
other corporation, partnership, association, trust, plan or other organization
or enterprise in which one or more of the Corporation's directors, officers or
security holders are directors, officers, security holders, members or
employees, or have a direct or indirect financial interest, shall be void or
voidable solely because of such position or interest, solely because the
director, officer or security holder is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(a) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the Board of Directors or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
(b) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the shareholders entitled to
vote thereon, and the contract or transaction is specifically approved in good
faith by a vote of the shareholders; or
(C) the contract or transaction is fair to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction. No director shall be liable to
account to the Corporation for any profits realized by, from or through any
such contract or transaction by reason of an interest therein when such
contract or transaction has been authorized or ratified in accordance with the
foregoing. This section shall not be construed to invalidate any contract or
transaction which would otherwise be valid in the absence of this provision.
Section 10. Indemnification. Any person who was, is, or is threatened
to be made, a named defendant or respondent in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrative,
investigative or administrative, any appeal in such action suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding (collectively, a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation, or, while a director or
officer of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise, shall be indemnified by the Corporation to the fullest
extent authorized by the Texas Business Corporation Act, as the same exists or
may hereafter be amended (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, court costs, fines, penalties, excise taxes, and
amounts paid in settlement) reasonably incurred or suffered in connection
therewith and such indemnification shall continue as to any such person who has
ceased to be a director or officer and shall inure to the benefit of such
persons' heirs,
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<PAGE> 15
executors and administrators. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses (court costs and attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition; provided,
the applicable requirements of the Texas Business Corporation Act are met prior
to such advancement.
The right to indemnification and to the advancement of expenses
conferred in this Section shall not be exclusive of, nor shall it be construed
to limit, any other right which any person may have or hereafter acquire under
any statute, the Articles of Incorporation, these Bylaws, agreement, vote of
shareholders or otherwise.
ARTICLE IX.
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any meeting of the Board of Directors at which a quorum is present
by the affirmative vote of a majority of the directors present at such meeting.
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<PAGE> 16
CERTIFICATE
I, A.J. LEWIS III, the undersigned President of SOUTHCO ICE, INC., do
hereby certify that the foregoing is a true and correct copy of the Bylaws of
said Corporation as duly approved at the organizational meeting of the Board of
Directors of the Corporation and as duly amended by action of the Board of
Directors through the date hereof.
WITNESS my hand and the seal of the Corporation this the 20th day of
January, 1997.
-------------------------------------
A.J. LEWIS III, PRESIDENT
16
<PAGE> 1
EXHIBIT 3.10
ARTICLES OF INCORPORATION
OF
PACKAGED ICE MISSION, INC.
* * *
ARTICLE ONE
The name of the Corporation is PACKAGED ICE MISSION, INC.
ARTICLE TWO
The period of duration of the Corporation is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is to transact any or
all lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE FOUR
The Corporation is authorized to issue an aggregate of 1,000 shares of
stock, consisting of only one class (designated "Common Stock"), having a par
value of $.01 per share. The shares of stock shall have identical rights and
privileges in every respect.
ARTICLE FIVE
No security holder shall have the preemptive right to subscribe for or
acquire shares or other securities of any kind of the Corporation, except to
the extent such right is expressly granted in writing by the Corporation.
ARTICLE SIX
Cumulative voting by the shareholders of the Corporation at elections of
directors is expressly prohibited.
ARTICLE SEVEN
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of at least One Thousand
Dollars ($1,000.00), consisting of money, labor done, property actually
received or such other consideration as may be authorized by law.
<PAGE> 2
ARTICLE EIGHT
The initial board of directors consists of five (5) members who shall
serve as directors until the first annual meeting of shareholders or until
their successors are elected and qualified, and whose names and addresses are:
Name Address
---- -------
James F. Stuart 8572 Katy Freeway, Suite 101
Houston, Texas 77024
A.J. Lewis III 1120 E. Durango
San Antonio, Texas 78210
Steven P. Rosenberg 5430 LBJ Freeway, Suite 1600
Dallas, Texas 75219
Richard A. Coonrod 5720 Smetana Drive, Suite 300
Minnetonka, Minnesota 55343
Stephen R. Sefton 222 South Ninth St., Suite 2800
Minneapolis, Minnesota 55402
The number of directors constituting the board of directors (other than
the initial board of directors) shall be fixed by, or in the manner provided
in, the bylaws of the Corporation.
ARTICLE NINE
A director of the Corporation shall not be liable to the Corporation or
its security holders for monetary damages for any act or omission in the
director's capacity as a director. This Article does not eliminate or limit
the liability of a director for (i) a breach of the director's duty of loyalty
to the Corporation or its shareholders, (ii) an act or omission not in good
faith that constitutes a breach of duty of the director to the Corporation or
an act or omission that involves intentional misconduct or a knowing violation
of the law, (iii) a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action taken within the
scope of the director's office, or (iv) an act or omission for which the
liability of a director is expressly provided by an applicable statute.
This Article is intended to limit the liability of a director of the
Corporation to the fullest extent permitted by law. In the event that the
Texas Miscellaneous Corporation Laws Act or the Texas Business Corporation Act
is amended to authorize corporate action further limiting or eliminating
liability of directors, then the liability of a director of the Corporation
shall be limited or eliminated to the fullest extent permitted by either of
such Acts, as so amended, without any further action. The limitation of
liability contained in this Article shall not be deemed exclusive
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<PAGE> 3
of any rights or limitations of liability or indemnity to which a director may
otherwise be entitled. Any repeal or modification of this Article by the
shareholders of the Corporation or otherwise shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE TEN
The street address of the Corporation's initial registered office and
the name of its initial registered agent at such address are:
Name Address
---- -------
James F. Stuart 8572 Katy Freeway, Suite 101
Houston, Texas 77024
ARTICLE ELEVEN
The name and address of the incorporator is:
Name Address
---- -------
Alan Schoenbaum Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
INCORPORATOR:
-------------------------------------
Alan Schoenbaum
3
<PAGE> 1
EXHIBIT 3.11
ARTICLES OF MERGER
OF
MISSION PARTY ICE, INC.
A TEXAS CORPORATION
INTO
PACKAGED ICE MISSION, INC.
A TEXAS CORPORATION
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act, the undersigned corporations adopt the following Articles of
Merger for the purpose of merging them into one of such corporations (the
"Merger"):
1. The Plan of Merger (the "Plan of Merger") which was approved by
the shareholders of each of the undersigned corporations in the manner
prescribed by the Texas Business Corporation Act is set forth as Exhibit A
attached hereto and incorporated herein by reference for all purposes.
2. As to each of the undersigned corporations, the number of shares
of Common Stock outstanding, being the only outstanding capital stock of each
such corporation entitled to vote on the Plan of Merger, are as follows:
<TABLE>
<CAPTION>
Name of Class of Number of
Corporation Shares Shares Outstanding
----------- ------ ------------------
<S> <C> <C>
Mission Party Ice, Inc. Common 1,000
("Mission")
Packaged Ice Mission, Inc. Common 1,000
("PIMI")
</TABLE>
3. As to each of the undersigned corporations, the number of shares
of Common Stock voted for and against the Plan of Merger, respectively, are as
follows:
<TABLE>
<CAPTION>
Name of Class of Total Number of
Corporation Shares Shares Voted
----------- ------ ---------------------
For Against
--- -------
<S> <C> <C> <C>
Mission Party Ice, Inc. Common 1,000 -0-
("Mission")
Packaged Ice Mission, Inc. Common 1,000 -0-
("PIMI")
</TABLE>
4. The Plan of Merger and the performance of its terms were duly
authorized by all action required by the laws of the State of Texas and by
Mission's and PIMI's constituent documents.
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<PAGE> 2
5. The Articles of Incorporation of PIMI immediately prior to the
Merger shall be the Articles of Incorporation of the surviving corporation,
provided that at the effective time of the Merger, Article I of such Articles
of Incorporation shall be amended to read in its entirety as follows:
"The name of the corporation is Mission Party Ice, Inc."
6. The merger of Mission into PIMI shall be effective upon the
issuance of the certificate of merger by the Secretary of State of Texas.
Dated: April 17, 1997
MISSION PARTY ICE, INC.
By:
------------------------------------------
A.J. Lewis III, President
PACKAGED ICE MISSION, INC.
By:
-----------------------------------------
James F. Stuart, Chief Executive
Officer
2
<PAGE> 3
EXHIBIT A
PLAN OF MERGER
This PLAN OF MERGER ("Plan of Merger") made and entered into as of the
17th day of April, 1997, by and between Mission Party Ice, Inc., a Texas
corporation (the "Company") and Packaged Ice Mission, Inc., a Texas corporation
("Newco"), being sometimes hereinafter together referred to as the "Constituent
Corporation."
W I T N E S S E T H:
WHEREAS, the Company is a corporation incorporated under the laws of
Texas, with authorized capital stock of 1,000,000 shares of common stock, par
value $.01 per share, of which 1,000 shares (the "Shares") are issued and
outstanding;
WHEREAS, Newco is a corporation incorporated under the laws of Texas
with authorized capital stock of 1,000 shares of common stock, par value $.01
per share (the "Newco Common Stock"), of which 1,000 shares are issued and
outstanding;
WHEREAS, A.J. Lewis III ("Shareholder") is the record holder of all of
the Shares;
WHEREAS, this Plan of Merger is being entered into pursuant to the
Agreement and Plan of Merger dated March 25, 1997 (the "Merger Agreement"), by
and among the Company, Shareholder, Newco and Packaged Ice, Inc. ("Parent"), a
Texas corporation and parent of Newco;
WHEREAS, the Company is to be merged with and into Newco in accordance
with the terms hereof; and
WHEREAS, all of the shareholders of each of the Constituent Corporation
have approved the merger of the Company with and into Newco pursuant to this
Plan of Merger in accordance with the applicable provisions of the Texas
Business Corporation Act, as amended from time to time ("TBCA");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree, in accordance with the
applicable provisions of the laws of the State of Texas, in accordance with the
terms of the Merger Agreement, and as hereinafter set forth, that the
Constituent Corporation shall be merged into a single Texas corporation;
1. Merger of the Company into Newco. At the Effective Date (as
hereinafter defined) and upon the terms and conditions hereof and in the Merger
Agreement, the Company shall merger with and into Newco (the "Merger") in
accordance with the TBCA and the terms hereof, and Newco shall be the surviving
corporation (the "Surviving Corporation") and as such shall continue to be
governed by the laws of the State of Texas.
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2. Filing; Effectiveness of the Merger. On the date hereof, the
Company and Newco will cause the Articles of Merger (the "Articles of Merger")
to be executed and filed pursuant to Article 5.04 of the TBCA. The Merger
shall become effective upon the occurrence of the issuance of the certificate
of merger (the "Effective Date") by the Secretary of State of the State of
Texas upon the filing of the Articles of Merger with the Secretary of the State
of Texas.
3. Continuing of Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of Newco, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of the Company, with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and into that
of Newco, and the Surviving Corporation shall be vested fully therewith and the
separate corporate existence and identity of the Company shall thereafter cease
except to the extent continued by statute.
4. Corporate Government.
(a) The Articles of Incorporation of Newco as in effect on the
Effective Date shall continue in full force and effect and shall be the
Articles of Incorporation of the Surviving Corporation, provided, however,
Article I of the Articles of Incorporation of Newco shall be amended to read in
its entirety as follows:
"The name of the corporation shall be Mission Party Ice, Inc."
(b) The Bylaws of Newco, as in effect as of the Effective
Date, shall continue in full force and effect and shall be the Bylaws of the
Surviving Corporation.
(c) The members of the Board of Directors and the officers of
the Surviving Corporation shall be the persons holding such offices with Newco
as of the Effective Date.
5. Conversion of Shares. The manner and basis of converting the
Shares shall be as follows:
(a) Each Share which is issued and outstanding immediately
prior to the Effective Date shall, by virtue of the Merger and without any
action on the part of the holder thereof, be automatically converted into the
right to receive cash, without interest thereon, and common stock, par value
$.01 per share (the "Parent Stock"), of Parent upon the surrender of the
certificate formerly representing such Share.
(b) Each Share shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and retired and cease to
exist.
(c) Each share of common stock, par value $.01 per share, of
Newco ("Newco Stock") which shall be outstanding immediately prior to the
Effective Date shall, at the Effective
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Date, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into one share of common stock of the Surviving
Corporation.
(d) The stock transfer books of the Company shall be closed as
of the close of business on the Effective Date, and no transfer of record of
any of the Shares shall take place thereafter.
(e) No fractional shares of Parent Stock and no certificates
or scrip therefor shall be issued.
(f) All of the Parent Stock, when delivered pursuant to the
provisions of this Agreement, shall be validly issued, fully paid and
nonassessable.
(g) At the Effective Date, the holders of certificates
representing Shares shall thereupon cease to have any rights with respect to
such Shares and shall surrender certificates representing the Shares to Parent
whereupon such holders shall receive a certificate or certificates for the
number of shares of Parent Stock and/or cash to which such holder is entitled.
6. Rights and Liabilities of the Surviving Corporation. As of the
Effective Date, the Surviving Corporation shall have the following rights and
obligations, pursuant to Article 5.06 of the TBCA:
(a) All rights, title and interests to all real estate and
other property owned by the Company and Newco shall be allocated to and vested
in the Surviving Corporation without reservation or impairment, without further
act or deed, and without any transfer or assignment having occurred, but
subject to any existing liens or other encumbrances thereon.
(b) All liabilities and obligations of the Company and Newco
shall be allocated to the Surviving Corporation, and the Surviving Corporation
shall be the primary obligor therefor and, except as otherwise provided by law
or contract, no other party to the merger, other than the Surviving
Corporation, shall be liable thereon.
(c) A proceeding pending by or against the Company may be
continued as if the Merger did not occur, or the Surviving Corporation to which
the liability, obligation, asset or right associated with such proceeding is
allocated to and vested in may be substituted in the proceeding.
(d) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the laws of the State of Texas.
7. Further Assurances. If at any time the Surviving Corporation
shall consider or be advised that any further assignment or assurance in law or
other action is necessary or desirable to vest, perfect, or confirm, of record
or otherwise, in the Surviving Corporation, the title to any
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property or rights of the Company or Newco acquired or to be acquired by or as
a result of the Merger, the proper officers, partners or other appropriate
representative of the Company, Newco and the Surviving Corporation,
respectively, shall be and they hereby are severally and fully authorized to
execute and deliver such proper deeds, assignments and assurances in law, and
take such other action as may be necessary or proper in the name of the
Company, Newco or the Surviving Corporation to vest, perfect or confirm title
to such property or rights in the Surviving Corporation and otherwise carry out
the purposes of this Plan of Merger.
8. Acknowledgment. The parties hereto acknowledge and agree that
the Plan of Merger is being executed and delivered pursuant to the Merger
Agreement and in the event of any inconsistencies as between this Plan of
Merger and the Merger Agreement, the Merger Agreement shall control.
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EXHIBIT 3.12
BYLAWS
OF
PACKAGED ICE MISSION, INC.
A TEXAS CORPORATION
(THE "CORPORATION")
ARTICLE I.
OFFICES
Section 1. Registered Office. The Corporation shall have and
continuously maintain a registered office in the State of Texas which may be,
but need not be, the same as its place of business (if located within the State
of Texas). The address of the registered office and the name of the registered
agent at such address shall be as set forth in the Corporation's Articles of
Incorporation.
Section 2. Place of Business. In addition to its registered office,
the Corporation may have offices and places of business at such places, both
within and without the State of Texas, as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. Annual meetings of the shareholders shall
be held at such times as shall be determined by the Board of Directors. At each
annual meeting, the shareholders shall elect a Board of Directors, and shall
transact such other business as may be properly brought before the meeting.
Section 2. Special Meetings. Unless otherwise provided by the
Articles of Incorporation, special meetings of the shareholders may be called
by the President, the Board of Directors or the holders of shares representing
not less than 10% of the votes entitled to be cast on any issue at meetings of
shareholders. A special meeting may be called for any purpose or purposes
though business transacted at a special meeting shall be confined to the
purposes stated in the notice of such meeting.
Section 3. Place of Meetings. Meetings of the shareholders of the
Corporation shall be held at such places within or without the State of Texas
as shall be determined by the Board of Directors or, in the absence of such a
determination, meetings of shareholders shall be held at the principal office
of the Corporation.
Section 4. Notice of Meetings. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called,
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shall be delivered not less than ten (10) nor more than sixty (60) days before
the date of the meeting, either personally or by mail, by or at the direction
of the President, the Secretary or the person calling the meeting, to each
shareholder entitled to vote at the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid.
Section 5. Voting List. At least ten (10) days before each meeting of
the shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the residence of each and the
number of voting shares held by each, shall be prepared by the officer or agent
having charge of the stock transfer-books. Such list shall be kept on file at
the registered office or principal place of business of the Corporation for a
period of ten (10) days prior to such meeting, and shall be subject to
inspection by any shareholder who may be present. The original stock transfer
books shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
Failure to comply with the requirements of this Section shall not affect the
validity of any action taken at such meeting.
Section 6. Quorum of Shareholders; Adjournment.
(A) The holders of shares representing a majority of the votes
entitled to be cast at a meeting, present in person or represented by proxy,
shall be requisite to and shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by the
Articles of Incorporation or by these Bylaws. Once a quorum is present at a
meeting of shareholders, the shareholders represented in person or by proxy at
the meeting may conduct such business as may be properly brought before the
meeting until it is adjourned, and the subsequent withdrawal from the meeting of
any shareholder or the refusal of any shareholder represented in person or by
proxy to vote shall not affect the presence of a quorum at the meeting. Upon
attainment of representation by a quorum, subsequent to an adjournment of the
meeting, any business may be transacted which might have been transacted at the
meeting as originally notified.
(B) If a quorum is not present or represented at any meeting
of the shareholders, the shareholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
these Bylaws, such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of the share transfer
records and the stated period of closing has expired.
Section 7. Organization; Order of Business. The Chairman of the Board
or such other person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his absence
such person as may be chosen by the holders of shares representing a majority
of the votes which could be cast by those present, in person or by proxy, and
entitled to vote shall call to order any meeting of the shareholders and act as
chairman of the meeting. The Secretary of the Corporation, if present, shall
act as secretary of the meeting, but in his absence,
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the secretary of the meeting shall be such person as the chairman of the
meeting appoints. The chairman of any meeting of shareholders shall determine
the order of business and the procedure at the meeting, including regulation of
the manner of voting and the conduct of discussion; but the order of business
to be followed at any meeting at which a quorum is present may be changed by
the holders of shares of stock present in person or by proxy and entitled to
vote at such meeting (determined by a majority of the votes cast).
Section 8. Required Vote. With respect to matters other than
elections of directors, except as otherwise required by statute, the Articles
of Incorporation or these Bylaws, the vote of the holders of shares
representing a majority of the votes cast shall decide any question properly
brought before such meeting. Directors shall be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election of
directors.
Section 9. Method of Voting; Proxies. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of the shareholders, except to the extent that the voting
rights of the shares of any class or classes are enhanced or limited by
statute, by the Articles of Incorporation (including amendments thereto) or by
agreement. At any meeting of the shareholders, each shareholder having the
right to vote shall be entitled to vote in person, or by written proxy
appointed by an instrument executed by such shareholder. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. A proxy shall be revocable unless expressly provided
therein to be irrevocable and unless otherwise made irrevocable by law. Each
proxy shall be filed with the Secretary of the Corporation prior to or at the
time of the meeting. Any vote may be taken by voice or by show of hands unless
a shareholder entitled to vote objects, in which case written ballots shall be
used.
Section 10. Action Without Meeting. Any action which must or may be
taken at any annual or special meeting of shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by (i) the holders
of all the shares entitled to vote with respect to the action that is the
subject of the consent, or (ii) if the Articles of Incorporation so provide,
the holders of shares of stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote on the action were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who did not consent in
writing.
Section 11. Telephone Meeting. Shareholders may participate in and
hold a meeting by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
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ARTICLE III.
DIRECTORS
Section 1. Management of the Corporation. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed under the direction of, the
Board of Directors of the Corporation. Except to the extent otherwise limited
by statute, the Articles of Incorporation, or these Bylaws, the Board of
Directors shall have the broadest powers available under Texas law.
Section 2. Number. The number of directors constituting the Board of
Directors shall be determined from time to time by resolution of a majority of
directors then in office, though less than a quorum; provided that at all times
the number of directors shall be at least one (1) and no decrease shall have
the effect of shortening the term of any incumbent director.
Section 3. Qualifications, Election and Term. Directors need not be
residents of Texas or shareholders of the Corporation. The directors
constituting the Board of Directors shall be elected at the annual meeting of
shareholders by a plurality of the votes cast by the shareholders entitled to
vote at such election of directors. Each director, upon election to the Board
of Directors, shall hold office until the next annual meeting of shareholders
and until his or her successor is elected and qualified.
Section 4. Chairman of the Board. The Board of Directors may elect a
member from the Board of Directors to serve as Chairman of the Board. The
Chairman of the Board shall preside at meetings of the Board of Directors and
shareholders.
Section 5. Removal. Any director may be removed either for or without
cause at any special or annual meeting of the shareholders by the affirmative
vote of the holders of shares having a majority of the entire number of votes
entitled to be cast for the election of such director, if notice of the
intention to act upon such matter shall have been given in the notice calling
such meeting.
Section 6. Vacancies. Any vacancies occurring in the Board of
Directors for any reason may be filled by a majority vote of the directors then
in office, though less than a quorum, or by election at an annual meeting of
shareholders or at a special meeting of shareholders called for that purpose;
provided that, during the period between any two (2) successive annual meetings
of shareholders, the Board of Directors may not fill more than two (2)
vacancies resulting from an increase in the number of directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office.
Section 7. Place of Meeting. The directors of the Corporation may
hold their meetings, both regular and special, either within or without the
State of Texas.
Section 8. Annual Meetings. Each newly elected Board of Directors
shall hold an annual meeting without further notice immediately following the
annual meeting of shareholders and at the
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same place, unless such place or time is changed by a majority vote of the
directors then elected and serving.
Section 9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and places as may be fixed
from time to time by resolutions adopted by the Board of Directors and
communicated to all directors at their last known addresses. Except as
otherwise provided by statute, the Articles of Incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any regular
meeting need be specified in the notice or waiver of notice of such meeting.
Section 10. Special Meetings. Special meetings of the Board of
Directors may be called by the President on twenty-four (24) hours' notice to
each director either personally or by mail or by telegram. Special meetings
shall be called by the President in like manner and on like notice on the
written request of two (2) directors. Except as may be otherwise expressly
provided by statute, the Articles of Incorporation or these Bylaws, neither the
business to be transacted at, nor the purpose of, any special meeting need be
specified in the notice or waiver of notice of such meeting.
Section 11. Quorum; Majority Vote. At all meetings of the Board of
Directors, the presence of a majority of the number of directors fixed in
accordance with these Bylaws shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically required by
statute, the Articles of Incorporation or these Bylaws. If a quorum is not
present at any meeting of the directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present. Upon attainment of representation by
a quorum, subsequent to an adjournment of the meeting, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 12. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before adjournment thereof or shall
forward such dissent by certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
Section 13. Compensation. The Board of Directors shall have authority
to determine from time to time the amount of compensation, if any, which shall
be paid to its members for their services as directors and as members of
standing or special committees of the Board. The Board shall also have power in
its discretion to provide for and to pay to directors rendering services to the
Corporation not ordinarily rendered by directors as such, special compensation
appropriate to the value of such services as determined by the Board from time
to time. Nothing in these Bylaws shall be construed to preclude any directors
from serving the Corporation in any capacity other than as a director and
receiving compensation therefor.
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Section 14. Procedure. The Board of Directors shall keep regular
minutes of its proceedings. The minutes shall be placed in the minute book of
the Corporation.
Section 15. Action Without Meeting. Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee thereof may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or such
committee, as the case may be. Such consent shall have the same force and
effect as unanimous vote at a meeting, and may be stated as such in any
document or instrument filed with the Secretary of State. The signed consent or
a copy thereof shall be placed in the minute book of the Corporation.
Section 16. Telephone Meeting. Members of the Board of Directors or of
any committee thereof may participate in and hold a meeting of the Board of
Directors of any committee thereof by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other. Participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV.
COMMITTEES OF THE BOARD
Section 1. Designation and Authority. The Board of Directors may, by
resolution adopted by a majority of the full Board of Directors, designate from
among its members one or more committees, each of which, to the extent provided
in such resolution, shall have and may exercise all of the authority of the
Board of Directors in the management of the business and affairs of the
Corporation, except that no such committee shall have the authority of the
Board of Directors to: amend the Articles of Incorporation (other than in
connection with the issuance of shares in series); propose a reduction of the
stated capital of the Corporation; approve a plan of merger or share exchange
of the Corporation; recommend to the shareholders the sale, lease or exchange
of all or substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business; recommend to
the shareholders a voluntary dissolution of the Corporation or a revocation
thereof; amend, alter or repeal the bylaws of the Corporation or adopt new
bylaws of the Corporation; fill vacancies in the Board of Directors; fill
vacancies in or designate alternate members of any committee of the Board of
Directors; fill any directorship to be filled by reason of an increase in the
number of directors; elect or remove officers of the Corporation or members or
alternate members of any committee of the Corporation; fix the compensation of
any member or alternate members of such committee; or alter or repeal any
resolution of the Board of Directors that by its terms provides that it shall
not be so amendable or repealable; and, unless such resolution expressly so
provides, no such committee shall have the authority to authorize a
distribution or to authorize the issuance of shares of the Corporation.
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Section 2. Change in Number. The number of members of any committee
may be increased or decreased from time to time by resolution adopted by the
Board of Directors.
Section 3. Removal and Vacancies. Members of committees may be
removed by the Board of Directors. Vacancies in committees may be filled by the
Board of Directors.
Section 4. Transaction of Business. Committees shall transact
business (at meetings or by unanimous consent) in the same manner as the Board
of Directors.
Section 5. Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed upon it or him
by law.
ARTICLE V.
NOTICE
Section 1. Manner of Giving Notice. Unless otherwise required by
these Bylaws, whenever any notice is required to be given under law, the
Articles of Incorporation or these Bylaws, such notice may be given in writing,
and delivered personally, through the United States mail, by a recognized
express delivery service (such as Federal Express) or by means of telegram,
telex or facsimile transmission, addressed to such director or shareholder at
his address or telex or facsimile transmission number, as the case may be. All
notices shall be deemed to be given on the earlier of receipt or at the time
when the same shall be deposited in the mail or with an express delivery
service or when transmitted, as the case may be, addressed or directed to the
proper destination as it appears on the records of the Corporation, with
postage and fees thereon prepaid. An affidavit of the Secretary or Assistant
Secretary or of the transfer agent of the Corporation that the notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
Section 2. Waiver of Notice. Whenever any notice is required to be
given to any committee member, director or shareholder of the Corporation under
the provisions of the statutes, the Articles of Incorporation or these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated in such notice, shall be deemed
equivalent to the giving of such notice. Attendance at a meeting shall
constitute a waiver of notice of such meeting, except where a person attends
for the expressed purpose of objecting to the transaction of any business on
the ground that the meeting is not lawfully called or convened.
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ARTICLE VI.
OFFICERS, EMPLOYEES AND AGENTS:
POWERS AND DUTIES
Section 1. Appointment of Officers. The officers of the Corporation
shall be appointed by the Board of Directors and shall be a Chairman, a Chief
Executive Officer, a President, a Chief Operating Officer, a Chief Financial
Officer, a Vice President, a Secretary and a Treasurer. The Board of Directors
may also choose additional Vice Presidents and Assistant Secretaries and
Assistant Treasurers and such other officers as the Board of Directors may deem
appropriate. Any two or more offices may be held by the same person.
Additionally, unless expressly prohibited by the Board of Directors, the
President may appoint such assistant officers as the President deems necessary.
Section 2. Qualifications. Officers of the Corporation need not be
directors or shareholders of the Corporation, or residents of the State of
Texas. Any two or more offices may be held by the same person.
Section 3. Term of Office. Each officer of the Corporation shall hold
office for the term specified by the Board of Directors. If no term is
specified, each officer shall hold office until his or her successor is chosen
and qualifies, or until his or her earlier death, resignation or removal from
office. The designation of a specific term of office does not grant to an
officer any contract rights, and the Board of Directors may remove such officer
as provided in these Bylaws.
Section 4. Removal; Filling of Vacancies. Any officer may be removed
at any time, for or without cause, by the Board of Directors or, if appointed
by the President, by the President. Such removal shall be without prejudice to
the contract rights, if any, of the person so removed. A vacancy occurring in
any office for any reason may be filled by the Board of Directors. A vacancy in
any office held by an officer appointed by the President may be filled by the
President unless such authority is limited by the Board of Directors.
Section 5. Compensation. The compensation of all officers of the
Corporation shall be fixed from time to time by the Board of Directors. The
Board of Directors may from time to time delegate to the President the
authority to fix the compensation of any or all of the other officers of the
Corporation.
Section 6. Chairman of the Board. The Chairman of the Board shall be
selected among the members of the Board of Directors and will preside when
present at all meetings of the Board of Directors and of the shareholders. The
Chairman of the Board shall be available to consult with and advise the
officers of the Corporation with respect to the conduct of the business and
affairs of the Corporation and shall have such other powers and duties as
designated in accordance with these Bylaws and as from time to time may be
assigned by the Board of Directors. The Chairman of the Board shall be the
highest officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all business and affairs of
the Corporation.
Section 7. Chief Executive Officer. Subject to the direction and
authority of the Board of Directors, the Chief Executive Officer shall have
general executive charge, management and control
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of the properties, business and operations of the Corporation with all such
powers as may be reasonably incident to such responsibilities and each shall
have such other powers and duties as designated in accordance with these Bylaws
and as from time to time be assigned to him by the Board of Directors. The
Chief Executive Officer may from time to time delegate any of the
aforementioned duties and responsibilities in accordance with these Bylaws to
any officer who directly or indirectly reports to him.
Section 8. President. The President shall have charge of such
properties, business and operations of the Corporation as may be assigned to
him from time to time in accordance with these Bylaws by the Chief Executive
Officer, as well as all such powers as may be reasonably incident to such
charge. Unless the Board of Directors otherwise determines, he shall, in the
absence of the Chairman of the Board and the Chief Executive Officer, preside
at all meetings of the shareholders and the Board of Directors. The President
shall have such other powers and duties as designated in accordance with these
Bylaws and as the Board of Directors shall prescribe. The President shall
report directly to the Chief Executive Officer and the Board of Directors.
Section 9. Chief Operating Officer. The Chief Operating Officer shall
be responsible for the day to day operations of the Corporation and its
subsidiaries, and will have such other powers and duties as designated in
accordance with these Bylaws and as the Chief Executive Officer or the Board of
Directors shall prescribe. The Chief Operating Officer shall report directly to
the Chief Executive Officer and the Board of Directors.
Section 10. Chief Financial Officer. The Chief Financial Officer will
be the principal accounting and financial officer of the Corporation and will
have active control of and shall be responsible for all matters pertaining to
the accounts and finances of the Corporation. The Chief Financial Officer shall
be prepared at all times to give information as to the condition of the
Corporation and shall make a detailed annual report of the entire business and
financial condition of the Corporation. The person holding the office of Chief
Financial Officer shall also perform, under the direction and subject to the
control of the Chief Executive Officer, the President and the Board of
Directors, such other duties as may be assigned by either of such officers.
Section 11. Vice Presidents. Each Vice President shall have only such
powers and perform only such duties as the Board of Directors may from time to
time prescribe or as a Chief Executive Officer or the President may from time
to time delegate to him or her.
Section 12. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose and
shall perform like duties for any committee when required. Except as otherwise
provided herein, the Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it, and, when so affixed,
it shall be attested by his signature or by the signature of the Treasurer or
an Assistant Secretary.
9
<PAGE> 10
Section 13. Assistant Secretaries. Each Assistant Secretary shall have
only such powers and perform only such duties as the Board of Directors may
from time to time prescribe or as the President may from time to time delegate.
Section 14. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the Chief
Executive Officer, the President, the Chief Financial Officer and directors, at
the regular meetings of the Board of Directors, or whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation, and shall perform such other duties as the Board
of Directors may prescribe. If required by the Board of Directors, he shall
give the Corporation a bond in such form, in such sum, and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 15. Assistant Treasurers. Each Assistant Treasurer shall have
only such powers and perform only such duties as the Chief Executive Officer,
the President, the Chief Financial Officer or the Board of Directors may from
time to time prescribe.
Section 16. Additional Powers and Duties. In addition to the foregoing
specially enumerated duties, services and powers, the several elected and
appointive officers of the Corporation shall perform such other duties and
services and exercise such further powers as may be provided by statute, the
Articles of Incorporation or these Bylaws, or as the Board of Directors may
from time to time determine or as may be assigned to them by any competent
superior officer.
ARTICLE VII.
STOCK AND TRANSFER OF STOCK
Section 1. Certificates Representing Shares. Certificates in such
form as may be determined by the Board of Directors and as shall conform to the
requirements of the statutes, the Articles of Incorporation and these Bylaws
shall be delivered representing all shares to which shareholders are entitled.
Such certificates shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued. Each certificate shall state on
the face thereof that the Corporation is organized under the laws of the State
of Texas, the holder's name, the number and class of shares and the designation
of the series, if any, which such certificate represents, the par value of such
shares or a statement that such shares are without par value and such other
matters as may be required by law. Each certificate shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary and
may be sealed with the seal of the Corporation or a facsimile thereof. If any
certificate is countersigned by a transfer agent or registered by a registrar,
either of
10
<PAGE> 11
which is other than the Corporation or an employee of the Corporation, the
signature of any such officer may be a facsimile.
Section 2. Issuance. Subject to the provisions of the statutes, the
Articles of Incorporation or these Bylaws, shares may be issued for such
consideration and to such persons as the Board of Directors may determine from
time to time. Shares may not be issued until the full amount of the
consideration, fixed as provided by law, has been paid.
Section 3. Payment of Shares. The consideration for the issuance of
shares shall consist of money paid, labor done (including services actually
performed for the Corporation) or property (tangible or intangible) actually
received. Neither promissory notes nor the promise of future services shall
constitute payment for shares. In the absence of fraud in the transaction, the
judgment of the Board of Directors as to the value of consideration received
shall be conclusive. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be considered
fully paid and nonassessable.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors, the President, or such other officer or officers of the Corporation
as the Board of Directors may from time to time designate, in its or his
discretion, may direct a new certificate or certificates representing shares to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate or
certificates to be lost, stolen or destroyed. When authorizing such issuance of
a new certificate or certificates, the Board of Directors, the President, or
any such other officer, in its or his discretion and as a condition precedent
to the issuance thereof, may require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it or he shall require and/or give the
Corporation a bond in such form, in such sum, and with such surety or sureties,
as it or he may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate or certificates alleged to have
been lost, stolen or destroyed.
Section 5. Transfers of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate or certificates representing shares,
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, with all required stock transfer tax stamps affixed
thereto and cancelled or accompanied by sufficient funds to pay such taxes, it
shall be the duty of the Corporation or the transfer agent of the Corporation
to issue a new certificate or certificates to the person entitled thereto,
cancel the old certificate or certificates and record the transaction upon its
books.
Section 6. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
11
<PAGE> 12
Section 7. Restriction on Transfer of Shares of Stock. These Bylaws
authorize (but do not require) a restriction on the transfer of the
Corporation's shares which:
(A) maintains the status of the Corporation as an electing
small business corporation under Subchapter S of the United States Internal
Revenue Code;
(B) obligates the holders of the restricted stock to offer to
the other holders of stock of the Corporation a prior opportunity, to be
exercised within a reasonable time, to acquire the restricted stock pursuant to
an agreement respecting the purchase and sale of the restricted stock;
(C) obligates the Corporation to the extent permitted by law
or any holder of stock of the Corporation to purchase the stock which is the
subject of an agreement respecting the purchase and sale of the restricted
stock; or
(D) requires the Corporation and the holders of any stock of
the Corporation to consent to any proposed transfer of the restricted stock for
the purpose of preventing violations of federal or state law.
The Corporation will furnish to the holder of a certificate of stock in
the Corporation, without charge, upon written request to the Corporation at its
principal place of business or registered office, a copy of the Bylaws and the
Agreement, if any, restricting the transfer of stock.
ARTICLE VIII.
MISCELLANEOUS
Section 1. Fixing Record Dates. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive a distribution by the
Corporation (other than a distribution involving a purchase or redemption by
the Corporation of any of its shares) or a share dividend, or in order to make
a determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may (i)
fix in advance the record date for any such determination of shareholders,
though such record date shall not be more than sixty (60) days and, for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, shall not be less than ten (10) days, prior to the
date on which the particular action requiring such determination of
shareholders is to be taken, or (ii) close the share transfer records for a
period of not more than sixty (60) days and, for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, for
a period of not less than ten (10) days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
In the absence of any such action by the Board of Directors, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such distribution or share dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. The record date for the purpose of
12
<PAGE> 13
determining shareholders entitled to consent to an action shall be fixed in
accordance with applicable statutes.
Section 2. Reserves. There may be created from time to time by
resolution of the Board of Directors, out of the earned surplus of the
Corporation, such reserve or reserves as the directors from time to time, in
their discretion, think proper to provide for contingencies, or to equalize
dividends, or to repair or maintain any property of the Corporation or for such
other purpose as the directors shall think beneficial to the Corporation. The
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 3. Signature of Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officer, officers, agent or agents and in such manner as
are permitted by these Bylaws and/or as, from time to time, may be prescribed
by resolution (whether general or special) of the Board of Directors.
Section 4. Fiscal Year. The business of the Corporation shall be
conducted on either a fiscal year or calendar year basis, and the selection of
the basis to be used shall be, and is hereby delegated to the discretion of the
Board of Directors.
Section 5. Seal. The Corporation's seal, if obtained, shall be in
such form as shall be adopted and approved from time to time by the Board of
Directors. The seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed, imprinted or in any manner reproduced. Except as expressly
required by law, no action shall be invalid or unenforceable for failure to use
the corporate seal in connection therewith.
Section 6. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and Board of Directors and shall keep at its registered
office or principal place of business, or at the office of its transfer agent
or registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of the shares held by each.
Section 7. Resignation. Unless otherwise expressly provided, any
director, committee member, officer or agent may resign by giving written
notice to the President or the Secretary. The resignation shall take effect at
the time specified therein, or immediately if no time is specified. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 8. Surety Bonds. Such officers and agents of the Corporation
(if any) as the President, or the Board of Directors may direct, from time to
time, shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation,
retirement, disqualification or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in their possession or
under their control belonging to the Corporation, in such amounts and by such
surety companies as the President or the Board of Directors may determine. The
premiums on such bonds shall be paid by the Corporation, and the bonds so
furnished shall be in the custody of the Secretary.
13
<PAGE> 14
Section 9. Interested Directors, Officers and Security Holders. No
contract or transaction between the Corporation and one or more of its
directors, officers or security holders, or between the Corporation and any
other corporation, partnership, association, trust, plan or other organization
or enterprise in which one or more of the Corporation's directors, officers or
security holders are directors, officers, security holders, members or
employees, or have a direct or indirect financial interest, shall be void or
voidable solely because of such position or interest, solely because the
director, officer or security holder is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(a) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the Board of Directors or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
(b) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the shareholders entitled to
vote thereon, and the contract or transaction is specifically approved in good
faith by a vote of the shareholders; or
(c) the contract or transaction is fair to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction. No director shall be liable to
account to the Corporation for any profits realized by, from or through any
such contract or transaction by reason of an interest therein when such
contract or transaction has been authorized or ratified in accordance with the
foregoing. This section shall not be construed to invalidate any contract or
transaction which would otherwise be valid in the absence of this provision.
Section 10. Indemnification. Any person who was, is, or is threatened
to be made, a named defendant or respondent in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrative,
investigative or administrative, any appeal in such action suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding (collectively, a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation, or, while a director or
officer of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise, shall be indemnified by the Corporation to the fullest
extent authorized by the Texas Business Corporation Act, as the same exists or
may hereafter be amended (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, court costs, fines, penalties, excise taxes, and
amounts paid in settlement) reasonably incurred or suffered in connection
therewith and such indemnification shall continue as to any such person who has
ceased to be a director or officer and shall inure to the benefit of such
persons' heirs,
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<PAGE> 15
executors and administrators. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses (court costs and attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition; provided, the
applicable requirements of the Texas Business Corporation Act are met prior to
such advancement.
The right to indemnification and to the advancement of expenses
conferred in this Section shall not be exclusive of, nor shall it be construed
to limit, any other right which any person may have or hereafter acquire under
any statute, the Articles of Incorporation, these Bylaws, agreement, vote of
shareholders or otherwise.
ARTICLE IX.
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any meeting of the Board of Directors at which a quorum is present
by the affirmative vote of a majority of the directors present at such meeting.
15
<PAGE> 16
CERTIFICATE
I, A.J. LEWIS III, the undersigned President of PACKAGED ICE MISSION,
INC., do hereby certify that the foregoing is a true and correct copy of the
Bylaws of said Corporation as duly approved at the organizational meeting of
the Board of Directors of the Corporation and as duly amended by action of the
Board of Directors through the date hereof.
WITNESS my hand and the seal of the Corporation this the 24th day of
March, 1997.
-------------------------------------
A.J. LEWIS III, PRESIDENT
16
<PAGE> 1
EXHIBIT 3.13
ARTICLES OF INCORPORATION
OF
PACKAGED ICE STPI, INC.
* * *
ARTICLE ONE
The name of the Corporation is PACKAGED ICE STPI, INC.
ARTICLE TWO
The period of duration of the Corporation is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is to transact any or
all lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE FOUR
The Corporation is authorized to issue an aggregate of 1,000 shares of
stock, consisting of only one class (designated "Common Stock"), having a par
value of $.01 per share. The shares of stock shall have identical rights and
privileges in every respect.
ARTICLE FIVE
No security holder shall have the preemptive right to subscribe for or
acquire shares or other securities of any kind of the Corporation, except to
the extent such right is expressly granted in writing by the Corporation.
ARTICLE SIX
Cumulative voting by the shareholders of the Corporation at elections of
directors is expressly prohibited.
ARTICLE SEVEN
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of at least One Thousand
Dollars ($1,000.00), consisting of money, labor done, property actually
received or such other consideration as may be authorized by law.
<PAGE> 2
ARTICLE EIGHT
The initial board of directors consists of five (5) members who shall
serve as directors until the first annual meeting of shareholders or until
their successors are elected and qualified, and whose names and addresses are:
Name Address
---- -------
James F. Stuart 8572 Katy Freeway, Suite 101
Houston, Texas 77024
A.J. Lewis III 1120 E. Durango
San Antonio, Texas 78210
Steven P. Rosenberg 5430 LBJ Freeway, Suite 1600
Dallas, Texas 75219
Richard A. Coonrod 5720 Smetana Drive, Suite 300
Minnetonka, Minnesota 55343
Stephen R. Sefton 222 South Ninth St., Suite 2800
Minneapolis, Minnesota 55402
The number of directors constituting the board of directors (other than
the initial board of directors) shall be fixed by, or in the manner provided
in, the bylaws of the Corporation.
ARTICLE NINE
A director of the Corporation shall not be liable to the Corporation or
its security holders for monetary damages for any act or omission in the
director's capacity as a director. This Article does not eliminate or limit
the liability of a director for (i) a breach of the director's duty of loyalty
to the Corporation or its shareholders, (ii) an act or omission not in good
faith that constitutes a breach of duty of the director to the Corporation or
an act or omission that involves intentional misconduct or a knowing violation
of the law, (iii) a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action taken within the
scope of the director's office, or (iv) an act or omission for which the
liability of a director is expressly provided by an applicable statute.
This Article is intended to limit the liability of a director of the
Corporation to the fullest extent permitted by law. In the event that the
Texas Miscellaneous Corporation Laws Act or the Texas Business Corporation Act
is amended to authorize corporate action further limiting or eliminating
liability of directors, then the liability of a director of the Corporation
shall be limited or eliminated to the fullest extent permitted by either of
such Acts, as so amended, without any further action. The limitation of
liability contained in this Article shall not be deemed exclusive
2
<PAGE> 3
of any rights or limitations of liability or indemnity to which a director may
otherwise be entitled. Any repeal or modification of this Article by the
shareholders of the Corporation or otherwise shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE TEN
The street address of the Corporation's initial registered office and
the name of its initial registered agent at such address are:
Name Address
---- -------
James F. Stuart 8572 Katy Freeway, Suite 101
Houston, Texas 77024
ARTICLE ELEVEN
The name and address of the incorporator is:
Name Address
---- -------
Alan Schoenbaum Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
INCORPORATOR:
-------------------------------------
Alan Schoenbaum
3
<PAGE> 1
EXHIBIT 3.14
ARTICLES OF MERGER
OF
SOUTHWEST TEXAS PACKAGED ICE, INC.
A TEXAS CORPORATION
INTO
PACKAGED ICE STPI, INC.
A TEXAS CORPORATION
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act, the undersigned corporations adopt the following Articles of
Merger for the purpose of merging them into one of such corporations (the
"Merger"):
1. The Plan of Merger (the "Plan of Merger") which was approved by
the shareholders of each of the undersigned corporations in the manner
prescribed by the Texas Business Corporation Act is set forth as Exhibit A
attached hereto and incorporated herein by reference for all purposes.
2. As to each of the undersigned corporations, the number of shares
of Common Stock outstanding, being the only outstanding capital stock of each
such corporation entitled to vote on the Plan of Merger, are as follows:
<TABLE>
<CAPTION>
Name of Class of Number of
Corporation Shares Shares Outstanding
----------- ------ ------------------
<S> <C> <C>
Southwest Texas Packaged Ice, Inc. Common 1,250
("STPI")
Packaged Ice STPI, Inc. Common 1,000
("Packaged Ice")
</TABLE>
3. As to each of the undersigned corporations, the number of shares
of Common Stock voted for and against the Plan of Merger, respectively, are as
follows:
<TABLE>
<CAPTION>
Name of Class of Total Number of
Corporation Shares Shares Voted
----------- ------ ---------------------
For Against
--- -------
<S> <C> <C> <C>
STPI Common 1,250 -0-
Packaged Ice STPI Common 1,000 -0-
</TABLE>
4. The Plan of Merger and the performance of its terms were duly
authorized by all action required by the laws of the State of Texas and by
STPI's and Packaged Ice STPI's constituent documents.
<PAGE> 2
5. The Articles of Incorporation of Packaged Ice immediately prior
to the Merger shall be the Articles of Incorporation of the surviving
corporation, provided that at the effective time of the Merger, Article I of
such Articles of Incorporation shall be amended to read in its entirety as
follows:
"The name of the corporation is Southwest Texas Packaged Ice, Inc."
6. The merger of STPI into Packaged Ice STPI shall be effective upon
the issuance of the certificate of merger by the Secretary of State of Texas.
Dated: April 17, 1997
SOUTHWEST TEXAS PACKAGED ICE, INC.
By:
----------------------------------
A.J. Lewis III, President
PACKAGED ICE STPI, INC.
By:
---------------------------------
James F. Stuart, Chief
Executive Officer
2
<PAGE> 3
EXHIBIT A
PLAN OF MERGER
This PLAN OF MERGER ("Plan of Merger") made and entered into as of the
17th day of April, 1997, by and between Southwest Texas Packaged, Inc., a Texas
corporation (the "Company") and Packaged Ice STPI, Inc., a Texas corporation
("Subco"), being sometimes hereinafter together referred to as the "Constituent
Corporation."
W I T N E S S E T H:
WHEREAS, the Company is a corporation incorporated under the laws of
Texas, with authorized capital stock of 1,000,000 shares of common stock, par
value $1.00 per share, of which 1,250 shares (the "Shares") are issued and
outstanding;
WHEREAS, Subco is a corporation incorporated under the laws of Texas
with authorized capital stock of 1,000 shares of common stock, par value $.01
per share (the "Subco Common Stock"), of which 1,000 shares are issued and
outstanding;
WHEREAS, this Plan of Merger is being entered into pursuant to the
Agreement and Plan of Merger dated March 25, 1997 (the "Merger Agreement"), by
and among Subco, Packaged Ice, Inc. ("Parent"), a Texas corporation and parent
of Subco, the Company, and the shareholders of the Company;
WHEREAS, the Company is to be merged with and into Subco in accordance
with the terms hereof;
WHEREAS, all of the shareholders of each of the Constituent Corporation
have approved the merger of the Company with and into Subco and this Plan of
Merger pursuant to the applicable provisions of the Texas Business Corporation
Act, as amended from time to time ("TBCA");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree, in accordance with the
applicable provisions of the laws of the State of Texas, in accordance with the
terms of the Merger Agreement, and as hereinafter set forth, that the
Constituent Corporation shall be merged into a single Texas corporation;
1. Merger of the Company into Newco. At the Effective Date (as
hereinafter defined) and upon the terms and conditions hereof and in the Merger
Agreement, the Company shall merge with and into Subco in accordance with the
TBCA and the terms hereof, and Subco shall be the surviving corporation (the
"Surviving Corporation") and as such shall continue to be governed by the laws
of the State of Texas.
2. Filing; Effectiveness of the Merger. On the date hereof, the
Company and Subco will cause the Articles of Merger (the "Articles of Merger")
to be executed and filed pursuant to Article
<PAGE> 4
5.04 of the TBCA. The Merger shall become effective upon the occurrence of the
issuance of the certificate of merger (the "Effective Date") by the Secretary
of State of the State of Texas upon the filing of the Articles of Merger with
the Secretary of the State of Texas.
3. Continuing of Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of Subco, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of the Company, with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and into that
of Subco, and the Surviving Corporation shall be vested fully therewith and the
separate corporate existence and identity of the Company shall thereafter cease
except to the extent continued by statute.
4. Corporate Government.
(a) The Articles of Incorporation of Subco as in effect on the
Effective Date shall continue in full force and effect and shall be the
Articles of Incorporation of the Surviving Corporation, provided, however,
Article I of the Articles of Incorporation of Subco shall be amended to read in
its entirety as follows:
"The name of the corporation shall be Southwest Texas Packaged
Ice, Inc."
(b) The Bylaws of Subco, as in effect as of the Effective
Date, shall continue in full force and effect and shall be the Bylaws of the
Surviving Corporation.
(c) The members of the Board of Directors and the officers of
the Surviving Corporation shall be the persons holding such offices with Subco
as of the Effective Date.
5. Conversion of Shares. The manner and basis of converting the
Shares and the Subco Common Stock shall be as follows:
(a) Certain of the shareholders shall receive only cash in
exchange for their Shares. The remaining shareholders of the Company will
receive a combination of cash and shares of common stock, par value $.01 per
share ("Parent Stock"), of Parent. Each Share which is issued and outstanding
immediately prior to the Effective Date shall, by virtue of the Merger and
without any action on the part of the holder thereof, be automatically
converted into the right to receive such consideration upon the surrender of
the certificate formerly representing such Share in accordance with Section
5(e) below.
(b) Each Share shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and retired and cease to
exist.
(c) Each share of Subco Common Stock which shall be
outstanding immediately prior to the Effective Date shall, at the Effective
Date, by virtue of the Merger and without any action
2
<PAGE> 5
on the part of the holder thereof, be converted into one share of common stock
of the Surviving Corporation.
(d) The stock transfer books of the Company shall be closed as
of the close of business on the Effective Date, and no transfer of record of
any of the Shares shall take place thereafter.
(e) No fractional shares of Parent Stock and no certificates
or scrip therefor shall be issued.
(f) All of the Parent Stock, when delivered pursuant to the
provisions of this Agreement, shall be validly issued, fully paid and
nonassessable.
(g) At the Effective Date, the holders of certificates
representing Shares shall thereupon cease to have any rights with respect to
such Shares and shall surrender certificates representing the Shares to Parent
whereupon such holders shall receive a certificate or certificates for the
number of shares of Parent Stock to which such holder is entitled hereunder.
6. Rights and Liabilities of the Surviving Corporation. As of the
Effective Date, the Surviving Corporation shall have the following rights and
obligations, pursuant to Article 5.06 of the TBCA:
(a) All rights, title and interests to all real estate and
other property owned by the Company and Subco shall be allocated to and vested
in the Surviving Corporation without reservation or impairment, without further
act or deed, and without any transfer or assignment having occurred, but
subject to any existing liens or other encumbrances thereon.
(b) All liabilities and obligations of the Company and Newco
shall be allocated to the Surviving Corporation, and the Surviving Corporation
shall be the primary obligor therefor and, except as otherwise provided by law
or contract, no other party to the merger, other than the Surviving
Corporation, shall be liable thereon.
(c) A proceeding pending by or against the Company may be
continued as if the Merger did not occur, or the Surviving Corporation to which
the liability, obligation, asset or right associated with such proceeding is
allocated to and vested in may be substituted in the proceeding.
(d) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the laws of the State of Texas.
7. Further Assurances. If at any time the Surviving Corporation
shall consider or be advised that any further assignment or assurance in law or
other action is necessary or desirable to vest, perfect, or confirm, of record
or otherwise, in the Surviving Corporation, the title to any
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property or rights of the Company or Subco acquired or to be acquired by or as
a result of the Merger, the proper officers, partners or other appropriate
representative of the Company, Subco and the Surviving Corporation,
respectively, shall be and they hereby are severally and fully authorized to
execute and deliver such proper deeds, assignments and assurances in law, and
take such other action as may be necessary or proper in the name of the
Company, Subco or the Surviving Corporation to vest, perfect or confirm title
to such property or rights in the Surviving Corporation and otherwise carry out
the purposes of this Plan of Merger.
8. Acknowledgment. The parties hereto acknowledge and agree that
the Plan of Merger is being executed and delivered pursuant to the Merger
Agreement and in the event of any inconsistencies as between this Plan of
Merger and the Merger Agreement, the Merger Agreement shall control.
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EXHIBIT 3.15
BYLAWS
OF
PACKAGED ICE STPI, INC.
A TEXAS CORPORATION
(THE "CORPORATION")
ARTICLE I.
OFFICES
Section 1. Registered Office. The Corporation shall have and
continuously maintain a registered office in the State of Texas which may be,
but need not be, the same as its place of business (if located within the State
of Texas). The address of the registered office and the name of the registered
agent at such address shall be as set forth in the Corporation's Articles of
Incorporation.
Section 2. Place of Business. In addition to its registered office,
the Corporation may have offices and places of business at such places, both
within and without the State of Texas, as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. Annual meetings of the shareholders shall
be held at such times as shall be determined by the Board of Directors. At each
annual meeting, the shareholders shall elect a Board of Directors, and shall
transact such other business as may be properly brought before the meeting.
Section 2. Special Meetings. Unless otherwise provided by the
Articles of Incorporation, special meetings of the shareholders may be called
by the President, the Board of Directors or the holders of shares representing
not less than 10% of the votes entitled to be cast on any issue at meetings of
shareholders. A special meeting may be called for any purpose or purposes
though business transacted at a special meeting shall be confined to the
purposes stated in the notice of such meeting.
Section 3. Place of Meetings. Meetings of the shareholders of the
Corporation shall be held at such places within or without the State of Texas
as shall be determined by the Board of Directors or, in the absence of such a
determination, meetings of shareholders shall be held at the principal office
of the Corporation.
Section 4. Notice of Meetings. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called,
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shall be delivered not less than ten (10) nor more than sixty (60) days before
the date of the meeting, either personally or by mail, by or at the direction
of the President, the Secretary or the person calling the meeting, to each
shareholder entitled to vote at the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid.
Section 5. Voting List. At least ten (10) days before each meeting of
the shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the residence of each and the
number of voting shares held by each, shall be prepared by the officer or agent
having charge of the stock transfer-books. Such list shall be kept on file at
the registered office or principal place of business of the Corporation for a
period of ten (10) days prior to such meeting, and shall be subject to
inspection by any shareholder who may be present. The original stock transfer
books shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
Failure to comply with the requirements of this Section shall not affect the
validity of any action taken at such meeting.
Section 6. Quorum of Shareholders; Adjournment.
(A) The holders of shares representing a majority of the votes
entitled to be cast at a meeting, present in person or represented by proxy,
shall be requisite to and shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
the Articles of Incorporation or by these Bylaws. Once a quorum is present at a
meeting of shareholders, the shareholders represented in person or by proxy at
the meeting may conduct such business as may be properly brought before the
meeting until it is adjourned, and the subsequent withdrawal from the meeting
of any shareholder or the refusal of any shareholder represented in person or
by proxy to vote shall not affect the presence of a quorum at the meeting. Upon
attainment of representation by a quorum, subsequent to an adjournment of the
meeting, any business may be transacted which might have been transacted at the
meeting as originally notified.
(B) If a quorum is not present or represented at any meeting
of the shareholders, the shareholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
these Bylaws, such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of the share transfer
records and the stated period of closing has expired.
Section 7. Organization; Order of Business. The Chairman of the Board
or such other person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his absence
such person as may be chosen by the holders of shares representing a majority
of the votes which could be cast by those present, in person or by proxy, and
entitled to vote shall call to order any meeting of the shareholders and act as
chairman of the meeting. The Secretary of the Corporation, if present, shall
act as secretary of the meeting, but in his absence,
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the secretary of the meeting shall be such person as the chairman of the
meeting appoints. The chairman of any meeting of shareholders shall determine
the order of business and the procedure at the meeting, including regulation of
the manner of voting and the conduct of discussion; but the order of business
to be followed at any meeting at which a quorum is present may be changed by
the holders of shares of stock present in person or by proxy and entitled to
vote at such meeting (determined by a majority of the votes cast).
Section 8. Required Vote. With respect to matters other than
elections of directors, except as otherwise required by statute, the Articles
of Incorporation or these Bylaws, the vote of the holders of shares
representing a majority of the votes cast shall decide any question properly
brought before such meeting. Directors shall be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election of
directors.
Section 9. Method of Voting; Proxies. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of the shareholders, except to the extent that the voting
rights of the shares of any class or classes are enhanced or limited by
statute, by the Articles of Incorporation (including amendments thereto) or by
agreement. At any meeting of the shareholders, each shareholder having the
right to vote shall be entitled to vote in person, or by written proxy
appointed by an instrument executed by such shareholder. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. A proxy shall be revocable unless expressly provided
therein to be irrevocable and unless otherwise made irrevocable by law. Each
proxy shall be filed with the Secretary of the Corporation prior to or at the
time of the meeting. Any vote may be taken by voice or by show of hands unless
a shareholder entitled to vote objects, in which case written ballots shall be
used.
Section 10. Action Without Meeting. Any action which must or may be
taken at any annual or special meeting of shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by (i) the holders
of all the shares entitled to vote with respect to the action that is the
subject of the consent, or (ii) if the Articles of Incorporation so provide,
the holders of shares of stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote on the action were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who did not consent in
writing.
Section 11. Telephone Meeting. Shareholders may participate in and
hold a meeting by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
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ARTICLE III.
DIRECTORS
Section 1. Management of the Corporation. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed under the direction of, the
Board of Directors of the Corporation. Except to the extent otherwise limited
by statute, the Articles of Incorporation, or these Bylaws, the Board of
Directors shall have the broadest powers available under Texas law.
Section 2. Number. The number of directors constituting the Board of
Directors shall be determined from time to time by resolution of a majority of
directors then in office, though less than a quorum; provided that at all times
the number of directors shall be at least one (1) and no decrease shall have
the effect of shortening the term of any incumbent director.
Section 3. Qualifications, Election and Term. Directors need not be
residents of Texas or shareholders of the Corporation. The directors
constituting the Board of Directors shall be elected at the annual meeting of
shareholders by a plurality of the votes cast by the shareholders entitled to
vote at such election of directors. Each director, upon election to the Board
of Directors, shall hold office until the next annual meeting of shareholders
and until his or her successor is elected and qualified.
Section 4. Chairman of the Board. The Board of Directors may elect a
member from the Board of Directors to serve as Chairman of the Board. The
Chairman of the Board shall preside at meetings of the Board of Directors and
shareholders.
Section 5. Removal. Any director may be removed either for or without
cause at any special or annual meeting of the shareholders by the affirmative
vote of the holders of shares having a majority of the entire number of votes
entitled to be cast for the election of such director, if notice of the
intention to act upon such matter shall have been given in the notice calling
such meeting.
Section 6. Vacancies. Any vacancies occurring in the Board of
Directors for any reason may be filled by a majority vote of the directors then
in office, though less than a quorum, or by election at an annual meeting of
shareholders or at a special meeting of shareholders called for that purpose;
provided that, during the period between any two (2) successive annual meetings
of shareholders, the Board of Directors may not fill more than two (2)
vacancies resulting from an increase in the number of directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office.
Section 7. Place of Meeting. The directors of the Corporation may
hold their meetings, both regular and special, either within or without the
State of Texas.
Section 8. Annual Meetings. Each newly elected Board of Directors
shall hold an annual meeting without further notice immediately following the
annual meeting of shareholders and at the
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same place, unless such place or time is changed by a majority vote of the
directors then elected and serving.
Section 9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and places as may be fixed
from time to time by resolutions adopted by the Board of Directors and
communicated to all directors at their last known addresses. Except as
otherwise provided by statute, the Articles of Incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any regular
meeting need be specified in the notice or waiver of notice of such meeting.
Section 10. Special Meetings. Special meetings of the Board of
Directors may be called by the President on twenty-four (24) hours' notice to
each director either personally or by mail or by telegram. Special meetings
shall be called by the President in like manner and on like notice on the
written request of two (2) directors. Except as may be otherwise expressly
provided by statute, the Articles of Incorporation or these Bylaws, neither the
business to be transacted at, nor the purpose of, any special meeting need be
specified in the notice or waiver of notice of such meeting.
Section 11. Quorum; Majority Vote. At all meetings of the Board of
Directors, the presence of a majority of the number of directors fixed in
accordance with these Bylaws shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically required by
statute, the Articles of Incorporation or these Bylaws. If a quorum is not
present at any meeting of the directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present. Upon attainment of representation by
a quorum, subsequent to an adjournment of the meeting, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 12. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before adjournment thereof or shall
forward such dissent by certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
Section 13. Compensation. The Board of Directors shall have authority
to determine from time to time the amount of compensation, if any, which shall
be paid to its members for their services as directors and as members of
standing or special committees of the Board. The Board shall also have power in
its discretion to provide for and to pay to directors rendering services to the
Corporation not ordinarily rendered by directors as such, special compensation
appropriate to the value of such services as determined by the Board from time
to time. Nothing in these Bylaws shall be construed to preclude any directors
from serving the Corporation in any capacity other than as a director and
receiving compensation therefor.
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Section 14. Procedure. The Board of Directors shall keep regular
minutes of its proceedings. The minutes shall be placed in the minute book of
the Corporation.
Section 15. Action Without Meeting. Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee thereof may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or such
committee, as the case may be. Such consent shall have the same force and
effect as unanimous vote at a meeting, and may be stated as such in any
document or instrument filed with the Secretary of State. The signed consent or
a copy thereof shall be placed in the minute book of the Corporation.
Section 16. Telephone Meeting. Members of the Board of Directors or of
any committee thereof may participate in and hold a meeting of the Board of
Directors of any committee thereof by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other. Participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV.
COMMITTEES OF THE BOARD
Section 1. Designation and Authority. The Board of Directors may, by
resolution adopted by a majority of the full Board of Directors, designate from
among its members one or more committees, each of which, to the extent provided
in such resolution, shall have and may exercise all of the authority of the
Board of Directors in the management of the business and affairs of the
Corporation, except that no such committee shall have the authority of the
Board of Directors to: amend the Articles of Incorporation (other than in
connection with the issuance of shares in series); propose a reduction of the
stated capital of the Corporation; approve a plan of merger or share exchange
of the Corporation; recommend to the shareholders the sale, lease or exchange
of all or substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business; recommend to
the shareholders a voluntary dissolution of the Corporation or a revocation
thereof; amend, alter or repeal the bylaws of the Corporation or adopt new
bylaws of the Corporation; fill vacancies in the Board of Directors; fill
vacancies in or designate alternate members of any committee of the Board of
Directors; fill any directorship to be filled by reason of an increase in the
number of directors; elect or remove officers of the Corporation or members or
alternate members of any committee of the Corporation; fix the compensation of
any member or alternate members of such committee; or alter or repeal any
resolution of the Board of Directors that by its terms provides that it shall
not be so amendable or repealable; and, unless such resolution expressly so
provides, no such committee shall have the authority to authorize a
distribution or to authorize the issuance of shares of the Corporation.
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Section 2. Change in Number. The number of members of any committee
may be increased or decreased from time to time by resolution adopted by the
Board of Directors.
Section 3. Removal and Vacancies. Members of committees may be
removed by the Board of Directors. Vacancies in committees may be filled by the
Board of Directors.
Section 4. Transaction of Business. Committees shall transact
business (at meetings or by unanimous consent) in the same manner as the Board
of Directors.
Section 5. Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed upon it or him
by law.
ARTICLE V.
NOTICE
Section 1. Manner of Giving Notice. Unless otherwise required by
these Bylaws, whenever any notice is required to be given under law, the
Articles of Incorporation or these Bylaws, such notice may be given in writing,
and delivered personally, through the United States mail, by a recognized
express delivery service (such as Federal Express) or by means of telegram,
telex or facsimile transmission, addressed to such director or shareholder at
his address or telex or facsimile transmission number, as the case may be. All
notices shall be deemed to be given on the earlier of receipt or at the time
when the same shall be deposited in the mail or with an express delivery
service or when transmitted, as the case may be, addressed or directed to the
proper destination as it appears on the records of the Corporation, with
postage and fees thereon prepaid. An affidavit of the Secretary or Assistant
Secretary or of the transfer agent of the Corporation that the notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
Section 2. Waiver of Notice. Whenever any notice is required to be
given to any committee member, director or shareholder of the Corporation under
the provisions of the statutes, the Articles of Incorporation or these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated in such notice, shall be deemed
equivalent to the giving of such notice. Attendance at a meeting shall
constitute a waiver of notice of such meeting, except where a person attends
for the expressed purpose of objecting to the transaction of any business on
the ground that the meeting is not lawfully called or convened.
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ARTICLE VI.
OFFICERS, EMPLOYEES AND AGENTS:
POWERS AND DUTIES
Section 1. Appointment of Officers. The officers of the Corporation
shall be appointed by the Board of Directors and shall be a Chairman, a Chief
Executive Officer, a President, a Chief Operating Officer, a Chief Financial
Officer, a Vice President, a Secretary and a Treasurer. The Board of Directors
may also choose additional Vice Presidents and Assistant Secretaries and
Assistant Treasurers and such other officers as the Board of Directors may deem
appropriate. Any two or more offices may be held by the same person.
Additionally, unless expressly prohibited by the Board of Directors, the
President may appoint such assistant officers as the President deems necessary.
Section 2. Qualifications. Officers of the Corporation need not be
directors or shareholders of the Corporation, or residents of the State of
Texas. Any two or more offices may be held by the same person.
Section 3. Term of Office. Each officer of the Corporation shall hold
office for the term specified by the Board of Directors. If no term is
specified, each officer shall hold office until his or her successor is chosen
and qualifies, or until his or her earlier death, resignation or removal from
office. The designation of a specific term of office does not grant to an
officer any contract rights, and the Board of Directors may remove such officer
as provided in these Bylaws.
Section 4. Removal; Filling of Vacancies. Any officer may be removed
at any time, for or without cause, by the Board of Directors or, if appointed
by the President, by the President. Such removal shall be without prejudice to
the contract rights, if any, of the person so removed. A vacancy occurring in
any office for any reason may be filled by the Board of Directors. A vacancy in
any office held by an officer appointed by the President may be filled by the
President unless such authority is limited by the Board of Directors.
Section 5. Compensation. The compensation of all officers of the
Corporation shall be fixed from time to time by the Board of Directors. The
Board of Directors may from time to time delegate to the President the
authority to fix the compensation of any or all of the other officers of the
Corporation.
Section 6. Chairman of the Board. The Chairman of the Board shall be
selected among the members of the Board of Directors and will preside when
present at all meetings of the Board of Directors and of the shareholders. The
Chairman of the Board shall be available to consult with and advise the
officers of the Corporation with respect to the conduct of the business and
affairs of the Corporation and shall have such other powers and duties as
designated in accordance with these Bylaws and as from time to time may be
assigned by the Board of Directors. The Chairman of the Board shall be the
highest officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all business and affairs of
the Corporation.
Section 7. Chief Executive Officer. Subject to the direction and
authority of the Board of Directors, the Chief Executive Officer shall have
general executive charge, management and control
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of the properties, business and operations of the Corporation with all such
powers as may be reasonably incident to such responsibilities and each shall
have such other powers and duties as designated in accordance with these Bylaws
and as from time to time be assigned to him by the Board of Directors. The
Chief Executive Officer may from time to time delegate any of the
aforementioned duties and responsibilities in accordance with these Bylaws to
any officer who directly or indirectly reports to him.
Section 8. President. The President shall have charge of such
properties, business and operations of the Corporation as may be assigned to
him from time to time in accordance with these Bylaws by the Chief Executive
Officer, as well as all such powers as may be reasonably incident to such
charge. Unless the Board of Directors otherwise determines, he shall, in the
absence of the Chairman of the Board and the Chief Executive Officer, preside
at all meetings of the shareholders and the Board of Directors. The President
shall have such other powers and duties as designated in accordance with these
Bylaws and as the Board of Directors shall prescribe. The President shall
report directly to the Chief Executive Officer and the Board of Directors.
Section 9. Chief Operating Officer. The Chief Operating Officer shall
be responsible for the day to day operations of the Corporation and its
subsidiaries, and will have such other powers and duties as designated in
accordance with these Bylaws and as the Chief Executive Officer or the Board of
Directors shall prescribe. The Chief Operating Officer shall report directly to
the Chief Executive Officer and the Board of Directors.
Section 10. Chief Financial Officer. The Chief Financial Officer will
be the principal accounting and financial officer of the Corporation and will
have active control of and shall be responsible for all matters pertaining to
the accounts and finances of the Corporation. The Chief Financial Officer shall
be prepared at all times to give information as to the condition of the
Corporation and shall make a detailed annual report of the entire business and
financial condition of the Corporation. The person holding the office of Chief
Financial Officer shall also perform, under the direction and subject to the
control of the Chief Executive Officer, the President and the Board of
Directors, such other duties as may be assigned by either of such officers.
Section 11. Vice Presidents. Each Vice President shall have only such
powers and perform only such duties as the Board of Directors may from time to
time prescribe or as a Chief Executive Officer or the President may from time
to time delegate to him or her.
Section 12. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose and
shall perform like duties for any committee when required. Except as otherwise
provided herein, the Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it, and, when so affixed,
it shall be attested by his signature or by the signature of the Treasurer or
an Assistant Secretary.
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Section 13. Assistant Secretaries. Each Assistant Secretary shall have
only such powers and perform only such duties as the Board of Directors may
from time to time prescribe or as the President may from time to time delegate.
Section 14. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the Chief
Executive Officer, the President, the Chief Financial Officer and directors, at
the regular meetings of the Board of Directors, or whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation, and shall perform such other duties as the Board
of Directors may prescribe. If required by the Board of Directors, he shall
give the Corporation a bond in such form, in such sum, and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 15. Assistant Treasurers. Each Assistant Treasurer shall have
only such powers and perform only such duties as the Chief Executive Officer,
the President, the Chief Financial Officer or the Board of Directors may from
time to time prescribe.
Section 16. Additional Powers and Duties. In addition to the foregoing
specially enumerated duties, services and powers, the several elected and
appointive officers of the Corporation shall perform such other duties and
services and exercise such further powers as may be provided by statute, the
Articles of Incorporation or these Bylaws, or as the Board of Directors may
from time to time determine or as may be assigned to them by any competent
superior officer.
ARTICLE VII.
STOCK AND TRANSFER OF STOCK
Section 1. Certificates Representing Shares. Certificates in such
form as may be determined by the Board of Directors and as shall conform to the
requirements of the statutes, the Articles of Incorporation and these Bylaws
shall be delivered representing all shares to which shareholders are entitled.
Such certificates shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued. Each certificate shall state on
the face thereof that the Corporation is organized under the laws of the State
of Texas, the holder's name, the number and class of shares and the designation
of the series, if any, which such certificate represents, the par value of such
shares or a statement that such shares are without par value and such other
matters as may be required by law. Each certificate shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary and
may be sealed with the seal of the Corporation or a facsimile thereof. If any
certificate is countersigned by a transfer agent or registered by a registrar,
either of
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which is other than the Corporation or an employee of the Corporation, the
signature of any such officer may be a facsimile.
Section 2. Issuance. Subject to the provisions of the statutes, the
Articles of Incorporation or these Bylaws, shares may be issued for such
consideration and to such persons as the Board of Directors may determine from
time to time. Shares may not be issued until the full amount of the
consideration, fixed as provided by law, has been paid.
Section 3. Payment of Shares. The consideration for the issuance of
shares shall consist of money paid, labor done (including services actually
performed for the Corporation) or property (tangible or intangible) actually
received. Neither promissory notes nor the promise of future services shall
constitute payment for shares. In the absence of fraud in the transaction, the
judgment of the Board of Directors as to the value of consideration received
shall be conclusive. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be considered
fully paid and nonassessable.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors, the President, or such other officer or officers of the Corporation
as the Board of Directors may from time to time designate, in its or his
discretion, may direct a new certificate or certificates representing shares to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate or
certificates to be lost, stolen or destroyed. When authorizing such issuance of
a new certificate or certificates, the Board of Directors, the President, or
any such other officer, in its or his discretion and as a condition precedent
to the issuance thereof, may require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it or he shall require and/or give the
Corporation a bond in such form, in such sum, and with such surety or sureties,
as it or he may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate or certificates alleged to have
been lost, stolen or destroyed.
Section 5. Transfers of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate or certificates representing shares,
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, with all required stock transfer tax stamps affixed
thereto and cancelled or accompanied by sufficient funds to pay such taxes, it
shall be the duty of the Corporation or the transfer agent of the Corporation
to issue a new certificate or certificates to the person entitled thereto,
cancel the old certificate or certificates and record the transaction upon its
books.
Section 6. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
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<PAGE> 12
Section 7. Restriction on Transfer of Shares of Stock. These Bylaws
authorize (but do not require) a restriction on the transfer of the
Corporation's shares which:
(A) maintains the status of the Corporation as an electing
small business corporation under Subchapter S of the United States Internal
Revenue Code;
(B) obligates the holders of the restricted stock to offer to
the other holders of stock of the Corporation a prior opportunity, to be
exercised within a reasonable time, to acquire the restricted stock pursuant to
an agreement respecting the purchase and sale of the restricted stock;
(C) obligates the Corporation to the extent permitted by law
or any holder of stock of the Corporation to purchase the stock which is the
subject of an agreement respecting the purchase and sale of the restricted
stock; or
(D) requires the Corporation and the holders of any stock of
the Corporation to consent to any proposed transfer of the restricted stock for
the purpose of preventing violations of federal or state law.
The Corporation will furnish to the holder of a certificate of stock in
the Corporation, without charge, upon written request to the Corporation at its
principal place of business or registered office, a copy of the Bylaws and the
Agreement, if any, restricting the transfer of stock.
ARTICLE VIII.
MISCELLANEOUS
Section 1. Fixing Record Dates. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive a distribution by the
Corporation (other than a distribution involving a purchase or redemption by
the Corporation of any of its shares) or a share dividend, or in order to make
a determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may (i)
fix in advance the record date for any such determination of shareholders,
though such record date shall not be more than sixty (60) days and, for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, shall not be less than ten (10) days, prior to the
date on which the particular action requiring such determination of
shareholders is to be taken, or (ii) close the share transfer records for a
period of not more than sixty (60) days and, for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, for
a period of not less than ten (10) days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
In the absence of any such action by the Board of Directors, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such distribution or share dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. The record date for the purpose of
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<PAGE> 13
determining shareholders entitled to consent to an action shall be fixed in
accordance with applicable statutes.
Section 2. Reserves. There may be created from time to time by
resolution of the Board of Directors, out of the earned surplus of the
Corporation, such reserve or reserves as the directors from time to time, in
their discretion, think proper to provide for contingencies, or to equalize
dividends, or to repair or maintain any property of the Corporation or for such
other purpose as the directors shall think beneficial to the Corporation. The
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 3. Signature of Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officer, officers, agent or agents and in such manner as
are permitted by these Bylaws and/or as, from time to time, may be prescribed
by resolution (whether general or special) of the Board of Directors.
Section 4. Fiscal Year. The business of the Corporation shall be
conducted on either a fiscal year or calendar year basis, and the selection of
the basis to be used shall be, and is hereby delegated to the discretion of the
Board of Directors.
Section 5. Seal. The Corporation's seal, if obtained, shall be in
such form as shall be adopted and approved from time to time by the Board of
Directors. The seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed, imprinted or in any manner reproduced. Except as expressly
required by law, no action shall be invalid or unenforceable for failure to use
the corporate seal in connection therewith.
Section 6. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and Board of Directors and shall keep at its registered
office or principal place of business, or at the office of its transfer agent
or registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of the shares held by each.
Section 7. Resignation. Unless otherwise expressly provided, any
director, committee member, officer or agent may resign by giving written
notice to the President or the Secretary. The resignation shall take effect at
the time specified therein, or immediately if no time is specified. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 8. Surety Bonds. Such officers and agents of the Corporation
(if any) as the President, or the Board of Directors may direct, from time to
time, shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation,
retirement, disqualification or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in their possession or
under their control belonging to the Corporation, in such amounts and by such
surety companies as the President or the Board of Directors may determine. The
premiums on such bonds shall be paid by the Corporation, and the bonds so
furnished shall be in the custody of the Secretary.
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<PAGE> 14
Section 9. Interested Directors, Officers and Security Holders. No
contract or transaction between the Corporation and one or more of its
directors, officers or security holders, or between the Corporation and any
other corporation, partnership, association, trust, plan or other organization
or enterprise in which one or more of the Corporation's directors, officers or
security holders are directors, officers, security holders, members or
employees, or have a direct or indirect financial interest, shall be void or
voidable solely because of such position or interest, solely because the
director, officer or security holder is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(a) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the Board of Directors or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
(b) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the shareholders entitled to
vote thereon, and the contract or transaction is specifically approved in good
faith by a vote of the shareholders; or
(c) the contract or transaction is fair to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction. No director shall be liable to
account to the Corporation for any profits realized by, from or through any
such contract or transaction by reason of an interest therein when such
contract or transaction has been authorized or ratified in accordance with the
foregoing. This section shall not be construed to invalidate any contract or
transaction which would otherwise be valid in the absence of this provision.
Section 10. Indemnification. Any person who was, is, or is threatened
to be made, a named defendant or respondent in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrative,
investigative or administrative, any appeal in such action suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding (collectively, a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation, or, while a director or
officer of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise, shall be indemnified by the Corporation to the fullest
extent authorized by the Texas Business Corporation Act, as the same exists or
may hereafter be amended (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, court costs, fines, penalties, excise taxes, and
amounts paid in settlement) reasonably incurred or suffered in connection
therewith and such indemnification shall continue as to any such person who has
ceased to be a director or officer and shall inure to the benefit of such
persons' heirs,
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<PAGE> 15
executors and administrators. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses (court costs and attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition; provided, the
applicable requirements of the Texas Business Corporation Act are met prior to
such advancement.
The right to indemnification and to the advancement of expenses
conferred in this Section shall not be exclusive of, nor shall it be construed
to limit, any other right which any person may have or hereafter acquire under
any statute, the Articles of Incorporation, these Bylaws, agreement, vote of
shareholders or otherwise.
ARTICLE IX.
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any meeting of the Board of Directors at which a quorum is present
by the affirmative vote of a majority of the directors present at such meeting.
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<PAGE> 16
CERTIFICATE
I, A.J. LEWIS III, the undersigned President of PACKAGED ICE STPI, INC.,
do hereby certify that the foregoing is a true and correct copy of the Bylaws
of said Corporation as duly approved at the organizational meeting of the Board
of Directors of the Corporation and as duly amended by action of the Board of
Directors through the date hereof.
WITNESS my hand and the seal of the Corporation this the 24th day of
March, 1997.
-------------------------------------
A.J. LEWIS III, PRESIDENT
16
<PAGE> 1
EXHIBIT 3.16
ARTICLES OF INCORPORATION
OF
PACKAGED ICE SOUTHWESTERN, INC.
* * *
ARTICLE ONE
The name of the Corporation is PACKAGED ICE SOUTHWESTERN, INC.
ARTICLE TWO
The period of duration of the Corporation is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is to transact any or
all lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE FOUR
The Corporation is authorized to issue an aggregate of 1,000 shares of
stock, consisting of only one class (designated "Common Stock"), having a par
value of $.01 per share. The shares of stock shall have identical rights and
privileges in every respect.
ARTICLE FIVE
No security holder shall have the preemptive right to subscribe for or
acquire shares or other securities of any kind of the Corporation, except to
the extent such right is expressly granted in writing by the Corporation.
ARTICLE SIX
Cumulative voting by the shareholders of the Corporation at elections of
directors is expressly prohibited.
ARTICLE SEVEN
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of at least One Thousand
Dollars ($1,000.00), consisting of money, labor done, property actually
received or such other consideration as may be authorized by law.
<PAGE> 2
ARTICLE EIGHT
The initial board of directors consists of five (5) members who shall
serve as directors until the first annual meeting of shareholders or until
their successors are elected and qualified, and whose names and addresses are:
Name Address
---- -------
James F. Stuart 8572 Katy Freeway, Suite 101
Houston, Texas 77024
A.J. Lewis III 1120 E. Durango
San Antonio, Texas 78210
Steven P. Rosenberg 5430 LBJ Freeway, Suite 1600
Dallas, Texas 75219
Richard A. Coonrod 5720 Smetana Drive, Suite 300
Minnetonka, Minnesota 55343
Stephen R. Sefton 222 South Ninth St., Suite 2800
Minneapolis, Minnesota 55402
The number of directors constituting the board of directors (other than
the initial board of directors) shall be fixed by, or in the manner provided
in, the bylaws of the Corporation.
ARTICLE NINE
A director of the Corporation shall not be liable to the Corporation or
its security holders for monetary damages for any act or omission in the
director's capacity as a director. This Article does not eliminate or limit
the liability of a director for (i) a breach of the director's duty of loyalty
to the Corporation or its shareholders, (ii) an act or omission not in good
faith that constitutes a breach of duty of the director to the Corporation or
an act or omission that involves intentional misconduct or a knowing violation
of the law, (iii) a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action taken within the
scope of the director's office, or (iv) an act or omission for which the
liability of a director is expressly provided by an applicable statute.
This Article is intended to limit the liability of a director of the
Corporation to the fullest extent permitted by law. In the event that the
Texas Miscellaneous Corporation Laws Act or the Texas Business Corporation Act
is amended to authorize corporate action further limiting or eliminating
liability of directors, then the liability of a director of the Corporation
shall be limited or eliminated to the fullest extent permitted by either of
such Acts, as so amended, without any further action. The limitation of
liability contained in this Article shall not be deemed exclusive
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<PAGE> 3
of any rights or limitations of liability or indemnity to which a director may
otherwise be entitled. Any repeal or modification of this Article by the
shareholders of the Corporation or otherwise shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE TEN
The street address of the Corporation's initial registered office and
the name of its initial registered agent at such address are:
Name Address
---- -------
James F. Stuart 8572 Katy Freeway, Suite 101
Houston, Texas 77024
ARTICLE ELEVEN
The name and address of the incorporator is:
Name Address
---- -------
Alan Schoenbaum Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
INCORPORATOR:
-------------------------------------
Alan Schoenbaum
3
<PAGE> 1
EXHIBIT 3.17
ARTICLES OF MERGER
OF
SOUTHWESTERN ICE, INC.
AN ARIZONA CORPORATION
INTO
PACKAGED ICE SOUTHWESTERN, INC.
A TEXAS CORPORATION
Pursuant to the provisions of article 5.04 of the Texas Business
Corporation Act, the undersigned corporations adopt the following articles of
merger for the purpose of effecting a merger in accordance with the provisions
of article 5.01 of the Texas Business Corporation Act.
1. A plan of merger adopted in accordance with the provisions of article
5.04 of the Texas Business Corporation Act providing for the combination of
Southwestern Ice, Inc., an Arizona corporation, and Packaged Ice Southwestern,
Inc., a Texas corporation, resulting in Packaged Ice Southwestern, Inc., a
Texas corporation, being the surviving corporation in the merger is attached
hereto as Exhibit A and is incorporated herein by reference.
2. The name of each of the undersigned corporations and other entity or
entities, the type of such corporation or other entity and the laws under which
such corporation or other entity was organized are:
<TABLE>
<CAPTION>
Name of Corporation or
Other Entity Type of Entity State
- ---------------------- -------------- -----
<S> <C> <C>
Southwestern Ice, Inc. Corporation Arizona
Packaged Ice Southwestern, Inc. Corporation Texas
</TABLE>
3. As to each of the undersigned domestic corporations, the approval of
whose shareholders is required, the number of outstanding shares of each class
or series of stock of such corporation entitled to vote, with other shares or
as a class, on the Plan of Merger are as follows:
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Entitled to Vote
Name of Corporation Outstanding Class as a Class or Series
- ------------------- ---------------- ----- --------------------
<S> <C> <C> <C>
Packaged Ice
Southwestern, Inc. 1,000 Common N/A
</TABLE>
4. As to each of the undersigned domestic corporations, the approval of
whose shareholders is required, the number of shares, not entitled to vote only
as a class, voted for and against the plan of merger, respectively, are as
follows:
<PAGE> 2
<TABLE>
<CAPTION>
Number of Shares Entitled
To Vote as a Class
Total Total -------------------------
Name of Voted Voted Voted Voted
Corporation For Against Class For Against
- ----------- --- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C>
Packaged Ice
Southwestern, Inc. 1,000 0 Common N/A N/A
</TABLE>
5. The plan of merger and the performance of its terms were duly authorized
by all action required by the laws under which each foreign corporation or
other entity that is a party to the plan of merger was incorporated or
organized by its constituent documents.
6. The merger will become effective upon the issuance of the certificate of
merger by the Secretary of State of the State of Texas in accordance with 5.05
of the TBCA.
Dated: April 17, 1997
SOUTHWESTERN ICE, INC.
By:
----------------------------------
Dale M. Johnson, Chief
Financial Officer
PACKAGED ICE SOUTHWESTERN, INC.
By:
---------------------------------
James F. Stuart, Chief
Executive Officer
2
<PAGE> 3
EXHIBIT A
PLAN OF MERGER
AND ARTICLES OF AMENDMENT TO
THE ARTICLES OF INCORPORATION
OF SURVIVING CORPORATION
1. Names of the corporations proposing to merge:
Southwestern Ice, Inc., an Arizona corporation
Packaged Ice Southwestern, Inc., a Texas corporation
2. Packaged Ice Southwestern, Inc., a Texas corporation, the
"Surviving Corporation" shall continue its existence as the surviving
corporation after the merger.
3. The terms and conditions of the merger are as follows:
(a) Effective Date. The merger shall become effective upon the
occurrence of the issuance of the certificate of merger (the "Effective
Date") by the Secretary of State of the State of Texas pursuant to
Article 5.05 of the Texas Business Corporation Act.
(b) Corporate Existence. The corporate existence and identity
of Packaged Ice Southwestern, Inc., a Texas corporation, with all its
purposes, powers, franchises, privileges, rights and immunities, shall
continue unaffected and unimpaired by the merger, and the corporate
existence and identity of Southwestern Ice, Inc., an Arizona
corporation, with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and
into that of Packaged Ice Southwestern, Inc., a Texas corporation, and
the Surviving Corporation shall be vested fully therewith and the
separate corporate existence and identity of Southwestern Ice, Inc., an
Arizona corporation, shall thereafter cease except to the extent
continued by statute.
(c) Manner and Basis of Converting Shares. Certain
shareholders of Southwestern Ice, Inc., an Arizona corporation (the
"Minority Shareholders") will receive only cash in exchange for their
shares of common stock of Southwestern Ice, Inc., an Arizona
corporation. The remaining shareholders of Southwestern Ice, Inc., an
Arizona corporation (the "Majority Shareholders") will receive a
combination of cash and shares of common stock of Packaged Ice, Inc., a
Texas corporation, in exchange for their shares of common stock of
Southwestern Ice, Inc., an Arizona corporation.
4. The Articles of Incorporation of Packaged Ice Southwestern, Inc.,
the Surviving Corporation, shall be amended simultaneously with the merger to
change the corporation name. The amendment alters or changes Article One of the
original Articles of Incorporation and the full text of each provision as
altered is as follows:
Article One
The name of the corporation is Southwestern Ice, Inc.
<PAGE> 1
EXHIBIT 3.18
BYLAWS
OF
PACKAGED ICE SOUTHWESTERN, INC.
A TEXAS CORPORATION
(THE "CORPORATION")
ARTICLE I.
OFFICES
Section 1. Registered Office. The Corporation shall have and
continuously maintain a registered office in the State of Texas which may be,
but need not be, the same as its place of business (if located within the State
of Texas). The address of the registered office and the name of the registered
agent at such address shall be as set forth in the Corporation's Articles of
Incorporation.
Section 2. Place of Business. In addition to its registered office,
the Corporation may have offices and places of business at such places, both
within and without the State of Texas, as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meetings. Annual meetings of the shareholders shall
be held at such times as shall be determined by the Board of Directors. At each
annual meeting, the shareholders shall elect a Board of Directors, and shall
transact such other business as may be properly brought before the meeting.
Section 2. Special Meetings. Unless otherwise provided by the
Articles of Incorporation, special meetings of the shareholders may be called
by the President, the Board of Directors or the holders of shares representing
not less than 10% of the votes entitled to be cast on any issue at meetings of
shareholders. A special meeting may be called for any purpose or purposes
though business transacted at a special meeting shall be confined to the
purposes stated in the notice of such meeting.
Section 3. Place of Meetings. Meetings of the shareholders of the
Corporation shall be held at such places within or without the State of Texas
as shall be determined by the Board of Directors or, in the absence of such a
determination, meetings of shareholders shall be held at the principal office
of the Corporation.
Section 4. Notice of Meetings. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called,
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<PAGE> 2
shall be delivered not less than ten (10) nor more than sixty (60) days before
the date of the meeting, either personally or by mail, by or at the direction
of the President, the Secretary or the person calling the meeting, to each
shareholder entitled to vote at the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid.
Section 5. Voting List. At least ten (10) days before each meeting of
the shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the residence of each and the
number of voting shares held by each, shall be prepared by the officer or agent
having charge of the stock transfer-books. Such list shall be kept on file at
the registered office or principal place of business of the Corporation for a
period of ten (10) days prior to such meeting, and shall be subject to
inspection by any shareholder who may be present. The original stock transfer
books shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
Failure to comply with the requirements of this Section shall not affect the
validity of any action taken at such meeting.
Section 6. Quorum of Shareholders; Adjournment.
(A) The holders of shares representing a majority of the votes
entitled to be cast at a meeting, present in person or represented by proxy,
shall be requisite to and shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
the Articles of Incorporation or by these Bylaws. Once a quorum is present at a
meeting of shareholders, the shareholders represented in person or by proxy at
the meeting may conduct such business as may be properly brought before the
meeting until it is adjourned, and the subsequent withdrawal from the meeting
of any shareholder or the refusal of any shareholder represented in person or
by proxy to vote shall not affect the presence of a quorum at the meeting. Upon
attainment of representation by a quorum, subsequent to an adjournment of the
meeting, any business may be transacted which might have been transacted at the
meeting as originally notified.
(B) If a quorum is not present or represented at any meeting
of the shareholders, the shareholders entitled to vote thereat, present in
person or represented by proxy, shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
these Bylaws, such determination shall apply to any adjournment thereof except
where the determination has been made through the closing of the share transfer
records and the stated period of closing has expired.
Section 7. Organization; Order of Business. The Chairman of the Board
or such other person as the Board of Directors may have designated or, in the
absence of such a person, the President of the Corporation or, in his absence
such person as may be chosen by the holders of shares representing a majority
of the votes which could be cast by those present, in person or by proxy, and
entitled to vote shall call to order any meeting of the shareholders and act as
chairman of the meeting. The Secretary of the Corporation, if present, shall
act as secretary of the meeting, but in his absence,
2
<PAGE> 3
the secretary of the meeting shall be such person as the chairman of the
meeting appoints. The chairman of any meeting of shareholders shall determine
the order of business and the procedure at the meeting, including regulation of
the manner of voting and the conduct of discussion; but the order of business
to be followed at any meeting at which a quorum is present may be changed by
the holders of shares of stock present in person or by proxy and entitled to
vote at such meeting (determined by a majority of the votes cast).
Section 8. Required Vote. With respect to matters other than
elections of directors, except as otherwise required by statute, the Articles
of Incorporation or these Bylaws, the vote of the holders of shares
representing a majority of the votes cast shall decide any question properly
brought before such meeting. Directors shall be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election of
directors.
Section 9. Method of Voting; Proxies. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of the shareholders, except to the extent that the voting
rights of the shares of any class or classes are enhanced or limited by
statute, by the Articles of Incorporation (including amendments thereto) or by
agreement. At any meeting of the shareholders, each shareholder having the
right to vote shall be entitled to vote in person, or by written proxy
appointed by an instrument executed by such shareholder. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. A proxy shall be revocable unless expressly provided
therein to be irrevocable and unless otherwise made irrevocable by law. Each
proxy shall be filed with the Secretary of the Corporation prior to or at the
time of the meeting. Any vote may be taken by voice or by show of hands unless
a shareholder entitled to vote objects, in which case written ballots shall be
used.
Section 10. Action Without Meeting. Any action which must or may be
taken at any annual or special meeting of shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by (i) the holders
of all the shares entitled to vote with respect to the action that is the
subject of the consent, or (ii) if the Articles of Incorporation so provide,
the holders of shares of stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote on the action were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who did not consent in
writing.
Section 11. Telephone Meeting. Shareholders may participate in and
hold a meeting by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section shall constitute
presence in person at such meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
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ARTICLE III.
DIRECTORS
Section 1. Management of the Corporation. The powers of the
Corporation shall be exercised by or under the authority of, and the business
and affairs of the Corporation shall be managed under the direction of, the
Board of Directors of the Corporation. Except to the extent otherwise limited
by statute, the Articles of Incorporation, or these Bylaws, the Board of
Directors shall have the broadest powers available under Texas law.
Section 2. Number. The number of directors constituting the Board of
Directors shall be determined from time to time by resolution of a majority of
directors then in office, though less than a quorum; provided that at all times
the number of directors shall be at least one (1) and no decrease shall have
the effect of shortening the term of any incumbent director.
Section 3. Qualifications, Election and Term. Directors need not be
residents of Texas or shareholders of the Corporation. The directors
constituting the Board of Directors shall be elected at the annual meeting of
shareholders by a plurality of the votes cast by the shareholders entitled to
vote at such election of directors. Each director, upon election to the Board
of Directors, shall hold office until the next annual meeting of shareholders
and until his or her successor is elected and qualified.
Section 4. Chairman of the Board. The Board of Directors may elect a
member from the Board of Directors to serve as Chairman of the Board. The
Chairman of the Board shall preside at meetings of the Board of Directors and
shareholders.
Section 5. Removal. Any director may be removed either for or without
cause at any special or annual meeting of the shareholders by the affirmative
vote of the holders of shares having a majority of the entire number of votes
entitled to be cast for the election of such director, if notice of the
intention to act upon such matter shall have been given in the notice calling
such meeting.
Section 6. Vacancies. Any vacancies occurring in the Board of
Directors for any reason may be filled by a majority vote of the directors then
in office, though less than a quorum, or by election at an annual meeting of
shareholders or at a special meeting of shareholders called for that purpose;
provided that, during the period between any two (2) successive annual meetings
of shareholders, the Board of Directors may not fill more than two (2)
vacancies resulting from an increase in the number of directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his or her
predecessor in office.
Section 7. Place of Meeting. The directors of the Corporation may
hold their meetings, both regular and special, either within or without the
State of Texas.
Section 8. Annual Meetings. Each newly elected Board of Directors
shall hold an annual meeting without further notice immediately following the
annual meeting of shareholders and at the
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same place, unless such place or time is changed by a majority vote of the
directors then elected and serving.
Section 9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and places as may be fixed
from time to time by resolutions adopted by the Board of Directors and
communicated to all directors at their last known addresses. Except as
otherwise provided by statute, the Articles of Incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any regular
meeting need be specified in the notice or waiver of notice of such meeting.
Section 10. Special Meetings. Special meetings of the Board of
Directors may be called by the President on twenty-four (24) hours' notice to
each director either personally or by mail or by telegram. Special meetings
shall be called by the President in like manner and on like notice on the
written request of two (2) directors. Except as may be otherwise expressly
provided by statute, the Articles of Incorporation or these Bylaws, neither the
business to be transacted at, nor the purpose of, any special meeting need be
specified in the notice or waiver of notice of such meeting.
Section 11. Quorum; Majority Vote. At all meetings of the Board of
Directors, the presence of a majority of the number of directors fixed in
accordance with these Bylaws shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors, except as may be otherwise specifically required by
statute, the Articles of Incorporation or these Bylaws. If a quorum is not
present at any meeting of the directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present. Upon attainment of representation by
a quorum, subsequent to an adjournment of the meeting, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 12. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before adjournment thereof or shall
forward such dissent by certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
Section 13. Compensation. The Board of Directors shall have authority
to determine from time to time the amount of compensation, if any, which shall
be paid to its members for their services as directors and as members of
standing or special committees of the Board. The Board shall also have power in
its discretion to provide for and to pay to directors rendering services to the
Corporation not ordinarily rendered by directors as such, special compensation
appropriate to the value of such services as determined by the Board from time
to time. Nothing in these Bylaws shall be construed to preclude any directors
from serving the Corporation in any capacity other than as a director and
receiving compensation therefor.
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Section 14. Procedure. The Board of Directors shall keep regular
minutes of its proceedings. The minutes shall be placed in the minute book of
the Corporation.
Section 15. Action Without Meeting. Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee thereof may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or such
committee, as the case may be. Such consent shall have the same force and
effect as unanimous vote at a meeting, and may be stated as such in any
document or instrument filed with the Secretary of State. The signed consent or
a copy thereof shall be placed in the minute book of the Corporation.
Section 16. Telephone Meeting. Members of the Board of Directors or of
any committee thereof may participate in and hold a meeting of the Board of
Directors of any committee thereof by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other. Participation in a meeting pursuant to this Section shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV.
COMMITTEES OF THE BOARD
Section 1. Designation and Authority. The Board of Directors may, by
resolution adopted by a majority of the full Board of Directors, designate from
among its members one or more committees, each of which, to the extent provided
in such resolution, shall have and may exercise all of the authority of the
Board of Directors in the management of the business and affairs of the
Corporation, except that no such committee shall have the authority of the
Board of Directors to: amend the Articles of Incorporation (other than in
connection with the issuance of shares in series); propose a reduction of the
stated capital of the Corporation; approve a plan of merger or share exchange
of the Corporation; recommend to the shareholders the sale, lease or exchange
of all or substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business; recommend to
the shareholders a voluntary dissolution of the Corporation or a revocation
thereof; amend, alter or repeal the bylaws of the Corporation or adopt new
bylaws of the Corporation; fill vacancies in the Board of Directors; fill
vacancies in or designate alternate members of any committee of the Board of
Directors; fill any directorship to be filled by reason of an increase in the
number of directors; elect or remove officers of the Corporation or members or
alternate members of any committee of the Corporation; fix the compensation of
any member or alternate members of such committee; or alter or repeal any
resolution of the Board of Directors that by its terms provides that it shall
not be so amendable or repealable; and, unless such resolution expressly so
provides, no such committee shall have the authority to authorize a
distribution or to authorize the issuance of shares of the Corporation.
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Section 2. Change in Number. The number of members of any committee
may be increased or decreased from time to time by resolution adopted by the
Board of Directors.
Section 3. Removal and Vacancies. Members of committees may be
removed by the Board of Directors. Vacancies in committees may be filled by the
Board of Directors.
Section 4. Transaction of Business. Committees shall transact
business (at meetings or by unanimous consent) in the same manner as the Board
of Directors.
Section 5. Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed upon it or him
by law.
ARTICLE V.
NOTICE
Section 1. Manner of Giving Notice. Unless otherwise required by
these Bylaws, whenever any notice is required to be given under law, the
Articles of Incorporation or these Bylaws, such notice may be given in writing,
and delivered personally, through the United States mail, by a recognized
express delivery service (such as Federal Express) or by means of telegram,
telex or facsimile transmission, addressed to such director or shareholder at
his address or telex or facsimile transmission number, as the case may be. All
notices shall be deemed to be given on the earlier of receipt or at the time
when the same shall be deposited in the mail or with an express delivery
service or when transmitted, as the case may be, addressed or directed to the
proper destination as it appears on the records of the Corporation, with
postage and fees thereon prepaid. An affidavit of the Secretary or Assistant
Secretary or of the transfer agent of the Corporation that the notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
Section 2. Waiver of Notice. Whenever any notice is required to be
given to any committee member, director or shareholder of the Corporation under
the provisions of the statutes, the Articles of Incorporation or these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated in such notice, shall be deemed
equivalent to the giving of such notice. Attendance at a meeting shall
constitute a waiver of notice of such meeting, except where a person attends
for the expressed purpose of objecting to the transaction of any business on
the ground that the meeting is not lawfully called or convened.
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ARTICLE VI.
OFFICERS, EMPLOYEES AND AGENTS:
POWERS AND DUTIES
Section 1. Appointment of Officers. The officers of the Corporation
shall be appointed by the Board of Directors and shall be a Chairman, a Chief
Executive Officer, a President, a Chief Operating Officer, a Chief Financial
Officer, a Vice President, a Secretary and a Treasurer. The Board of Directors
may also choose additional Vice Presidents and Assistant Secretaries and
Assistant Treasurers and such other officers as the Board of Directors may deem
appropriate. Any two or more offices may be held by the same person.
Additionally, unless expressly prohibited by the Board of Directors, the
President may appoint such assistant officers as the President deems necessary.
Section 2. Qualifications. Officers of the Corporation need not be
directors or shareholders of the Corporation, or residents of the State of
Texas. Any two or more offices may be held by the same person.
Section 3. Term of Office. Each officer of the Corporation shall hold
office for the term specified by the Board of Directors. If no term is
specified, each officer shall hold office until his or her successor is chosen
and qualifies, or until his or her earlier death, resignation or removal from
office. The designation of a specific term of office does not grant to an
officer any contract rights, and the Board of Directors may remove such officer
as provided in these Bylaws.
Section 4. Removal; Filling of Vacancies. Any officer may be removed
at any time, for or without cause, by the Board of Directors or, if appointed
by the President, by the President. Such removal shall be without prejudice to
the contract rights, if any, of the person so removed. A vacancy occurring in
any office for any reason may be filled by the Board of Directors. A vacancy in
any office held by an officer appointed by the President may be filled by the
President unless such authority is limited by the Board of Directors.
Section 5. Compensation. The compensation of all officers of the
Corporation shall be fixed from time to time by the Board of Directors. The
Board of Directors may from time to time delegate to the President the
authority to fix the compensation of any or all of the other officers of the
Corporation.
Section 6. Chairman of the Board. The Chairman of the Board shall be
selected among the members of the Board of Directors and will preside when
present at all meetings of the Board of Directors and of the shareholders. The
Chairman of the Board shall be available to consult with and advise the
officers of the Corporation with respect to the conduct of the business and
affairs of the Corporation and shall have such other powers and duties as
designated in accordance with these Bylaws and as from time to time may be
assigned by the Board of Directors. The Chairman of the Board shall be the
highest officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all business and affairs of
the Corporation.
Section 7. Chief Executive Officer. Subject to the direction and
authority of the Board of Directors, the Chief Executive Officer shall have
general executive charge, management and control
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of the properties, business and operations of the Corporation with all such
powers as may be reasonably incident to such responsibilities and each shall
have such other powers and duties as designated in accordance with these Bylaws
and as from time to time be assigned to him by the Board of Directors. The
Chief Executive Officer may from time to time delegate any of the
aforementioned duties and responsibilities in accordance with these Bylaws to
any officer who directly or indirectly reports to him.
Section 8. President. The President shall have charge of such
properties, business and operations of the Corporation as may be assigned to
him from time to time in accordance with these Bylaws by the Chief Executive
Officer, as well as all such powers as may be reasonably incident to such
charge. Unless the Board of Directors otherwise determines, he shall, in the
absence of the Chairman of the Board and the Chief Executive Officer, preside
at all meetings of the shareholders and the Board of Directors. The President
shall have such other powers and duties as designated in accordance with these
Bylaws and as the Board of Directors shall prescribe. The President shall
report directly to the Chief Executive Officer and the Board of Directors.
Section 9. Chief Operating Officer. The Chief Operating Officer shall
be responsible for the day to day operations of the Corporation and its
subsidiaries, and will have such other powers and duties as designated in
accordance with these Bylaws and as the Chief Executive Officer or the Board of
Directors shall prescribe. The Chief Operating Officer shall report directly to
the Chief Executive Officer and the Board of Directors.
Section 10. Chief Financial Officer. The Chief Financial Officer will
be the principal accounting and financial officer of the Corporation and will
have active control of and shall be responsible for all matters pertaining to
the accounts and finances of the Corporation. The Chief Financial Officer shall
be prepared at all times to give information as to the condition of the
Corporation and shall make a detailed annual report of the entire business and
financial condition of the Corporation. The person holding the office of Chief
Financial Officer shall also perform, under the direction and subject to the
control of the Chief Executive Officer, the President and the Board of
Directors, such other duties as may be assigned by either of such officers.
Section 11. Vice Presidents. Each Vice President shall have only such
powers and perform only such duties as the Board of Directors may from time to
time prescribe or as a Chief Executive Officer or the President may from time
to time delegate to him or her.
Section 12. Secretary. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the stockholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose and
shall perform like duties for any committee when required. Except as otherwise
provided herein, the Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it, and, when so affixed,
it shall be attested by his signature or by the signature of the Treasurer or
an Assistant Secretary.
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Section 13. Assistant Secretaries. Each Assistant Secretary shall have
only such powers and perform only such duties as the Board of Directors may
from time to time prescribe or as the President may from time to time delegate.
Section 14. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the Chief
Executive Officer, the President, the Chief Financial Officer and directors, at
the regular meetings of the Board of Directors, or whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation, and shall perform such other duties as the Board
of Directors may prescribe. If required by the Board of Directors, he shall
give the Corporation a bond in such form, in such sum, and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 15. Assistant Treasurers. Each Assistant Treasurer shall have
only such powers and perform only such duties as the Chief Executive Officer,
the President, the Chief Financial Officer or the Board of Directors may from
time to time prescribe.
Section 16. Additional Powers and Duties. In addition to the foregoing
specially enumerated duties, services and powers, the several elected and
appointive officers of the Corporation shall perform such other duties and
services and exercise such further powers as may be provided by statute, the
Articles of Incorporation or these Bylaws, or as the Board of Directors may
from time to time determine or as may be assigned to them by any competent
superior officer.
ARTICLE VII.
STOCK AND TRANSFER OF STOCK
Section 1. Certificates Representing Shares. Certificates in such
form as may be determined by the Board of Directors and as shall conform to the
requirements of the statutes, the Articles of Incorporation and these Bylaws
shall be delivered representing all shares to which shareholders are entitled.
Such certificates shall be consecutively numbered and shall be entered in the
books of the Corporation as they are issued. Each certificate shall state on
the face thereof that the Corporation is organized under the laws of the State
of Texas, the holder's name, the number and class of shares and the designation
of the series, if any, which such certificate represents, the par value of such
shares or a statement that such shares are without par value and such other
matters as may be required by law. Each certificate shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary and
may be sealed with the seal of the Corporation or a facsimile thereof. If any
certificate is countersigned by a transfer agent or registered by a registrar,
either of
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which is other than the Corporation or an employee of the Corporation, the
signature of any such officer may be a facsimile.
Section 2. Issuance. Subject to the provisions of the statutes, the
Articles of Incorporation or these Bylaws, shares may be issued for such
consideration and to such persons as the Board of Directors may determine from
time to time. Shares may not be issued until the full amount of the
consideration, fixed as provided by law, has been paid.
Section 3. Payment of Shares. The consideration for the issuance of
shares shall consist of money paid, labor done (including services actually
performed for the Corporation) or property (tangible or intangible) actually
received. Neither promissory notes nor the promise of future services shall
constitute payment for shares. In the absence of fraud in the transaction, the
judgment of the Board of Directors as to the value of consideration received
shall be conclusive. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be considered
fully paid and nonassessable.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors, the President, or such other officer or officers of the Corporation
as the Board of Directors may from time to time designate, in its or his
discretion, may direct a new certificate or certificates representing shares to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate or
certificates to be lost, stolen or destroyed. When authorizing such issuance of
a new certificate or certificates, the Board of Directors, the President, or
any such other officer, in its or his discretion and as a condition precedent
to the issuance thereof, may require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it or he shall require and/or give the
Corporation a bond in such form, in such sum, and with such surety or sureties,
as it or he may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate or certificates alleged to have
been lost, stolen or destroyed.
Section 5. Transfers of Shares. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate or certificates representing shares,
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, with all required stock transfer tax stamps affixed
thereto and cancelled or accompanied by sufficient funds to pay such taxes, it
shall be the duty of the Corporation or the transfer agent of the Corporation
to issue a new certificate or certificates to the person entitled thereto,
cancel the old certificate or certificates and record the transaction upon its
books.
Section 6. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
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Section 7. Restriction on Transfer of Shares of Stock. These Bylaws
authorize (but do not require) a restriction on the transfer of the
Corporation's shares which:
(A) maintains the status of the Corporation as an electing
small business corporation under Subchapter S of the United States Internal
Revenue Code;
(B) obligates the holders of the restricted stock to offer to
the other holders of stock of the Corporation a prior opportunity, to be
exercised within a reasonable time, to acquire the restricted stock pursuant to
an agreement respecting the purchase and sale of the restricted stock;
(C) obligates the Corporation to the extent permitted by law
or any holder of stock of the Corporation to purchase the stock which is the
subject of an agreement respecting the purchase and sale of the restricted
stock; or
(D) requires the Corporation and the holders of any stock of
the Corporation to consent to any proposed transfer of the restricted stock for
the purpose of preventing violations of federal or state law.
The Corporation will furnish to the holder of a certificate of stock in
the Corporation, without charge, upon written request to the Corporation at its
principal place of business or registered office, a copy of the Bylaws and the
Agreement, if any, restricting the transfer of stock.
ARTICLE VIII.
MISCELLANEOUS
Section 1. Fixing Record Dates. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive a distribution by the
Corporation (other than a distribution involving a purchase or redemption by
the Corporation of any of its shares) or a share dividend, or in order to make
a determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may (i)
fix in advance the record date for any such determination of shareholders,
though such record date shall not be more than sixty (60) days and, for the
purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, shall not be less than ten (10) days, prior to the
date on which the particular action requiring such determination of
shareholders is to be taken, or (ii) close the share transfer records for a
period of not more than sixty (60) days and, for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, for
a period of not less than ten (10) days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
In the absence of any such action by the Board of Directors, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such distribution or share dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. The record date for the purpose of
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determining shareholders entitled to consent to an action shall be fixed in
accordance with applicable statutes.
Section 2. Reserves. There may be created from time to time by
resolution of the Board of Directors, out of the earned surplus of the
Corporation, such reserve or reserves as the directors from time to time, in
their discretion, think proper to provide for contingencies, or to equalize
dividends, or to repair or maintain any property of the Corporation or for such
other purpose as the directors shall think beneficial to the Corporation. The
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 3. Signature of Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officer, officers, agent or agents and in such manner as
are permitted by these Bylaws and/or as, from time to time, may be prescribed
by resolution (whether general or special) of the Board of Directors.
Section 4. Fiscal Year. The business of the Corporation shall be
conducted on either a fiscal year or calendar year basis, and the selection of
the basis to be used shall be, and is hereby delegated to the discretion of the
Board of Directors.
Section 5. Seal. The Corporation's seal, if obtained, shall be in
such form as shall be adopted and approved from time to time by the Board of
Directors. The seal may be used by causing it, or a facsimile thereof, to be
impressed, affixed, imprinted or in any manner reproduced. Except as expressly
required by law, no action shall be invalid or unenforceable for failure to use
the corporate seal in connection therewith.
Section 6. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and Board of Directors and shall keep at its registered
office or principal place of business, or at the office of its transfer agent
or registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of the shares held by each.
Section 7. Resignation. Unless otherwise expressly provided, any
director, committee member, officer or agent may resign by giving written
notice to the President or the Secretary. The resignation shall take effect at
the time specified therein, or immediately if no time is specified. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 8. Surety Bonds. Such officers and agents of the Corporation
(if any) as the President, or the Board of Directors may direct, from time to
time, shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation,
retirement, disqualification or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in their possession or
under their control belonging to the Corporation, in such amounts and by such
surety companies as the President or the Board of Directors may determine. The
premiums on such bonds shall be paid by the Corporation, and the bonds so
furnished shall be in the custody of the Secretary.
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Section 9. Interested Directors, Officers and Security Holders. No
contract or transaction between the Corporation and one or more of its
directors, officers or security holders, or between the Corporation and any
other corporation, partnership, association, trust, plan or other organization
or enterprise in which one or more of the Corporation's directors, officers or
security holders are directors, officers, security holders, members or
employees, or have a direct or indirect financial interest, shall be void or
voidable solely because of such position or interest, solely because the
director, officer or security holder is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if:
(a) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the Board of Directors or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
(b) the material facts of the contract or transaction and of the
relationship or interest are known or disclosed to the shareholders entitled to
vote thereon, and the contract or transaction is specifically approved in good
faith by a vote of the shareholders; or
(c) the contract or transaction is fair to the Corporation as of the
time it is authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction. No director shall be liable to
account to the Corporation for any profits realized by, from or through any
such contract or transaction by reason of an interest therein when such
contract or transaction has been authorized or ratified in accordance with the
foregoing. This section shall not be construed to invalidate any contract or
transaction which would otherwise be valid in the absence of this provision.
Section 10. Indemnification. Any person who was, is, or is threatened
to be made, a named defendant or respondent in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrative,
investigative or administrative, any appeal in such action suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding (collectively, a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation, or, while a director or
officer of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise, shall be indemnified by the Corporation to the fullest
extent authorized by the Texas Business Corporation Act, as the same exists or
may hereafter be amended (but in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, court costs, fines, penalties, excise taxes, and
amounts paid in settlement) reasonably incurred or suffered in connection
therewith and such indemnification shall continue as to any such person who has
ceased to be a director or officer and shall inure to the benefit of such
persons' heirs,
14
<PAGE> 15
executors and administrators. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses (court costs and attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition; provided, the
applicable requirements of the Texas Business Corporation Act are met prior to
such advancement.
The right to indemnification and to the advancement of expenses
conferred in this Section shall not be exclusive of, nor shall it be construed
to limit, any other right which any person may have or hereafter acquire under
any statute, the Articles of Incorporation, these Bylaws, agreement, vote of
shareholders or otherwise.
ARTICLE IX.
AMENDMENTS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any meeting of the Board of Directors at which a quorum is present
by the affirmative vote of a majority of the directors present at such meeting.
15
<PAGE> 16
CERTIFICATE
I, A.J. LEWIS III, the undersigned President of PACKAGED ICE
SOUTHWESTERN, INC., do hereby certify that the foregoing is a true and correct
copy of the Bylaws of said Corporation as duly approved at the organizational
meeting of the Board of Directors of the Corporation and as duly amended by
action of the Board of Directors through the date hereof.
WITNESS my hand and the seal of the Corporation this the 24th day of
March, 1997.
-------------------------------------
A.J. LEWIS III, PRESIDENT
16
<PAGE> 1
EXHIBIT 4.1
================================================================================
PACKAGED ICE, INC.
as Issuer,
THE SUBSIDIARY GUARANTORS NAMED HEREIN
AND
U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
--------------------
INDENTURE
Dated as of April 17, 1997
--------------------
$50,000,000
12% Series A Senior Notes
due April 15, 2004
12% Series B Senior Notes
due April 15, 2004
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1) ................................................................. 7.10
(a)(2) ................................................................. 7.10
(a)(3) ................................................................. N.A.
(a)(4) ................................................................. N.A.
(a)(5) ........................................................... 7.08; 7.10
(b) ...................................................... 7.08; 7.10; 11.02
(c) .................................................................... N.A.
311(a) .................................................................... 7.11
(b) .................................................................... 7.11
(c) .................................................................... N.A.
312(a) .................................................................... 2.05
(b) .................................................................. 12.03
(c) .................................................................. 12.03
313(a) .................................................................... 7.06
(b)(1) ................................................................. N.A.
(b)(2) ................................................................. 7.06
(c) ............................................................ 7.06; 11.02
(d) .................................................................... 7.06
314(a) ...................................................... 4.08; 4.10; 11.02
(b) .................................................................... N.A.
(c)(1) ......................................................... 7.02; 11.04
(c)(2) ......................................................... 7.02; 11.04
(c)(3) ................................................................. N.A.
(d) .................................................................... N.A.
(e) .................................................................. 11.05
(f) .................................................................... N.A.
315(a) ................................................................ 7.01(b)
(b) ............................................................ 7.05; 11.02
(c) ................................................................ 7.01(a)
(d) .......................................................... 6.05; 7.01(c)
(e) .................................................................... 6.11
316(a)(last sentence) ..................................................... 2.09
(a)(l)(A) .............................................................. 6.05
(a)(l)(B) .............................................................. 6.04
(a)(2) ................................................................. N.A.
(b) .................................................................... 6.07
317(a)(1) ................................................................. 6.08
(a)(2) ................................................................. 6.09
(b) .................................................................... 2.04
318(a) .................................................................. 11.01
(c) .................................................................. 11.01
</TABLE>
- ---------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions ................................................. 1
SECTION 1.02. Incorporation by Reference of TIA ........................... 20
SECTION 1.03. Rules of Construction ....................................... 20
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating. ............................................ 21
SECTION 2.02. Execution and Authentication ................................ 21
SECTION 2.03. Registrar and Paying Agent .................................. 22
SECTION 2.04. Paying Agent to Hold Assets in Trust. ....................... 22
SECTION 2.05. Securityholder Lists ........................................ 23
SECTION 2.06. Transfer and Exchange ....................................... 23
SECTION 2.07. Replacement Securities. ..................................... 24
SECTION 2.08. Outstanding Securities ...................................... 24
SECTION 2.09. Treasury Securities ......................................... 24
SECTION 2.10. Temporary Securities ........................................ 25
SECTION 2.11. Cancellation ................................................ 25
SECTION 2.12. CUSIP Number ................................................ 25
SECTION 2.13. Deposit of Moneys ........................................... 25
SECTION 2.14. Book-Entry Provisions for Global Securities ................. 26
SECTION 2.15. Registration of Transfers and Exchanges ..................... 26
SECTION 2.16. Designation ................................................. 30
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee .......................................... 31
SECTION 3.02. Selection of Securities to Be Redeemed ...................... 31
SECTION 3.03. Notice of Redemption ........................................ 31
SECTION 3.04. Effect of Notice of Redemption .............................. 32
SECTION 3.05. Deposit of Redemption Price ................................. 32
SECTION 3.06. Securities Redeemed in Part ................................. 33
SECTION 3.07. Optional Redemption ......................................... 33
SECTION 3.08. Procedures for Purchase Offers .............................. 33
</TABLE>
-i-
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities ....................................... 35
SECTION 4.02. Maintenance of Office or Agency ............................. 35
SECTION 4.03. Limitation on Restricted Payments ........................... 35
SECTION 4.04. Limitation on Indebtedness .................................. 37
SECTION 4.05. Corporate Existence ......................................... 38
SECTION 4.06. Payment of Taxes and Other Claims ........................... 38
SECTION 4.07. Maintenance of Properties and Insurance ..................... 38
SECTION 4.08. Compliance Certificate; Notice of Default; Tax
Information ................................................. 39
SECTION 4.09. Compliance with Laws ........................................ 39
SECTION 4.10. SEC Reports ................................................. 39
SECTION 4.11. Waiver of Stay, Extension or Usury Laws ..................... 40
SECTION 4.12. Limitation on Transactions with Affiliates .................. 40
SECTION 4.13. Limitation on Conduct of Business ........................... 41
SECTION 4.14. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries ......................... 41
SECTION 4.15. Limitation on Liens ......................................... 42
SECTION 4.16. Offer to Repurchase Upon Change of Control .................. 42
SECTION 4.17. Asset Sales ................................................. 43
SECTION 4.18. Limitation on Issuances and Sales of Capital
Stock of Subsidiaries ....................................... 45
SECTION 4.19. Limitation on Status as Investment Company .................. 45
SECTION 4.20. Sale and Leaseback Transactions ............................. 45
SECTION 4.21. Additional Subsidiary Guarantees. ........................... 45
SECTION 4.22. Limitation on Dividends. .................................... 46
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets .................. 46
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default ........................................... 47
SECTION 6.02. Acceleration ................................................ 49
SECTION 6.03. Other Remedies .............................................. 49
SECTION 6.04. Waiver of Past Defaults ..................................... 50
SECTION 6.05. Control by Majority ......................................... 50
SECTION 6.06. Limitation on Suits ......................................... 50
SECTION 6.07. Rights of Holders to Receive Payment ........................ 51
SECTION 6.08. Collection Suit by Trustee .................................. 51
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 6.09. Trustee May File Proofs of Claim ............................ 51
SECTION 6.10. Priorities .................................................. 51
SECTION 6.11. Undertaking for Costs ....................................... 52
SECTION 6.12. Restoration of Rights and Remedies. ......................... 52
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee ........................................... 52
SECTION 7.02. Rights of Trustee ........................................... 53
SECTION 7.03. Individual Rights of Trustee ................................ 54
SECTION 7.04. Trustee's Disclaimer ........................................ 54
SECTION 7.05. Notice of Default ........................................... 55
SECTION 7.06. Reports by Trustee to Holders ............................... 55
SECTION 7.07. Compensation and Indemnity .................................. 56
SECTION 7.08. Replacement of Trustee ...................................... 56
SECTION 7.09. Successor Trustee by Merger, Etc ............................ 57
SECTION 7.10. Eligibility; Disqualification ............................... 57
SECTION 7.11. Preferential Collection of Claims Against
Company ..................................................... 58
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance .................... 58
SECTION 8.02. Satisfaction and Discharge .................................. 61
SECTION 8.03. Survival of Certain Obligations ............................. 62
SECTION 8.04. Acknowledgment of Discharge by Trustee ...................... 62
SECTION 8.05. Application of Trust Assets ................................. 62
SECTION 8.06. Repayment to the Company or Subsidiary
Guarantors; Unclaimed Money ................................. 62
SECTION 8.07. Reinstatement ............................................... 63
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders .................................. 63
SECTION 9.02. With Consent of Holders ..................................... 64
SECTION 9.03. Compliance with TIA ......................................... 65
SECTION 9.04. Revocation and Effect of Consents ........................... 65
SECTION 9.05. Notation on or Exchange of Securities ....................... 66
SECTION 9.06. Trustee to Sign Amendments, Etc ............................. 66
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<S> <C> <C>
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee ..................................... 66
SECTION 10.02. Severability ................................................ 67
SECTION 10.03. Limitation of Subsidiary Guarantor's Liability .............. 67
SECTION 10.04. Subsidiary Guarantors May Consolidate, etc., on
Certain Terms ............................................... 68
SECTION 10.05. Contribution ................................................ 69
SECTION 10.06. Waiver of Subrogation ....................................... 69
SECTION 10.07. Execution of Subsidiary Guarantee ........................... 70
SECTION 10.08. Waiver of Stay, Extension or Usury Laws ..................... 70
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls ................................................ 71
SECTION 11.02. Notices ..................................................... 71
SECTION 11.03. Communications by Holders with Other Holders ................ 72
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent ................................................... 72
SECTION 11.05. Statements Required in Certificate or Opinion ............... 72
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar ................... 73
SECTION 11.07. Legal Holidays .............................................. 73
SECTION 11.08. Governing Law ............................................... 73
SECTION 11.09. No Adverse Interpretation of Other Agreements ............... 73
SECTION 11.10. No Recourse Against Others .................................. 74
SECTION 11.11. Successors .................................................. 74
SECTION 11.12. Duplicate Originals ......................................... 74
SECTION 11.13. Severability ................................................ 74
</TABLE>
SIGNATURES
Exhibit A-1 - Form of Series A Security
Exhibit A-2 - Form of Series B Security
Exhibit B - Form of Legend for Global Securities
Exhibit C - Form of Certificate Deliverable Upon Transfer or Exchange
of Securities
Exhibit D - Transferee Certificate for Non-QIB Accredited Investors
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
-iv-
<PAGE> 7
THIS INDENTURE dated as of April 17, 1997, is among PACKAGED ICE, INC.,
a Texas corporation (the "Company"), PACKAGED ICE LEASING, INC., a Nevada
corporation, SOUTHCO ICE, INC., a Texas corporation, PACKAGED ICE MISSION,
INC., a Texas corporation, PACKAGED ICE STPI, INC., a Texas corporation, and
PACKAGED ICE SOUTHWESTERN, INC., a Texas corporation (collectively, the
"Subsidiary Guarantors"), and U.S. TRUST COMPANY OF TEXAS, N.A., a national
banking association, as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Series A Securities
and the Series B Securities (as such terms are hereinafter defined), without
preference of one such series over the other:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" of any Person means Indebtedness of another
Person and any of its Subsidiaries existing at the time such other Person
becomes a Subsidiary of such Person or at the time it merges or consolidates
with such Person or any of such Person's Subsidiaries or is assumed by such
Person or any Subsidiary of such Person in connection with the acquisition of
assets from such other Person and in each case not Incurred by such Person or
any Subsidiary of such Person or such other Person in connection with, or in
anticipation or contemplation of, such other Person becoming a Subsidiary of
such Person or such acquisition, merger or consolidation, and which
Indebtedness is without recourse to the Company or any of its Subsidiaries or
to any of their respective properties or assets other than the Person or such
Person's Subsidiaries or the assets to which such Indebtedness related prior to
the time such Person becomes a Subsidiary of the Company or the time of such
acquisition, merger or consolidation.
"Adjusted Net Assets" has the meaning provided in Section 10.05
"Affiliate" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct or cause the direction of management or policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.12.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Acquisition" means (i) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be merged with or into the
Company or any Subsidiary of the Company or (ii) the acquisition by the Company
or any Subsidiary of the Company of assets of any Person comprising an existing
business (whether existing as a separate entity), subsidiary, division or unit
of such Person.
<PAGE> 8
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition to any Person other than the Company or any of its
Subsidiaries (including, without limitation, by means of a sale and leaseback
transaction or a merger or consolidation) (collectively, for purposes of this
definition, a "transfer"), directly or indirectly, in one or a series of
related transactions, of (a) any Capital Stock of any Subsidiary held by the
Company or any other Subsidiary, (b) all or substantially all of the properties
and assets of any division or line of business of the Company or any of its
Subsidiaries, (c) any other properties or assets of the Company or any of its
Subsidiaries other than transfers of cash, Cash Equivalents, accounts
receivable, or properties or assets in the ordinary course of business;
provided that the transfer of all or substantially all of the properties or
assets of the Company and its Subsidiaries, taken as a whole, will be governed
by the provisions of Section 5.01 and/or Section 4.16 and not by the provisions
of Section 4.17. For the purposes of this definition, the term "Asset Sale"
also shall not include any of the following: (i) sales of damaged, worn-out or
obsolete equipment or assets that, in the Company's reasonable judgment, are
either (A) no longer used or (B) no longer useful in the business of the
Company or its Subsidiaries; (ii) any lease of any property entered into the
ordinary course of business and with respect to which the Company or any
Subsidiary is the lessor, except any such lease that provides for the
acquisition of such property by the lessee during or at the end of the term
thereof for an amount that is less than the fair market value thereof at the
time the right to acquire such property is granted; (iii) a Restricted Payment
or Permitted Investment permitted under Section 4.03; and (iv) any transfers
that, but for this clause (iv), would be Asset Sales, if (A) the Company elects
to designate such transfers as not constituting Asset Sales and (B) after
giving effect to such transfers, the aggregate fair market value of the
properties or assets transferred in such transaction or any such series of
related transactions so designated by the Company does not exceed $1,000,000.
"Asset Proceeds Deficiency" has the meaning set forth in Section 4.17.
"Asset Proceeds Offer" has the meaning set forth in Section 4.17.
"Attributable Indebtedness" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended). As used in the preceding sentence, the
"net rental payments" under any lease for any such period shall mean the sum of
rental and other payments required to be paid with respect to such period by
the lessee thereunder, excluding any amounts required to be paid by such lessee
on account of maintenance and repairs, insurance, taxes, assessments, water
rates or similar charges. In the case of any lease that is terminable by the
lessee upon payment of penalty, such net rental payment shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
"Available Proceeds Amount" has the meaning set forth in Section 4.17.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
-2-
<PAGE> 9
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which banking institutions in The City of New York or Dallas, Texas are
required or authorized by law or other governmental action to be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person, and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease that are required to
be classified and accounted for as capital lease obligations under GAAP and,
for purposes of this definition, the amount of such obligations at any date
shall be the capitalized amount of such obligations at such date, determined in
accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than 270 days from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-l from S&P or at least P-l from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
180 days from the date of acquisition thereof issued by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; (vi) deposits available for withdrawal on demand with any commercial
bank not meeting the qualifications specified in clause (ii) above, provided
that all such deposits do not exceed $5,000,000 in the aggregate at any one
time; (vii) demand and time deposits and certificates of deposit with any
commercial bank organized in the United States not meeting the qualifications
specified in clause (ii) above, provided that such deposits and certificates
support bond, letter of credit and other similar types of obligations incurred
in the ordinary course
-3-
<PAGE> 10
of business; and (viii) investments in money market or other mutual funds
substantially all of whose assets comprise securities of the types described in
clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Subsidiaries
taken as a whole to any person (as such term is used in Section 13(d)(3) of the
Exchange Act) other than to the Company or a Subsidiary Guarantor; (ii) the
Company consolidates with or merges into another Person or any Person
consolidates with, or merges into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed
into or exchanged for cash, securities or other property, other than any such
transaction where (a) the outstanding Voting Stock of the Company is changed
into or exchanged for Voting Stock of the surviving or resulting Person that is
Qualified Capital Stock and (b) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than a majority of the Voting Stock of the surviving or resulting Person
immediately after such transaction; (iii) the adoption of a plan relating to
the liquidation or dissolution of the Company not involving a merger or
consolidation or a sale or other disposition of assets described in clause
(i) above; (iv) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any person
(as defined above), excluding Permitted Holders, becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act),
directly or indirectly, of more than 50% of the total voting power of the
Voting Stock of the Company; provided that the sale of Voting Stock of the
Company to a Person or Persons acting as underwriters in connection with a firm
commitment underwriting shall not constitute a Change of Control; or (v) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors (other than by action of the Permitted
Holders). For purposes of this definition, any transfer or an equity interest
of an entity that was formed for the purpose of acquiring Voting Stock of the
Company will be deemed to be a transfer of such portion of such Voting Stock as
corresponds to the portion of the equity of such entity that has been so
transferred.
"Change of Control Offer" has the meaning provided in Section 4.16.
"Change of Control Payment" has the meaning provided in Section 4.16.
"Change of Control Payment Date" has the meaning provided in Section
4.16.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation,
all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income plus (ii) to the
extent that any of the following shall have
-4-
<PAGE> 11
been taken into account in determining Consolidated Net Income, (A) all income
taxes of such Person and its Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions of assets outside the ordinary course of business), Consolidated
Interest Expense, amortization expense and depreciation expense, and (B) other
non-cash items (other than non-cash interest) reducing Consolidated Net Income,
other than any non-cash item which requires the accrual of or a reserve for
cash charges for any future period and other than any non-cash charge
constituting an extraordinary item of loss, less other non-cash items
increasing Consolidated Net Income, all as determined on a consolidated basis
for such Person and its Subsidiaries in conformity with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters for which financial information is available (the "Four Quarter
Period") ending on or prior to the date of the transaction or event giving rise
to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for the Four
Quarter Period. In addition to and without limitation of the foregoing, for
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis for the
period of such calculation to (i) the Incurrence or repayment of any
Indebtedness of such Person or any of its Subsidiaries (and the application of
the proceeds thereof) giving rise to the need to make such calculation and any
Incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the Incurrence or repayment of Indebtedness in
the ordinary course of business for working capital purposes pursuant to
working capital facilities, at any time subsequent to the first day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Incurrence
or repayment, as the case may be (and the application of the proceeds thereof),
occurred on the first day of the Four Quarter Period, and (ii) any Asset Sales
or Asset Acquisitions (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of such Person or
one of its Subsidiaries (including any Person who becomes a Subsidiary as a
result of any such Asset Acquisition) Incurring, assuming or otherwise being
liable for Acquired Indebtedness) at any time subsequent to the first day of
the Four Quarter Period and on or prior to the Transaction Date, as if such
Asset Sale or Asset Acquisition (including the Incurrence, assumption or
liability for any such Indebtedness or Acquired Indebtedness and also including
any Consolidated EBITDA, based upon the four fiscal quarters of such Person for
which financial information is available immediately preceding such Asset
Acquisition, associated with such Asset Acquisition) occurred on the first day
of the Four Quarter Period; provided that the Consolidated EBITDA of any Person
acquired shall be included only to the extent includable pursuant to the
definition of "Consolidated Net Income." If such Person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third person,
the preceding sentence shall give effect to the Incurrence of such guaranteed
Indebtedness as if such Person or any Subsidiary of such Person had directly
Incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Fixed Charges" for purposes of determining the
denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage
Ratio," (1) interest on Indebtedness determined on a fluctuating basis as of
the Transaction Date (including Indebtedness actually Incurred on the
Transaction Date) and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (2)
notwithstanding clause (1) above, interest on Indebtedness determined on
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a fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Swap Obligations, shall be deemed to accrue at the rate
per annum resulting after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Common Stock)
paid, accrued or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated Federal, state and local tax rate
of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the aggregate of the interest expense (without deduction of
interest income) of such Person and its Subsidiaries (excluding amortization of
deferred financing fees) for such period, on a consolidated basis, as
determined in accordance with GAAP, and including (a) all amortization of
original issue discount (other than any original issue discount on Indebtedness
attributable to proceeds of the sale of warrants issued in connection with the
Incurrence of such Indebtedness); (b) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Subsidiaries during such period; (c) net cash costs under all
Interest Swap Obligations (including amortization of fees); (d) all capitalized
interest; and (e) the interest portion of any deferred payment obligations for
such period.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) after-tax gains from Asset
Sales or abandonments or reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains, (c) the net income or loss
of any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Subsidiary of the referent Person,
(d) the net income (but not loss) of any Subsidiary of the referent Person to
the extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is restricted by a contract, operation of law or
otherwise, (e) the net income of any Person, other than a Subsidiary of the
referent Person, except to the extent of cash dividends or distributions paid
to the referent Person or to a wholly-owned Subsidiary of the referent person
by such Person, (f) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date, (g)
income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued), and (h) in the case of a successor
to the referent Person by consolidation or merger or as a transferee of the
referent Person's assets, any earnings of the successor corporation prior to
such consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Capital Stock of such Person.
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<PAGE> 13
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries for such period, on a consolidated
basis, as determined in accordance with GAAP.
"Continuing Director" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date; (ii) was nominated for election or elected to such
Board of Directors with the approval of a majority of the Continuing Directors
who were members of such Board of Directors at the time of such nomination or
election (iii) was elected or nominated for election pursuant to the Voting
Agreement.
"Covenant Defeasance" has the meaning set forth in Section 8.01(c).
"Credit Facilities" means, with respect to the Company, one or more debt
facilities or commercial paper facilities with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
or letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means, with respect to the Securities issued in the form of
one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Disqualified Capital Stock" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the sole option of the holder thereof, in whole or in part, on or
prior to the final maturity date of the Securities.
"Events of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Existing Indebtedness" means up to $4.0 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries in existence on the
Issue Date, until such amounts are repaid.
The term "fair market value" or "fair value" means, with respect to any
asset or property, the price which could be negotiated in an arm's-length, free
market transaction, for cash, between an informed and willing seller and an
informed and willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair market value shall be determined
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<PAGE> 14
by the Board of Directors of the Company acting reasonably and in good faith
and shall be evidenced by a Board Resolution delivered to the Trustee;
provided, however, that if the aggregate non-cash consideration to be received
by the Company or any of its Subsidiaries from any Asset Sale could be
reasonably likely to exceed $2,500,000 the fair market value shall be
determined by an Independent Financial Advisor.
"Family Member" means, when used with reference to any natural Person,
such Person's spouse, siblings, parents, children, or other lineal descendants
(whether by adoption or consanguinity), and shall mean a trust, the primary
beneficiary of which is the Person's spouse, siblings, parents, children, or
other lineal descendants (whether by adoption or consanguinity).
"Financial Advisor" means an accounting, appraisal or investment banking
firm of nationally recognized standing that is, in the reasonable and good
faith judgment of the Board of Directors of the Company, qualified to perform
the task for which such firm has been engaged.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Global Security" means a Security evidencing all or a part of the
Securities issued to the Depository in accordance with Section 2.01 and bearing
the legend prescribed in Exhibit B.
"Holder" or "Security holder" means a Person in whose name a Security is
registered on the Registrar's books.
"Ice Business" means (i) the manufacture and sale (including, without
limitation, direct sales, wholesale sales and retail sales) of ice; (ii) the
manufacture and sale of ice and water by means of ice manufacturing or water
purification equipment (including ice makers, bins, baggers, merchandisers,
delivery devices and related equipment) installed on the premises of the
Company's customer(s) whether or not such equipment is owned by the Company,
the customers, or a third party; (iii) contract on-premises ice or water
service (including leasing of ice or water related equipment) for a customer's
internal use; (iv) providing cold storage and freezer related services in
conjunction with the traditional ice business; (v) the sale of products
incidental or related to the foregoing; and (v) all logical extensions of the
foregoing.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise,
of any such Indebtedness or other obligation on the balance sheet of such
Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have
meanings correlative to the foregoing); provided, however, that (A) any
Indebtedness assumed in connection with an acquisition
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<PAGE> 15
of assets and any Indebtedness of a Person existing at the time such Person
becomes a Subsidiary (whether by merger, consolidation, acquisition or
otherwise) of the Company or at the time such Person is merged or consolidated
with the Company or any subsidiary of the Company shall be deemed to be
Incurred at the time of the acquisition of such assets or by such Subsidiary at
the time it becomes, or is merged or consolidated with, a Subsidiary of the
Company or by the Company at the time of such merger or consolidation, as the
case may be, and (B) any amendment, modification or waiver of any document
pursuant to which Indebtedness was previously Incurred shall not be deemed to
be an Incurrence of Indebtedness unless such amendment, modification or waiver
increases the principal or premium thereof or interest rate thereon (including
by way of original issue discount). A guarantee by the Company or a Subsidiary
Guarantor of Indebtedness Incurred by the Company or a Subsidiary Guarantor, as
applicable, shall not be a separate incurrence of Indebtedness.
"Indebtedness" means with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and accrued liabilities arising
in the ordinary course of business that are not overdue by 90 days or more or
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) all Indebtedness of others (including all dividends of other
Persons for the payment of which is) guaranteed, directly or indirectly, by
such Person or that is otherwise its legal liability or which such Person has
agreed to purchase or repurchase or in respect of which such Person has agreed
contingently to supply or advance funds but excluding endorsements of
negotiable instruments and documents in the ordinary course of business, (vii)
net liabilities of such Person under Interest Swap Obligations, (viii) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
any asset or property (including, without limitation, leasehold interests and
any other tangible or intangible property) of such Person, whether or not such
Indebtedness is assumed by such Person or is not otherwise such Person's legal
liability; provided that if the Obligations so secured have not been assumed by
such Person or are otherwise not such Person's legal liability, the amount of
such Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount of such Indebtedness secured by such Lien or the fair
market value of the assets or property securing such Lien, and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends if any. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided that the
amount outstanding at any time of any non-interest bearing Indebtedness or
other Indebtedness issued with original issue discount is the full amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP, but such Indebtedness shall only be deemed to be Incurred as of the date
of original issuance thereof.
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<PAGE> 16
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Independent" when used with respect to any specified Person means such
a Person who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in the Company or any of
its Subsidiaries, or in any Affiliate of the Company or any of its Subsidiaries
and (c) is not an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions for the Company or any of its
Subsidiaries. Whenever it is provided in this Indenture that any Independent
Person's opinion or certificate shall be furnished to the Trustee, such Person
shall be appointed by the Company and approved by the Trustee in the exercise
of reasonable care, and such opinion or certificate shall state that the signer
has read this definition and that the signer is Independent within the meaning
thereof.
"Initial Purchaser" means Jefferies & Company, Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Swap Obligations" means the obligations of any Person under
any interest rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
"Investment" by any Person means any direct or indirect (i) loan,
advance or other extension of credit or capital contribution (by means of
transfers of cash or other property (valued at the fair market value thereof as
of the date of transfer) to others or payments for property or services for the
account or use of others, or otherwise) (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business); (ii) purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by any other
Person; (iii) guarantee or assumption of any Indebtedness or any other
obligation of any other Person (except for an assumption of Indebtedness for
which the assuming Person receives consideration at the time of such assumption
in the form of property or assets with a fair market value at least equal to
the principal amount of the Indebtedness assumed, extensions of trade credit or
other advances to customers on commercially reasonable terms in accordance with
normal trade practices or otherwise in the ordinary course of business,
workers' compensation, utility, lease and similar deposits and prepaid expenses
made in the ordinary course of business, and endorsements of negotiable
instruments and documents in the ordinary course of business); and (iv) all
other items that would be classified as investments on a balance sheet of such
Person prepared in accordance with GAAP. The amount of any Investment shall
not be adjusted for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment. If the Company or any
Subsidiary of the Company sells or otherwise disposes of any Common Stock of
any direct or indirect Subsidiary of the Company such that, after giving effect
to any such sale or disposition, the Company no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any
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<PAGE> 17
such sale or disposition equal to the fair market value of the Common Stock of
such Subsidiary not sold or disposed of.
"Issue Date" means the date on which the Series A Securities were first
issued hereunder.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statute or statutes) of any jurisdiction other than to reflect
ownership by a third party of property leased to the referent Person or any of
its Subsidiaries under a lease that is not in the nature of a conditional sale
or title retention agreement).
"Maturity Date" means April 15, 2004.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents (including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents) received by the Company or any of its Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, brokerage, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable ((1)
including, without limitation, income taxes reasonably estimated to be actually
payable as a result of any disposition of property within two years of the date
of disposition and (2) after taking into account any reduction in tax liability
due to available tax credits or deductions and any tax sharing arrangements)
and (c) appropriate amounts to be provided by the Company or any Subsidiary, as
the case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
"Net Equity Proceeds" means (a) in the case of any sale by the Company
of Qualified Capital Stock of the Company, the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions and the like
(including, without limitation, brokerage, legal, accounting and investment
banking fees and commissions) incurred in connection therewith, and (b) in the
case of any exchange, exercise, conversion or surrender of any outstanding
Indebtedness of the Company or any Subsidiary issued after the Issue Date for
or into shares of Qualified Capital Stock of the Company, the amount of such
Indebtedness (or, if such Indebtedness was issued at an amount less than the
stated principal amount thereof, the accrued amount thereof as determined in
accordance with GAAP) as reflected in the consolidated financial statements of
the Company prepared in accordance with GAAP as of the most recent date next
preceding the date of such exchange, exercise, conversion or surrender (plus
any additional amount required to be paid by the holder of such Indebtedness to
the Company or to any wholly-owned Subsidiary of the Company upon such
exchange, exercise, conversion or surrender and less any and all payments made
to the holders of
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<PAGE> 18
such Indebtedness, and all other expenses incurred by the Company in
connection therewith), in each case (a) and (b) to the extent consummated after
the Issue Date.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offered Price" has the meaning set forth in Section 4.17.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Chief Accounting Officer, the Treasurer or Assistant
Treasurer, the Controller, the Secretary or Assistant Secretary of such Person.
"Officers' Certificate" means a certificate signed by two Officers of
the Company.
"Opinion of Counsel" means a written opinion from legal counsel which
and who are reasonably acceptable to the Trustee.
"Pari Passu Indebtedness" means any Indebtedness of the Company that is
pari passu in right of payment to the Securities.
"Pari Passu Offer" has the meaning set forth in Section 4.17.
"Paying Agent" shall have the meaning set forth in Section 2.03.
"Payment Amount" has the meaning set forth in Section 4.17.
The term "payment default" has the meaning set forth in Section 6.01.
"Payment Restriction" has the meaning set forth in Section 4.14.
"Permitted Holders" means the following Persons: Norwest Equity
Partners V, a Minnesota Limited Partnership, Fleming Companies, Inc., The Food
Fund II Limited Partnership, A. J. Lewis III, Steven P. Rosenberg, and James F.
Stuart, and any of their respective Affiliates and Family Members, each of the
foregoing individually being a "Permitted Holder."
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Securities;
(ii) Indebtedness under any Existing Indebtedness;
(iii) Indebtedness in respect of bid, performance or surety
bonds issued for the account of the Company or any Subsidiary thereof in
the ordinary course of business, including guarantees or obligations of
the Company or any Subsidiary thereof with respect
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<PAGE> 19
to letters of credit supporting such bid, performance or surety
obligations (in each case other than for an obligation for money
borrowed);
(iv) Permitted Refinancing Indebtedness;
(v) The Subsidiary Guarantees of the Securities;
(vi) Interest Swap Obligations of the Company; provided,
however, that such Interest Swap Obligations are entered into to protect
the Company and its Subsidiaries from fluctuations in interest rates on
Indebtedness Incurred in accordance with this Indenture to the extent
the notional principal amount of such Interest Swap Obligation does not
exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(vii) Indebtedness of a direct or indirect Subsidiary of the
Company to the Company or to a direct or indirect Subsidiary of the
Company for so long as such Indebtedness is held by the Company or a
direct or indirect Subsidiary of the Company in each case subject to no
Lien held by a Person other than the Company or a direct or indirect
Subsidiary of the Company; provided that if as of any date any Person
other than the Company or a direct or indirect Subsidiary of the Company
owns or holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the date of the Incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of
such Indebtedness;
(viii) Indebtedness of the Company to a direct or indirect
Subsidiary of the Company for so long as such Indebtedness is held by a
direct or indirect Subsidiary of the Company in each case subject to no
Lien; provided, that (a) any Indebtedness of the Company to any direct
or indirect Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's Obligations under this
Indenture and the Securities, and (b) if as of any date any Person other
than a direct or indirect Subsidiary of the Company owns or holds any
such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the date of the Incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of
such Indebtedness; and
(ix) additional Indebtedness not to exceed an aggregate
principal amount of $15,000,000 at any one time outstanding and any
guarantee thereof.
"Permitted Investments" means (a) Investments in cash and Cash
Equivalents; (b) Investments by the Company or by any Subsidiary of the Company
in any Person that is or will become immediately after such Investment a direct
or indirect Subsidiary of the Company; (c) any Investments in the Company by
any Subsidiary of the Company; provided that any Indebtedness evidencing such
Investment is unsecured; (d) Investments made by the Company or by its
Subsidiaries as a result of an Asset Sale made in compliance with Section 4.17;
(e) Interest Swap Obligations to the extent the same constitute Permitted
Indebtedness; (f) Investments in an amount not to exceed $2,000,000 at any one
time outstanding; (g) Investments held by any Person on the date such Person
becomes a Subsidiary to the extent such Investments are not incurred in
anticipation of or in connection with such acquisition; and (h) Investments in
stock, obligations or
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<PAGE> 20
securities received in settlement of debts owing to the Company or any
Subsidiary as a result of bankruptcy or insolvency proceedings or upon the
foreclosure, perfection or enforcement of any Lien in favor of the Company or
any Subsidiary, in each case as to debt owing to the Company or any Subsidiary
that arose in the ordinary course of business of the Company or any such
Subsidiary, provided that any stocks, obligations or securities received in
settlement of debts that arose in the ordinary course of business (and received
other than as a result of bankruptcy or insolvency proceedings or upon
foreclosure, perfection or enforcement of any Lien) that are, within 30 days of
receipt, converted into cash or Cash Equivalents shall be treated as having
been cash or Cash Equivalents at the time received.
"Permitted Liens" means, without duplication, each of the following:
(i) Liens existing as of the date of this Indenture;
(ii) Liens securing the Securities, the Subsidiary Guarantees or any
Indebtedness under the Credit Facilities;
(iii) Liens in favor of the Company;
(iv) Liens for taxes, assessments and governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or its Subsidiaries shall have set
aside on its books such reserves as may be required pursuant to GAAP;
(v) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not delinquent for more
than 30 days or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(vi) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety and appeal bonds, bids,
government contracts and leases, performance and return of money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money);
(vii) judgment Liens not giving rise to an Event of Default so long as
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall have not expired;
(viii) any interest or title of a lessor under any Capital Lease
Obligation or operating lease;
(ix) Liens securing Purchase Money Indebtedness incurred in compliance
with Section 4.04; provided, however, that (i) the related Purchase Money
Indebtedness shall not be secured by any property or assets of the Company or
any Subsidiary other than the property or assets
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<PAGE> 21
so acquired and any proceeds therefrom and (ii) the Lien securing any such
Indebtedness shall be created within 90 days of such acquisition;
(x) Liens securing obligations under or in respect of Interest Swap
Obligations;
(xi) Liens upon specific items of inventory or other goods of any
Person securing such Person's obligations in respect of bankers' acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods;
(xii) Liens securing reimbursement obligations with respect to
commercial letters of credit that encumber documents and other property or
assets relating to such letters of credit and products and proceeds thereof;
(xiii) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the Company
or any of its Subsidiaries, including rights of offset and set-off; and
(xiv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company and Liens on property or assets of
a Subsidiary existing at the time it became a Subsidiary, provided that such
Liens were in existence prior to the contemplation of the acquisition and do
not extend to any assets other than the property of such Person or the acquired
property (and the proceeds thereof), as applicable.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Subsidiaries incurred pursuant to
clause (i), (ii) or (v) of the definition of "Permitted Indebtedness"; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so exchanged, refinanced,
renewed, replaced, defeased or refunded (plus the amount of related prepayment
penalties, fees and reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being exchanged, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being exchanged, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Securities or the Subsidiary Guarantees, such Permitted Refinancing
Indebtedness is subordinated in right of payment to, the Securities or the
Subsidiary Guarantees, as the case may be, on terms at least as favorable to
the Holders of Securities as those contained in the documentation governing the
Indebtedness being exchanged, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company or by
the Subsidiary that is the obligor on the Indebtedness being exchanged,
refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
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"Physical Securities" has the meaning set forth in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Purchase Money Indebtedness" means Indebtedness or that portion of
Indebtedness of the Company or any Subsidiary incurred in connection with the
acquisition by the Company or such Subsidiary, subsequent to the Issue Date, of
any property or assets.
"principal" of any Indebtedness (including the Securities) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Placement Legend" means the legend initially set forth on the
Series A Securities in the form set forth on Exhibit A-l.
"Public Equity Offering" means an underwritten offer and sale of
Qualified Capital Stock of the Company pursuant to a registration statement
that has been declared effective by the SEC 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).
"Purchase Agreement" means the purchase agreement dated as of April 11,
1997 by and among the Company, the Subsidiary Guarantors named therein and the
Initial Purchaser.
"Purchase Date" means the Change of Control Payment Date or purchase
date with respect to an Asset Proceeds Offer, as applicable.
"Purchase Offer" means either a Change of Control Offer or an Asset
Proceeds Offer, as applicable.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" has the meaning specified in
Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Securities.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to the terms of
this Indenture and Paragraph 5 in the forms of Security annexed hereto as
Exhibit A-1 and A-2.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to the terms of
this Indenture and Paragraph 5 in the forms of Security annexed hereto as
Exhibit A-1 and A-2.
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"Refinance" means, in respect of any security or Indebtedness, to
refinance, renew, refund, repay, prepay, redeem, defease or retire, or to issue
a security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Registered Exchange Offer" means the offer to exchange the Series B
Securities for all of the outstanding Series A Securities in accordance with
the Registration Rights Agreement.
"Registrar" has the meaning set forth in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
by and among the Company, the Subsidiary Guarantors named therein and the
Initial Purchaser, relating to the Securities and dated as of the Issue Date,
as the same may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
"Resale Restriction Termination Date" has the meaning provided in
Section 2.15.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Group (or any successor group) of the
Trustee, including without limitation any Vice President, any Assistant Vice
President, any Assistant Secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers, who shall, in any case, be responsible for the
administration of this document or have familiarity with it, and also means,
with respect to particular corporate trust matters, any other officer to whom
such matter is referred because of his or her knowledge of and familiarity with
the particular subject.
"Restricted Payment" has the meaning provided in Section 4.03.
"Restricted Security" has the meaning set forth in Rule 144(a)(3) under
the Securities Act and includes, without limitation, any Private Exchange Note
(as defined in the Registration Rights Agreement); provided that the Trustee
shall be entitled to request and conclusively rely upon an Opinion of Counsel
with respect to whether any Security is a Restricted Security.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and Series B Securities as
amended or supplemented from time to time in accordance with the terms hereof
that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
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"Series A Securities" means the 12% Series A Senior Notes due April 15,
2004, being issued and sold pursuant to the Purchase Agreement and this
Indenture.
"Series B Securities" means the 12% Series B Senior Notes due April 15,
2004 (the terms of which are identical to the Series A Securities except that
the Series B Securities shall be registered under the Securities Act, and shall
not contain the restrictive legend on the face of the form of the Series A
Securities), to be issued in exchange for the Series A Securities pursuant to
the Registered Exchange Offer and this Indenture.
"Specified Affiliate Transactions" means certain transactions among the
Company and Subsidiaries and certain Affiliates which were entered into prior
to the Issue Date as set forth in Schedule I to this Indenture.
"Subordinated Indebtedness" means any Indebtedness of the Company or a
Subsidiary Guarantor that is expressly subordinated in right of payment to the
Securities or the Subsidiary Guarantees, as the case may be.
"Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall be deemed not
to be a Subsidiary of the Company for purposes of this Indenture.
"Subsidiary Guarantee" means any guarantee of the Securities by a
Subsidiary Guarantor in accordance with the provisions described under Article
Ten.
"Subsidiary Guarantor" means (i) each of Packaged Ice Leasing, Inc.,
Southco Ice, Inc., Packaged Ice Mission, Inc., Packaged Ice STPI, Inc. and
Packaged Ice Southwestern, Inc. and (ii) each of the Company's Subsidiaries
that in the future executes a supplemental indenture in which such Subsidiary
agrees to be bound by the terms of this Indenture as a Subsidiary Guarantor;
provided that any Person constituting a Subsidiary Guarantor as described above
shall cease to constitute a Guarantor when its respective Subsidiary Guarantee
is released in accordance with the terms of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 9.03.
"Trust Officer" means any officer within the corporate trust
administration department (or any successor group of the Trustee), including
any vice president, assistant vice president, assistant secretary or any other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by the persons who at that time shall be such
officers, and also means,
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with respect to a particular corporate trust matter, any other officer to whom
such trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. Government Obligations" has the meaning provided in Section 8.01.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company which
at the time of determination shall be an Unrestricted Subsidiary (as designated
by the Board of Directors as provided below) and (2) any Subsidiary or
Subsidiaries of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any lien on any property
of, any other Subsidiary of the Company which is not a Subsidiary of the
Subsidiary of the Company to be so designated or otherwise an Unrestricted
Subsidiary, provided that either (x) the Subsidiary of the Company to be so
designated has total consolidated assets of $100,000 or less at the time of
designation or (y) immediately after giving pro forma effect to such
designation, the Company could incur $1.00 of additional Indebtedness pursuant
to Section 4.04(b). Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"Voting Agreement" means that certain amended and restated voting
agreement dated September 20, 1995, as amended, by and among the shareholders
of the Company named therein and the Company.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly-owned Subsidiary" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities which normally have the
right to vote in the election of directors, other than director's qualifying
shares, are owned by such Person or any wholly-owned Subsidiary of such Person.
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SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC;
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Security holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company, any Subsidiary
Guarantor or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision.
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series A Securities and Series B Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibits
A-l and A-2, respectively. The Securities may have notations, legends or
endorsements (including notations relating to the Guarantee) required by law,
stock exchange rule or usage. The Company and the Trustee shall approve the
form of the Securities and any notation, legend or endorsement (including
notations relating to the Subsidiary Guarantee) on them. Each Security shall
be dated the date of its authentication.
The terms and provisions contained in the Securities and the Subsidiary
Guarantee shall constitute, and are hereby expressly made, a part of this
Indenture. The Series A Securities and the Series B Securities shall be
considered collectively to be a single class for all purposes of this
Indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase.
Series A Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent Global Securities in
registered form, substantially in the form set forth in Exhibit A-l ("Global
Securities"), deposited with the Trustee, as custodian for the Depository, and
shall bear the legend set forth on Exhibit B. Series B Securities (other than
any constituting Private Exchange Notes) shall be issued initially in the form
of one or more permanent Global Securities in registered form, substantially
in the form set forth in Exhibit A-2, deposited with the Trustee, as custodian
for the Depositary, and shall bear the legend set forth on Exhibit B. The
aggregate principal amount of any Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.
Series A Securities offered and sold in reliance on any other exemption
from registration under the Securities Act other than as described in the
preceding paragraph and any Series B Securities constituting Private Exchange
Notes shall be issued in the form of certificated Securities in registered form
in substantially the form set forth in Exhibit A-l and Exhibit A-2,
respectively (the "Physical Securities").
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature. The Company's seal shall also be affixed to or imprinted or
reproduced on the Securities.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless. Each
Subsidiary Guarantor shall execute the Subsidiary Guarantee in the manner set
forth in Section 10.07.
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A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Series A Securities for original
issue in the aggregate principal amount of $50,000,000 and (ii) Series B
Securities from time to time for issue only in exchange for a like principal
amount of Series A Securities, in each case upon receipt of a written order of
the Company in the form of an Officers' Certificate. The Officers' Certificate
shall specify the amount of Securities to be authenticated, the series and type
of Securities and the date on which the Securities are to be authenticated.
The aggregate principal amount of Securities outstanding at any time may not
exceed $50,000,000, except as provided in Section 2.07. Upon receipt of a
written order of the Company in the form of an Officers' Certificate, the
Trustee shall authenticate Securities in substitution of Securities originally
issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency in The City of New York,
where (a) Securities may be presented or surrendered for registration of
transfer or for exchange ("Registrar"), (b) Securities may be presented or
surrendered for payment ("Paying Agent") and (c) notices and demands in respect
of the Securities and this Indenture may be served. The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company,
upon notice to the Trustee, may have one or more co-Registrars and one or more
additional Paying Agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. The Company initially
appoints the Trustee as Registrar and Paying Agent until such time as the
Trustee has resigned or a successor has been appointed. Except as set forth in
Section 2.13, neither the Company nor any Affiliate of the Company may act as
Paying Agent.
SECTION 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by such Paying Agent for the payment of
principal of, or interest on, the Securities, and shall notify the Trustee of
any Default by the Company in making any such payment. The Company at any time
may require a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee
and to account for any assets distributed. Upon distribution to the Trustee of
all assets that
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shall have been delivered by the Company to the Paying Agent, the Paying Agent
shall have no further liability for such assets. If the Company or any of its
Affiliates acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
During the continuance of any Event of Default, the Trustee shall serve as the
sole Paying Agent of the Securities.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before each Record Date and at such other times as the Trustee
may request in writing a list as of such date and in such form as the Trustee
may reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.14 and 2.15, when Securities are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of the same series and other authorized
denominations, the Registrar or co-Registrar shall register the transfer or
make the exchange as requested if its requirements for such transaction are
met; provided, however, that the Securities surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Registrar or co-Registrar,
duly executed by the Holder thereof or his attorney duly authorized in writing.
To permit registrations of transfers and exchanges, the Company shall execute
and the Trustee shall authenticate Securities at the Registrar's or co-
Registrar's written request. No service charge shall be made for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or other
governmental charge payable upon exchanges or transfers pursuant to Section
2.10, 3.06, 4.16, or 9.05). The Registrar or co-Registrar shall not be
required to register the transfer of or exchange of any Security (i) during a
period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities and ending at the close of business on the
day of such mailing, (ii) selected for redemption in whole or in part pursuant
to Article Three, except the unredeemed portion of any Security being redeemed
in part (iii) during a period beginning 15 days before the mailing of a notice
of an offer to repurchase pursuant to Section 4.16 or 4.17 or (iv) between a
Record Date and the next succeeding Interest Payment Date.
Any Holder of the Global Security shall, by acceptance of such Global
Security, agree that, subject to Section 2.15(d), transfers of beneficial
interests in such Global Security may be effected only through a book-entry
system maintained by the Depository (or its agent), and that ownership of a
beneficial interest in the Global Security shall be required to be reflected in
a book entry.
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SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee, upon the Company's written
request, shall authenticate a replacement Security of the same series if the
Trustee's requirements are met. If required by the Trustee or the Company,
such Holder must provide an indemnity bond or other indemnity, sufficient in
the judgment of both the Company and the Trustee, to protect the Company, the
Trustee and any Agent from any loss which any of them may suffer if a Security
is replaced. The Company and the Trustee may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Security, including
reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding because
the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds U.S.
Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Securities payable on that date, then on and
after that date such Securities cease to be outstanding and interest on them
ceases to accrue.
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or any of its Affiliates shall be disregarded, except that, for
the purposes of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities that the Trustee
actually knows are so owned shall be disregarded. Securities so owned which
have been pledged in good faith shall not be disregarded if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to the Securities and that the pledgee is not the Company, a
Subsidiary Guarantor or any other obligor upon the Securities or any Affiliate
of any of them.
The Trustee may require an Officers' Certificate listing Securities
owned by the Company, a Subsidiary of the Company or an Affiliate of the
Company.
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SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall, upon the Company's written request, authenticate
temporary Securities upon receipt of a written order of the Company in the form
of an Officers' Certificate. The Officers' Certificate shall specify the
amount of temporary Securities to be authenticated and the date on which the
temporary Securities are to be authenticated. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate upon receipt of a written order of the Company pursuant to Section
2.02 definitive Securities in exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new
Securities to replace Securities that it has paid or delivered to the Trustee
for cancellation. If the Company or any Subsidiary Guarantor shall acquire any
of the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and
until the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.
SECTION 2.12. CUSIP Number.
The Company in issuing each series of the Securities will use a "CUSIP"
number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company shall promptly notify the Trustee of any such
CUSIP number used by the Company in connection with the Securities and any
change in such CUSIP number.
SECTION 2.13. Deposit of Moneys.
Prior to 11:00 a.m. New York City time on each Interest Payment Date and
Maturity Date, the Company shall have deposited with the Paying Agent U.S.
Legal Tender sufficient to make cash payments due on such Interest Payment Date
or Maturity Date, as the case may be, and so as to permit the Paying Agent to
remit payment in immediately available funds to the Holders on such Interest
Payment Date or Maturity Date, as the case may be. Alternatively, the Company
may make payments on the Securities by wire transfer, in same day funds, or, in
the case of Physical Securities, by check delivered to the Holders thereof at
their registered addresses. To the extent the Company makes such payments
directly to the Holders, the Company shall simultaneously notify the Trustee
thereof in writing.
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SECTION 2.14. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit B.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Security.
(b) Global Securities may be transferred as a whole, and interests of
beneficial owners in Global Securities may be transferred or exchanged for
Physical Securities, only in accordance with the rules and procedures of the
Depository and the provisions of Section 2.15. In addition, Physical
Securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in Global Securities if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for any Global
Security and a successor depositary is not appointed by the Company within 90
days of such notice or (ii) an Event of Default has occurred and is continuing
and the Registrar has received a request from the Depository to issue Physical
Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b), the Global Securities
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Securities, an equal aggregate principal amount of
Physical Securities of authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to
paragraph (b) or (c) of this Section shall, except as otherwise provided by
Section 2.15, bear the legend regarding transfer restrictions applicable to the
Physical Securities set forth in Exhibit A-l.
(e) The Holder of any Global Security may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 2.15. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical
Securities are presented to the Registrar with a request:
(i) to register the transfer of the Physical Securities; or
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(ii) to exchange such Physical Securities for an equal number
of Physical Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Section 2.15 for such transactions are met;
provided, however, that the Physical Securities presented or surrendered for
registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company
and the Registrar or co-Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing;
and
(II) in the case of Physical Securities the offer and sale of
which have not been registered under the Securities Act
and are presented for transfer or exchange prior to (x)
the date which is two years after the later of the date of
original issue and the last date on which the Company or
any affiliate of the Company was the owner of such
Security, or any predecessor thereto and (y) such later
date, if any, as may be required by any subsequent change
in applicable law (the "Resale Restriction Termination
Date"), such Physical Securities shall be accompanied, in
the sole discretion of the Company, by the following
additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the
Registrar by a Holder for registration in the name
of such Holder, without transfer, a certification
from such Holder to that effect (in substantially
the form of Exhibit C hereto); or
(B) if such Physical Security is being transferred to a
qualified institutional buyer (as defined in Rule
144A under the Securities Act) in accordance with
Rule 144A under the Securities Act or pursuant to
an exemption from registration in accordance with
Rule 144 under the Securities Act, a certification
to that effect (in substantially the form of
Exhibit C hereto); or
(C) if such Physical Security is being transferred to
an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (a)(2), (a)(3) or
(a)(7) of Rule 501 under the Securities Act,
delivery of a Certificate of Transfer in the form
of Exhibit D hereto and an opinion of counsel
and/or other information satisfactory to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(D) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (in substantially the form of
Exhibit C hereto) and an opinion of counsel
reasonably acceptable to the
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Company to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a Physical Security for a Beneficial
Interest in a Global Security. A Physical Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar of a Physical
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Registrar, together with:
(A) certification, substantially in the form of Exhibit
C hereto, that such Security is being transferred
to a qualified institutional buyer (as defined in
Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act; and
(B) written instructions directing the Registrar to
make, or to direct the Depositary to make, an
endorsement on the Global Security to reflect an
increase in the aggregate amount of the Securities
represented by the Global Security,
then the Registrar shall cancel such Physical Security and cause, or direct the
Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Registrar, the number of
Securities represented by the Global Security to be increased accordingly. If
no Global Security is then outstanding, the Company shall issue and the
Registrar shall authenticate a new Global Security in the appropriate amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Transfer of a Beneficial Interest in a Global Security for a
Physical Security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial
interest for a Physical Security. Upon receipt by the
Registrar of written instructions or such other form of
instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any Person having a
beneficial interest in a Global Security and upon receipt
by the Registrar of a written order or such other form of
instructions as is customary for the Depositary or the
Person designated by the Depositary as having such a
beneficial interest containing registration instructions
and, in the case of any such transfer or exchange prior to
the Resale Restriction Termination Date, the following
additional information and documents:
(A) if such beneficial interest is being transferred to
the Person designated by the Depositary as being
the beneficial owner, a certification from
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such Person to that effect (in substantially the
form of Exhibit C hereto); or
(B) if such beneficial interest is being transferred to
a qualified institutional buyer (as defined in Rule
144A under the Securities Act) in accordance with
Rule 144A under the Securities Act or pursuant to
an exemption from registration in accordance with
Rule 144 under the Securities Act, a certification
to that effect from the transferee or transferor
(in substantially the form of Exhibit C hereto); or
(C) if such beneficial interest is being transferred to
an institutional "accredited investor" within the
meaning of subparagraph (a)(l), (a)(2), (a)(3) or
(a)(7) of Rule 501 under the Securities Act,
delivery of a Certificate of Transfer in the form
of Exhibit D hereto and an opinion of counsel
and/or other information satisfactory to the
Company to the effect that such transfer is in
compliance with the Securities Act; or
(D) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (in substantially the form of
Exhibit C hereto) and an opinion of counsel
reasonably acceptable to the Company to the effect
that such transfer is in compliance with the
Securities Act,
then the Registrar will cause, in accordance with the
standing instructions and procedures existing between the
Depositary and the Registrar, the aggregate amount of the
Global Security to be reduced and, following such
reduction, the Company will execute and, upon receipt of
an authentication order in the form of an Officers'
Certificate, the Registrar will authenticate and deliver
to the transferee a Physical Security.
(ii) Physical Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section
2.15(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar in writing. The
Registrar shall deliver such Physical Securities to the
Persons in whose names such Physical Securities are so
registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.15), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
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(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless, and the Trustee is hereby authorized to
deliver Securities without the Private Placement Legend only if, (i) the
circumstances contemplated by paragraph (a)(ii)(II) of this Section 2.15 exist,
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such
Security has been sold pursuant to an effective registration statement under
the Securities Act.
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of, and each beneficial interest in, such a
Security acknowledges the restrictions on transfer of such Security set forth
in this Indenture and in the Private Placement Legend and agrees that it will
transfer such Security only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.14 or this Section 2.15.
The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
SECTION 2.16. Designation.
The Indebtedness evidenced by the Securities is hereby irrevocably
designated as "senior indebtedness" or such other term denoting seniority for
the purposes of any future Indebtedness of the Company which the Company makes
subordinate to any senior indebtedness or such other term denoting seniority.
SECTION 2.17 Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Securities and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Security and the date of the proposed payment. The Trustee may fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the payment
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to Section 3.07
hereof, it shall notify the Trustee in writing of the Redemption Date and the
principal amount of Securities to be redeemed. The Company shall give notice
of redemption to the Paying Agent and Trustee at least 30 days but not more
than 60 days before the Redemption Date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed at any time,
selection of such Securities for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Securities are listed or, if such Securities are not then
listed on a national securities exchange, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate.
The Trustee shall make the selection from the Securities outstanding and
not previously called for redemption and shall promptly notify the Company in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date, the
Trustee, at the Company's request made at least 45 days before the Redemption
Date (unless a shorter notice shall be agreed to by the Trustee in writing)
shall mail a notice of redemption by first class mail, postage prepaid, to each
Holder whose Securities are to be redeemed at the addresses of such Holders as
they appear in the register maintained by the Register pursuant to Section
2.03. The Trustee shall give the notice of redemption in the Company's name
and at the Company's expense. Each notice for redemption shall identify the
Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest,
if any, to be paid;
(3) the name and address of the Paying Agent;
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(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price plus accrued
interest, if any;
(5) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue
on and after the Redemption Date, and the only remaining right of the
Holders of such Securities is to receive payment of the Redemption Price
upon surrender to the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the unredeemed portion
thereof will be issued
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption; and
(8) the subparagraph of the Securities pursuant to which the
Securities are to be redeemed.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to
the Trustee or Paying Agent, such Securities called for redemption shall be
paid at the Redemption Price (which shall include accrued interest thereon to
the Redemption Date), but installments of interest, the maturity of which is on
or prior to the Redemption Date, shall be payable to Holders of record at the
close of business on the relevant Record Dates. Failure to give notice or any
defect in the notice to any Holder shall not affect the validity of notice to
any other Holder.
SECTION 3.05. Deposit of Redemption Price.
On or before 11:00 a.m. New York Time on the Redemption Date, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price plus accrued interest, if any, of all Securities to be
redeemed on that date. The Paying Agent shall promptly return to the Company
any U.S. Legal Tender so deposited which is not required for that purpose upon
the written request of the Company, except with respect to monies owed as
obligations to the Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment.
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SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the Company
shall execute and the Trustee, upon the Company's written request, shall
authenticate for the Holder a new Security or Securities equal in principal
amount to the unredeemed portion of the Security surrendered.
SECTION 3.07 Optional Redemption.
(a) The Securities shall be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after April 15, 2001 at
the following Redemption Prices (expressed as percentages of the principal
amount) if redeemed during the twelve-month period commencing on April 15 of
the year set forth below, plus, in each case, accrued and unpaid interest
thereon to the Redemption Date.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2001 ........................... 107.00%
2002 ........................... 103.50%
2003 and thereafter ............ 100.00%
</TABLE>
(b) Notwithstanding the foregoing, at any time on or prior to April
15, 2000, the Company may redeem up to an aggregate of $17,500,000 principal
amount of Securities at a Redemption Price of 112% of the principal amount
thereof, plus accrued and unpaid interest thereon, to the Redemption Date, with
the net proceeds of any Public Equity Offering; provided that at least
$32,500,000 in aggregate principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and, provided, further,
that such redemption occurs within 90 days of the date of the closing of such
Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. Procedures for Purchase Offers.
Notice of a Purchase Offer pursuant to this Section 3.08 shall be mailed
or caused to be mailed, by first class mail, by the Company not less than 30
nor more than 60 days before the Purchase Date to all Holders at their last
registered addresses, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender
Securities pursuant to the Purchase Offer and shall state the following terms:
(1) the section of the Indenture pursuant to which the Purchase Offer
is being made and that all Securities properly tendered will be
accepted for payment; provided, however, that if the aggregate
principal amount of Securities tendered in connection with an
Asset Proceeds Offer plus accrued interest at the expiration of
such offer exceeds the Payment Amount, the Company shall select
the Securities to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so
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that only Securities in denominations of $1,000 or multiples
thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest) and
the Purchase Date and that the Purchase Offer will remain open
for at least 20 Business Days and until the close of business on
the Business Day prior to the Purchase Date;
(3) that any Security not properly tendered will continue to accrue
interest;
(4) that, unless the Company defaults in making payment therefor, any
Security accepted for payment pursuant to the Purchase Offer
shall cease to accrue interest after the Purchase Date;
(5) that Holders electing to have a Security purchased pursuant to a
Purchase Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on
the third Business Day prior to the Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than one Business Day prior to
the Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount
of the Securities the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have
such Security purchased; and
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; provided that
each Security purchased and each new Security issued shall be in
an original principal amount of $1,000 or integral multiples
thereof.
On or before 11:00 a.m. New York Time on the Purchase Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant
to the Purchase Offer which are to be purchased in accordance with item (1)
above, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the purchase price plus accrued interest, if any, of all Securities to be
purchased and (iii) deliver to the Trustee Securities so accepted together with
an Officers' Certificate stating the Securities or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail or otherwise
deliver to the Holders of Securities so accepted payment in an amount equal to
the purchase price plus accrued interest, if any. For purposes of any Purchase
Offer, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Securities pursuant to a
Purchase Offer shall be returned by the Trustee to the Company.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Securities pursuant to a Purchase Offer. To the extent
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the provisions of any such rule conflict with the provisions of this Indenture
relating to a Purchase Offer, the Company shall comply with the provisions of
such rule and be deemed not to have breached its obligations relating to such
Purchase Offer by virtue thereof.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities in
New York, New York in the manner provided in the Securities and this Indenture.
An installment of principal of or interest on the Securities shall be
considered paid on the date it is due if the Trustee or Paying Agent holds on
that date U.S. Legal Tender designated for and sufficient to pay the
installment.
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in The City of New York, the office or agency
required under Section 2.03. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the address of the Trustee set forth in Section 11.02. The Company hereby
initially designates the office of United States Trust Company, an affiliate of
the Trustee, as its office or agency in The City of New York.
SECTION 4.03. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, (a) purchase, redeem or otherwise
acquire or retire for value any Capital Stock of the Company, or any warrants,
rights or options to acquire shares of any class of such Capital Stock, other
than through the exchange therefor solely of Qualified Capital Stock of the
Company or warrants, rights or options to acquire Qualified Capital Stock of
the Company, (b) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund
payment, any Subordinated Indebtedness of the Company or (c) make any
Investment (other than Permitted Investments) in any Person (each of the
foregoing prohibited actions set forth in clauses (a), (b) and (c) being
referred to as a "Restricted Payment"), if at the time of such proposed
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default has occurred and is continuing or would result therefrom,
or (ii) the Company is not able to Incur at least $1.00 of additional
Indebtedness in accordance with paragraph (b) of Section 4.04 (as if such
Restricted Payment had been made as of the last day of the Four Quarter
Period), or (iii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date exceeds or would
exceed the sum of: (u) 50% of the Consolidated Net Income (or if Consolidated
Net Income shall be a loss, minus 100% of such loss) of the Company
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during the period (treating such period as a single accounting period) from the
beginning of the first fiscal quarter commencing after the Issue Date to the
end of the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment; (v)
100% of the aggregate Net Equity Proceeds received by the Company from any
Person from the issuance and sale subsequent to the Issue Date of Qualified
Capital Stock of the Company other than any Qualified Capital Stock sold to a
Subsidiary of the Company; (w) the aggregate net cash proceeds received after
the Issue Date by the Company (other than from any of its Subsidiaries) upon
the exercise of any options, warrants or rights to purchase shares of Qualified
Capital Stock of the Company; (x) the aggregate net cash proceeds received
after the Issue Date by the Company from the issuance or sale (other than to
any of its Subsidiaries) of debt securities or shares of Disqualified Capital
Stock that have been converted into or exchanged for Qualified Capital Stock of
the Company, together with the aggregate cash received by the Company at the
time of such conversion or exchange; (y) an amount equal to the net reduction
in Investments, subsequent to the date of the Indenture, in any Person
resulting from payments of interest on debt, dividends, repayments of loans or
advances, return of capital, or other transfers of property (but only to the
extent such distributions are not included in the calculation of Consolidated
Net Income), in each case, to the Company or any Subsidiary from any Person,
not to exceed in the case of any Person, the amount of Investments previously
made by the Company or any Subsidiary in such Person and which was treated as a
Restricted Payment; and (z) $100,000.
Notwithstanding the foregoing, these provisions do not prohibit: (1)
the acquisition of Capital Stock of the Company or warrants, rights or options
to acquire Capital Stock of the Company either (i) solely in exchange for
shares of Qualified Capital Stock of the Company or warrants, rights or options
to acquire Qualified Capital Stock of the Company, or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Subsidiary of the Company) of shares of Qualified Capital Stock of
the Company or warrants, rights or options to acquire Qualified Capital Stock
of the Company; (2) the acquisition of any Subordinated Indebtedness of the
Company either (i) solely in exchange for shares of Qualified Capital Stock of
the Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of (A)
shares of Qualified Capital Stock of the Company or warrants, rights or options
to acquire Qualified Capital Stock of the Company or (B) Permitted Refinancing
Indebtedness; or (3) loans by the Company to employees in the ordinary course
of business up to an aggregate amount of $100,000 at any one time outstanding;
provided, however, that in the case of clauses (1), (2) and (3) of this
paragraph, no Default or Event of Default shall have occurred and be continuing
at the time of such payment or as a result thereof. In determining the
aggregate amount of Restricted Payments made subsequent to the Issue Date,
amounts expended pursuant to clauses (1)(ii), (2)(i) and (2)(ii)(A) shall, in
each case, be included in such calculation.
For purposes of the foregoing provisions, the amount of any Restricted
Payment (other than cash) shall be the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) on the date of the Restricted Payment of the asset(s)
proposed to be transferred by the Company or such Subsidiary, as the case may
be, pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment complies with this Indenture
and setting forth in reasonable detail the basis upon which the required
calculations were
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computed, which calculations may be based upon the Company's latest available
internal quarterly financial statements.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would be permitted by the
provisions of this Section 4.03 and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. For purposes of making
such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash prior to such
designation) in the Restricted Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will reduce the amount
available for Restricted Payments under clause (iii) of the first paragraph of
this Section 4.03. All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the fair market value of such
Investments at the time of such designation.
For purposes of this Section 4.03, if a particular Restricted Payment
involves a non-cash payment, including a distribution of assets, then such
Restricted Payment shall be deemed to be an amount equal to the cash portion of
such Restricted Payment, if any, plus an amount equal to the fair market value
of the non-cash portion of such Restricted Payment.
SECTION 4.04. Limitation on Indebtedness.
(a) The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, Incur any Indebtedness, including,
without limitation, any Acquired Indebtedness (other than Permitted
Indebtedness).
(b) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur Indebtedness (including, without limitation, Acquired
Indebtedness), in each case, if (i) no Default or Event of Default shall have
occurred and be continuing on the date of the proposed Incurrence thereof or
would result as a consequence of such proposed Incurrence and (ii) immediately
after giving effect to such proposed Incurrence, the Consolidated Fixed Charge
Coverage Ratio of the Company is at least equal to 2.0 to 1.0 if such proposed
Incurrence is on or prior to March 31, 1999; and at least equal to 2.50 to 1.0
if such proposed Incurrence is thereafter.
(c) Neither the Company nor any Subsidiary Guarantor will, directly
or indirectly, in any event Incur any Indebtedness which by its terms (or by
the terms of any agreement governing such Indebtedness) is subordinated to any
other Indebtedness of the Company or such Subsidiary Guarantor, as the case may
be, unless such Indebtedness is also by its terms (or by the terms of any
agreement governing such Indebtedness) made expressly subordinate to the
Securities or the Subsidiary Guarantee of such Subsidiary Guarantor, as the
case may be, to the same extent and in the same manner as such Indebtedness is
subordinated pursuant to subordination provisions that are most favorable to
the holders of any other Indebtedness of the Company or such Subsidiary
Guarantor, as the case may be.
(d) Notwithstanding the foregoing limitations, the Company and its
Subsidiaries may Incur no more than $37,500,000 of secured Indebtedness.
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SECTION 4.05. Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other
existence of each of its Subsidiaries and the rights (charter and statutory)
and material franchises of the Company and each of its Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right or
franchise, or the corporate, partnership or other existence of any Subsidiary,
if the Board of Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company
and each of its Subsidiaries, taken as a whole, and that the loss thereof is
not, and will not be, disadvantageous in any material respect to the Holders.
SECTION 4.06. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments
and governmental charges levied or imposed upon it or any of its Subsidiaries
or upon the income, profits or property of it or any of its Subsidiaries and
(ii) all lawful claims for labor, materials and supplies which, in each case,
if unpaid, might by law become a Lien upon the property of it or any of its
Subsidiaries; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which appropriate provision has been
made.
SECTION 4.07. Maintenance of Properties and Insurance.
(a) The Company shall cause all material properties owned by or
leased by it or any of its Subsidiaries used or useful to the conduct of its
business or the business of any of its Subsidiaries to be improved or
maintained and kept in normal condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in its
judgment may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 4.07 shall prevent the Company or any of
its Subsidiaries from discontinuing the use, operation or maintenance of any of
such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors or of the board of
directors of any Subsidiary of the Company concerned, or of an officer (or
other agent employed by the Company or of any of its Subsidiaries) of the
Company or any of its Subsidiaries having managerial responsibility for any
such property, desirable in the conduct of the business of the Company or any
Subsidiary of the Company, and if such discontinuance or disposal is not
adverse in any material respect to the Holders.
(b) The Company shall maintain, and shall cause its Subsidiaries to
maintain, insurance with responsible carriers against such risks and in such
amounts, and with such deductibles, retentions, self-insured amounts and co-
insurance provisions, as are customarily carried by similar businesses of
similar size.
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SECTION 4.08. Compliance Certificate; Notice of Default; Tax Information.
(a) The Company shall deliver to the Trustee, within 120 days after
the close of each fiscal year an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries has been made under the
supervision of the signing officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such
certificate, that to the best of his knowledge the Company during such
preceding fiscal year has kept, observed, performed and fulfilled each and
every such covenant and no Default or Event of Default occurred during such
year and at the date of such certificate there is no Default or Event of
Default has occurred and is continuing or, if such signers do know of such
Default or Event of Default, the certificate shall describe its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
Upon the qualifications of this Indenture under the TIA, such Officer's
Certificate shall comply with TIA Section 314(a)(4).
(b) So long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
annual financial statements delivered pursuant to Section 4.10 shall be
accompanied by a written report of the Company's independent accountants (who
shall be a firm of established national reputation) that in conducting their
audit of such financial statements nothing has come to their attention that
would lead them to believe that the Company has violated any provisions of
Article 4 or 5 of this Indenture insofar as they relate to accounting matters
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall deliver to the Trustee, promptly upon any
Officer becoming aware of any Default or Event of Default in the performance of
any covenant, agreement or condition contained in this Indenture, an Officers'
Certificate specifying the Default or Event of Default and describing its
status with particularity.
(d) The Company shall calculate and deliver to the Trustee all
original issue discount information to be reported by the Trustee to Holders as
required by law.
SECTION 4.09. Compliance with Laws.
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their
respective properties, except for such noncompliances as would not in the
aggregate have a material adverse effect on the financial condition or results
of operations of the Company and its Subsidiaries taken as a whole.
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SECTION 4.10. SEC Reports.
(a) The Company will file with the SEC all information, documents and
reports required to be filed with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act, whether or not the Company is subject to such filing
requirements so long as the SEC will accept such filings. The Company will
file with the Trustee within 15 days after it files them with the SEC, copies
of the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe), without exhibits, which the Company files with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Upon qualification of
this Indenture under the TIA, the Company shall also comply with the provisions
of TIA Section 314(a).
(b) Regardless of whether the Company is required to furnish such
reports to its stockholders pursuant to the Exchange Act, the Company shall
cause its consolidated financial statements, comparable to that which would
have been required to appear in annual or quarterly reports, to be delivered to
the Trustee and the Holders. The Company will also make such reports available
to prospective purchasers of the Securities, securities analysts and broker-
dealers upon their request.
(c) For so long as any of the Securities remain outstanding the
Company will make available to any prospective purchaser of the Securities or
beneficial owner of the Securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act, until such
time as the Company has consummated the exchange offer the Series A Securities
for Series B Securities which have been registered under the Securities Act or
until such time as the holders thereof have disposed of such Securities
pursuant to an effective registration statement filed by the Company.
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture, and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.12. Limitation on Transactions with Affiliates.
(a) The Company shall not, and shall not cause or permit any of its
Subsidiaries to, conduct any business or enter into any transaction or series
of transactions with or for the benefit of any of their Affiliates (each an
"Affiliate Transaction") but excluding Specified Affiliate Transactions, except
in good faith and on terms that are no less favorable to the Company or such
Subsidiary, as the case may be, than those that could have been obtained in a
comparable transaction
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on an arm's-length basis from a Person not an Affiliate of the Company or such
Subsidiary. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $250,000 shall
be approved by the Board of Directors of the Company, such approval to be
evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
the Company or any Subsidiary of the Company enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) that involves an aggregate fair market value of more than $3,000,000, the
Company or such Subsidiary shall, prior to the consummation thereof, obtain a
favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Subsidiary, as the case may be,
from a financial point of view, from an Independent Financial Advisor and file
the same with the Trustee. Notwithstanding the foregoing, the restrictions set
forth in this Section 4.12 shall not apply to (i) transactions between the
Company and any Subsidiary or between Subsidiaries, (ii) any employee
compensation arrangement of the Company or any Subsidiary which has been
approved by a majority of the Company's disinterested directors and found in
good faith by such directors to be in the reasonable best interest of the
Company or such Subsidiary, as the case may be, or (iii) customary directors'
fees, indemnification and similar arrangements.
SECTION 4.13. Limitation on Conduct of Business.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in the conduct of any business other than the Ice Business on a basis
consistent with the conduct of such business as it is conducted on the Issue
Date.
SECTION 4.14. Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (a) pay dividends or make any other distributions
on its Capital Stock; (b) make loans or advances or pay any Indebtedness or
other obligation owed to the Company or to any Subsidiary of the Company; or
(c) transfer any of its property or assets to the Company or to any Subsidiary
of the Company (each such encumbrance or restriction in clause (a), (b), or (c)
a "Payment Restriction"), except for such encumbrances or restrictions existing
under or by reason of: (1) applicable law; (2) this Indenture; (3) customary
non-assignment provisions of any lease or license agreements or similar
agreements entered into the ordinary course of business of any Subsidiary of
the Company; (4) any instrument governing Acquired Indebtedness Incurred in
accordance with paragraph (b) of Section 4.04; provided that such encumbrance
or restriction is not, and will not be, applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property or
assets of the Person, becoming a Subsidiary of the Company; (5) agreements
existing on the Issue Date to the extent and in the manner such agreements are
in effect on the Issue Date; (6) any restriction or encumbrance contained in
contracts for the sale of assets to be consummated in accordance with this
Indenture solely in respect of the assets to be sold pursuant to such contract;
(7) any restrictions on the sale or other disposition or encumbrance of any
property securing Indebtedness as a result of a Permitted Lien on such
property; (8) any agreement relating
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to an acquisition of property, so long as the encumbrances or restrictions in
any such agreement relate solely to the property so acquired and are not or
were not created in anticipation of or in connection with the acquisition
thereof; (9) the Credit Facilities; or (10) any encumbrance or restriction
contained in Permitted Indebtedness or Permitted Refinancing Indebtedness
Incurred to Refinance the Indebtedness Incurred pursuant to an agreement
referred to in clauses (4), (5) or (9) above; provided, that the provisions
relating to such encumbrance or restriction contained in any such Permitted
Refinancing Indebtedness are no less favorable to the Company or to the Holders
in any material respect in the reasonable and good faith judgment of the Board
of Directors of the Company than the provisions relating to such encumbrance or
restriction contained in agreements referred to in such clause (4), (5) or (9).
SECTION 4.15. Limitation on Liens.
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, affirm or
suffer to exist or become effective any Lien of any kind except for Permitted
Liens, upon any of their respective property or assets, whether now owned or
acquired after the Issue Date, or any income, profits or proceeds therefrom, to
secure (a) any Indebtedness of the Company or such Subsidiary (if it is not
also a Subsidiary Guarantor), unless prior to, or contemporaneously therewith,
the Securities are equally and ratably secured, or (b) any Indebtedness of any
Subsidiary Guarantor, unless prior to, or contemporaneously therewith, the
Subsidiary Guarantees are equally and ratably secured; provided, however, that
if such Indebtedness is expressly subordinated to the Securities or the
Subsidiary Guarantees, the Lien securing such Indebtedness will be subordinated
and junior to the Lien securing the Securities or the Subsidiary Guarantees, as
the case may be, with the same relative priority as such Indebtedness has with
respect to the Securities or the Subsidiary Guarantees. The foregoing covenant
will not apply to any Lien securing Acquired Indebtedness, provided that any
such Lien extends only to the property or assets that were subject to such Lien
prior to the related acquisition by the Company or such Subsidiary and was not
created, incurred or assumed in contemplation of such transaction. The
incurrence of additional secured Indebtedness by the Company and its
Subsidiaries is subject to further limitations on the incurrence of
Indebtedness as described under Section 4.04.
SECTION 4.16. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Securities shall have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's
Securities on a Business Day (the "Change of Control Payment Date") not more
than 60 nor less than 30 days following such Change of Control, pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest thereon to the date of purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, the Trustee, at the written
direction of the Company, shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and the
Company's offer to repurchase Securities pursuant to the procedures required by
Section 3.08 and 4.16 and described in such notice. The Company shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Securities
as a result of a Change of Control.
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(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment all Securities or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with
the Paying Agent an amount equal to the Change of Control Payment in respect of
all Securities or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted, together with an Officers'
Certificate stating the aggregate principal amount of Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail
or otherwise deliver to each Holder of Securities so tendered the Change of
Control Payment for such Securities, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Security equal in principal amount to any unpurchased portion of the
Securities surrendered, if any; provided that each such new Security shall be
in a principal amount of $1,000 or an integral multiple thereof. The Company
shall publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
(c) The Change of Control provisions described above shall be
applicable whether or not any other provisions of this Indenture are
applicable.
(d) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control
Offer made by the Company and purchases all Securities validly tendered and not
withdrawn under such Change of Control Offer.
SECTION 4.17. Asset Sales.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in an Asset Sale unless (i) the Company or the Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board of Directors of
the Company set forth in an Officers' Certificate delivered to the Trustee) of
the assets or Properties issued or sold or otherwise disposed of and (ii) at
least 85% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash or Cash Equivalents; provided that the amount
of (x) any liabilities (as shown on the Company's or such Subsidiary's most
recent balance sheet) of the Company or any Subsidiary (other than contingent
liabilities and liabilities that are Subordinated Indebtedness or otherwise by
their terms subordinated to the Securities or the Subsidiary Guarantees) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Subsidiary from further
liability and (y) any notes or other obligations received by the Company or any
such Subsidiary from such transferee that are converted by the Company or such
Subsidiary into cash within 180 days of closing such Asset Sale (to the extent
of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 180 days after the receipt of any Net Cash Proceeds from any
Asset Sale, the Company may (i) apply all or any of the Net Cash Proceeds
therefrom to repay Indebtedness (other than Subordinated Indebtedness) of the
Company or any Subsidiary, provided, in each case, that the related loan
commitment of any revolving credit facility or other borrowing (if any) is
thereby permanently reduced by the amount of such Indebtedness so repaid, or
(ii) invest all or any part of
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the Net Cash Proceeds thereof in properties and other capital assets that
replace the properties or other capital assets that were the subject of such
Asset Sale or in other properties or other capital assets that will be used in
the Ice Business. Pending the final application of any such Net Cash Proceeds,
the Company may temporarily reduce borrowings under any revolving credit
facility or otherwise invest such Net Cash Proceeds in any manner that is not
prohibited by this Indenture. Any Net Cash Proceeds from an Asset Sale that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Available Proceeds Amount." When the aggregate
Available Proceeds Amount exceeds $2,500,000, the Company shall make an offer
to purchase, from all Holders of the Securities and any then outstanding Pari
Passu Indebtedness required to be repurchased or repaid on a permanent basis in
connection with an Asset Sale, an aggregate principal amount of Securities and
any such Pari Passu Indebtedness equal to such Available Proceeds Amount as
follows:
(i) (A) The Company shall make an offer to purchase (an "Asset
Proceeds Offer") from all Holders of the Securities in accordance with
the procedures set forth in this Indenture the maximum principal amount
(expressed as a multiple of $1,000) of Securities that may be purchased
out of an amount (the "Payment Amount") equal to the product of such
Available Proceeds Amount multiplied by a fraction, the numerator of
which is the outstanding principal amount of the Securities and the
denominator of which is the sum of the outstanding principal amount of
the Securities and such Pari Passu Indebtedness, if any (subject to
proration in the event such amount is less than the aggregate Offered
Price (as defined in clause (ii) below) of all Securities tendered), and
(B) to the extent required by any such Pari Passu Indebtedness and
provided there is a permanent reduction in the principal amount of such
Pari Passu Indebtedness, the Company shall make an offer to purchase
such Pari Passu Indebtedness (a "Pari Passu Offer") in an amount (the
"Pari Passu Indebtedness Amount") equal to the excess of the Available
Proceeds Amount over the Payment Amount.
(ii) The offer price for the Securities shall be payable in
cash in an amount equal to 100% of the principal amount of the
Securities tendered pursuant to an Asset Proceeds Offer, plus accrued
and unpaid interest, if any, to the date such Asset Proceeds Offer is
consummated (the "Offered Price"), in accordance with the procedures set
forth in this Indenture. To the extent that the aggregate Offered Price
of the Securities tendered pursuant to an Asset Proceeds Offer is less
than the Payment Amount relating thereto or the aggregate amount of the
Pari Passu Indebtedness that is purchased or repaid pursuant to the Pari
Passu Offer is less than the Pari Passu Indebtedness Amount (such
shortfall constituting an "Asset Proceeds Deficiency"), the Company may
use such Asset Proceeds Deficiency, or a portion thereof, for general
corporate purposes, subject to the limitations of Section 4.03.
(iii) If the aggregate Offered Price of Securities validly
tendered and not withdrawn by Holders thereof exceeds the Payment
Amount, Securities to be purchased will be selected on a pro rata basis.
Upon completion of such Net Proceeds Offer and Pari Passu Offer, the
amount of Available Proceeds Amount shall be reset to zero.
The Company shall not permit any Subsidiary to enter into or suffer to
exist any agreement (excluding Permitted Liens) that would place any
restriction of any kind (other than pursuant to law or regulation) on the
ability of the Company to make an Asset Proceeds Offer following any Asset
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Sale. The Company will comply with Rule 14e-1 under the Exchange Act, and any
other securities laws and regulations thereunder, if applicable, in the event
that an Asset Sale occurs and the Company is required to purchase Securities as
described above.
Any amounts remaining after the purchase of Securities pursuant to an
Asset Sale Offer shall be returned by the Trustee to the Company.
SECTION 4.18. Limitation on Issuances and Sales of Capital Stock of
Subsidiaries.
The Company shall not cause or permit any of its Subsidiaries to issue
or sell any Capital Stock (other than to the Company or to a wholly-owned
Subsidiary of the Company) or permit any Person (other than the Company or a
wholly-owned Subsidiary of the Company) to own or hold any Capital Stock of any
Subsidiary of the Company or any Lien or security interest therein; provided,
however, that this Section 4.18 shall not prohibit the disposition (by sale,
merger or otherwise) of all of the Capitol Stock of a Subsidiary provided any
Net Cash Proceeds therefrom are applied in accordance with Section 4.17.
SECTION 4.19. Limitation on Status as Investment Company.
The Company shall not, nor shall it permit any Subsidiary Guarantor to,
register as an "investment company" (as that term is defined in the Investment
Company Act of 1940, as amended), or otherwise become subject to regulation
under the Investment Company Act of 1940.
SECTION 4.20 Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company or any
Subsidiary, as applicable, may enter into a sale and leaseback transaction if
(i) the Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Indebtedness relating to such sale and leaseback transaction
pursuant to the Consolidated Fixed Charge Coverage Ratio test set forth in
clause (b) of Section 4.04 and (b) incurred a Lien to secure such Indebtedness
pursuant to the covenant described above under Section 4.15, (ii) the gross
cash proceeds of such sale and leaseback transaction are at least equal to the
fair market value (as determined in good faith by the Board of Directors of the
Company and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described under Section 4.17.
SECTION 4.21 Additional Subsidiary Guarantees.
If the Company or any of its Subsidiaries transfers or causes to be
transferred, in one transaction or a series of related transactions, any
property to any Subsidiary that is not a Subsidiary Guarantor, or if the
Company or any of its Subsidiaries shall organize, acquire or otherwise invest
in another Subsidiary having total assets with a book value in excess of
$50,000, then such transferee or acquired or other Subsidiary shall (i) execute
and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Subsidiary shall fully and
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unconditionally guarantee all of the Company's obligations under the Notes and
the Indenture on the terms set forth in the Indenture and (ii) deliver to the
Trustee an Opinion of Counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Subsidiary and constitutes a legal,
valid, binding and enforceable obligation of such Subsidiary. Thereafter, such
Subsidiary shall be a Subsidiary Guarantor for all purposes of the Indenture.
SECTION 4.22 Limitation on Dividends.
The Company will not declare or pay any dividend or make any
distribution (other than dividends or distributions payable solely in Qualified
Capital Stock of the Company) on shares of the Company's Capital Stock to
holders of such Capital Stock.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets.
(a) The Company shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of the Company's assets (determined on a consolidated basis for the Company
and the Company's Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless: (i) either (1) the Company shall be the
surviving or continuing corporation or (2) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
the Person which acquires by sale, assignment, transfer, lease, conveyance or
other disposition the properties and assets of the Company and of the Company's
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be
a corporation organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia and (y) shall expressly
assume, by supplemental indenture (in form and substance satisfactory to the
Trustee), executed and delivered to the Trustee, the due and punctual payment
of the principal of, and premium, if any, and interest on all of the Securities
and the performance of every covenant of the Securities, this Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and, if
applicable, the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness Incurred or
anticipated to be Incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall be
able to Incur at least $1.00 of additional Indebtedness pursuant to paragraph
(b) of Section 4.04 hereof; provided that in determining the Consolidated Fixed
Charge Coverage Ratio of the Company or such Surviving Entity, as the case may
be, such ratio shall be calculated as if the transaction (including the
Incurrence of any Indebtedness or Acquired Indebtedness) took place on the
first day of the Four Quarter Period; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness Incurred or anticipated to be Incurred
and any Lien granted
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in connection with or in respect of the transaction) no Default and no Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this Indenture
and that all conditions precedent in this Indenture relating to such
transaction have been satisfied.
(b) Upon any such consolidation, merger, conveyance, lease or
transfer in accordance with the foregoing, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made will succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor had been named as the Company therein, and
thereafter (except in the case of a sale, assignment, transfer, lease,
conveyance or other disposition) the predecessor corporation will be relieved
of all further obligations and covenants under this Indenture and the
Securities.
(c) Each Subsidiary Guarantor (other than any Subsidiary Guarantor
whose Subsidiary Guarantee is to be released in accordance with the terms of
the Guarantee and this Indenture in connection with any transaction complying
with the provisions of Section 4.17) will not, and the Company will not cause
or permit any Subsidiary Guarantor to, consolidate with or merge with or into
any Person or sell, assign, transfer, care, convey or otherwise dispose of all
or substantially all of its assets, other than the Company or any other
Subsidiary Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Subsidiary Guarantor), or to which
such disposition shall have been made, is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) such entity assumes by supplemental indenture all of the
obligations of the Subsidiary Guarantor on the Subsidiary Guarantee;
(iii) immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing; and (iv) immediately after
giving effect to such transaction and the use of any net proceeds therefrom on
a pro forma basis, the Company could satisfy the provisions of clause (a)(ii)
of this Section 5.01. Any merger or consolidation of a Subsidiary Guarantor
with and into the Company (with the Company being the surviving entity) or
another Subsidiary Guarantor need only comply with clause (a)(iv) of this
Section 5.01.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Security when the
same becomes due and payable and such failure continues for a period of
30 days; or
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(2) the Company fails to pay the principal of or premium on
any Security, when such principal or premium becomes due and payable,
whether at maturity, upon redemption or otherwise (including the failure
to make a payment to purchase securities properly tendered pursuant to a
Change of Control Offer or an Asset Proceeds Offer); or
(3) the Company defaults in the observance or performance of
any other covenant or agreement contained in this Indenture or any
Security Document which default continues for a period of 30 days after
the Company receives written notice specifying the default from the
Trustee or from Holders of at least 25% in principal amount of
outstanding Securities (except in the case of a default with respect to
Section 5.01 hereof, which will constitute an Event of Default with
notice but without passage of time); or
(4) the Company defaults under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company or of any
Subsidiary of the Company (or the payment of which is guaranteed by the
Company or any Subsidiary of the Company) which default (a) is caused by
a failure to pay principal of, interest or premium, if any, on such
Indebtedness after any applicable grace period provided in such
Indebtedness on the date of such default (a "payment default"), or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the
maturity of which has been so accelerated, aggregates $1,000,000; or
(5) one or more judgments in an aggregate amount in excess of
$1,000,000 (which are not covered by third-party insurance as to which a
financially sound insurer has not disclaimed coverage) being rendered
against the Company or any of its Subsidiaries and such judgments remain
undischarged, or unstayed or unsatisfied for a period of 60 days after
such judgment or judgments become final and non-appealable; or
(6) the Company or any of its Subsidiaries (A) admits in
writing its inability to pay its debts generally as they become due, (B)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (C) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under
any Bankruptcy Law, (D) consents to the appointment of a Custodian of it
or for substantially all of its property, (E) consents to or acquiesces
in the institution of a bankruptcy or an insolvency proceeding against
it, (F) makes a general assignment for the benefit of its creditors, or
(G) takes any corporate action to authorize or effect any of the
foregoing;
(7) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any of its
Subsidiaries in an involuntary case or proceeding under any Bankruptcy
Law, which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any of its Subsidiaries, (B) appoint a Custodian of the
Company or any of its Subsidiaries or for substantially all of its
property or (C) order the winding-up or liquidation of its affairs, and
such judgment, decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
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(8) any of the Subsidiary Guarantees ceases to be in full
force and effect, or any of the Subsidiary Guarantees is declared to be
null and void and unenforceable or any of the Subsidiary Guarantees is
found to be invalid or any of the Subsidiary Guarantors denies its
liability under its Subsidiary Guarantee (other than by reason of
release of a Subsidiary Guarantor in accordance with the terms of this
Indenture).
The Trustee shall, within 90 days after the occurrence of any Default
actually known to it, give to the Holders notice of such Default; provided
that, except in the case of a Default in the payment of principal of or
interest on any of the Securities, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or Responsible Officers, of
the Trustee in good faith determines that the withholding of such notice is in
the interest of the Holders.
Notwithstanding the foregoing, if an Event of Default specified in
Section 6.01(4) shall have occurred and be continuing, such Event of Default
and any consequential acceleration shall be automatically rescinded if the
Indebtedness that is the subject of such Event of Default has been repaid, or
if the default relating to such Indebtedness is waived or cured and if such
Indebtedness has been accelerated, the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness (provided, in each
case, that such repayment, waiver, cure or rescission is effected within a
period of 10 days from the continuation of such default beyond the applicable
grace period or the occurrence of such acceleration).
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (6) or (7) above with respect to the Company) occurs and is continuing,
then and in every such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the then outstanding Securities may declare the
unpaid principal of, premium, if any, and accrued and unpaid interest on, all
the Securities then outstanding to be due and payable, by a notice in writing
to the Company (and to the Trustee, if given by Holders) and upon such
declaration such principal amount, premium, if any, and accrued and unpaid
interest will become immediately due and payable. If an Event of Default with
respect to the Company specified in clauses (6) or (7) above occurs, all unpaid
principal of, and premium, if any, and accrued and unpaid interest on, the
Securities then outstanding will ipso facto become due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the Securities then outstanding by notice
to the Trustee may rescind an acceleration and its consequences if (i) all
existing Events of Default, other than the non-payment of the principal and
premium, if any, and interest of the Securities which has become due solely by
such declaration of acceleration, have been cured or waived and (ii) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Security holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 2.09, 6.02, 6.07 and 9.02, the Holders of not less
than a majority in principal amount of the outstanding Securities by notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on
any Security as specified in clauses (1) and (2) of Section 6.01. The Company
shall deliver to the Trustee an Officers' Certificate stating that the
requisite percentage of Holders have consented to such waiver and attaching
copies of such consents. When a Default or Event of Default is waived, it is
cured and ceases.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of not less than a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. Subject to Section 7.01,
however, the Trustee may refuse to follow any direction that conflicts with any
law or this Indenture that the Trustee determines may be unduly prejudicial to
the rights of another Security holder, or that may involve the Trustee in
personal liability; provided that the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture or any Security Document, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
any loss or expense caused by taking such action or following such direction.
SECTION 6.06. Limitation on Suits.
Subject to Section 6.07 below, a Security holder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holder or Holders of at least 25% in principal amount
of the outstanding Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to
the Trustee security or indemnity reasonably satisfactory to the Trustee
against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
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(5) during such 60-day period the Holder or Holders of a
majority in principal amount of the outstanding Securities do not give
the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Security holder may not use this Indenture to prejudice the rights of
another Security holder or to obtain a preference or priority over such other
Security holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on a Security, on or
after the respective due dates expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified in
clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of
principal and accrued interest and fees remaining unpaid, together with
interest on overdue principal, in each case at the rate per annum borne by the
Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Security holders
allowed in any judicial proceedings relating to the Company or the Subsidiary
Guarantors, its creditors or its property and shall be entitled and empowered
to collect and receive any monies or other property payable or deliverable on
any such claims and to distribute the same, and any Custodian in any such
judicial proceedings is hereby authorized by each Security holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Security holders, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Security holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Security holder in
any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
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First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities
for principal and interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
Third: to the Company or the Subsidiary Guarantors, as their
respective interests may appear.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Security holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Securities.
SECTION 6.12 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default actually known to the Trustee has occurred
and is continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs. The Trustee will be
under no obligation to exercise any of its rights or powers under this
Indenture at the request of any of the holders of Securities, unless they shall
have offered and, if requested, provided to the Trustee security and indemnity
satisfactory to it.
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(b) Except during the continuance of an Event of Default actually
known to the Trustee:
(1) The Trustee need perform only those duties as are
specifically set forth herein and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions and
such other documents delivered to it and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform, on their face, to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of
such funds is not assured to it or it does not receive security or indemnity
reasonably satisfactory to it in its sole discretion against such risk,
liability, loss, fee or expense which might be incurred by it in compliance
with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company or
any Subsidiary Guarantor. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
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(a) The Trustee may conclusively rely on any document believed
by it to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and an Opinion of Counsel, which shall
conform to the provisions of Section 11.05. The Trustee shall not be
liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
(other than an agent who is an employee of the Trustee) appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee may consult with counsel and the advice or
opinion of such counsel as to matters of law shall be full and complete
authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders shall have offered and, if
requested, provided to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company or any
Subsidiary Guarantor shall be sufficient if signed by an Officer of the
Company or such Subsidiary Guarantor.
(h) Except with respect to Section 4.01 and 4.08 hereof, the
Trustee shall have no duty to inquire as to the performance of the
Company's covenants in Article 4 hereof. In addition, the Trustee shall
not be deemed to have knowledge of any Default or Event of Default
except (i) any event of Default occurring pursuant to Sections 6.01(1)
and 6.01(2) hereof or (ii) any Default or Event of Default of which the
Trustee shall have received written notification or obtained actual
knowledge.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11.
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SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture, the Securities or the Subsidiary
Guarantees, it shall not be accountable for the Company's use of the proceeds
from the Securities, it shall not be responsible for the use or application of
any money by a Paying Agent other than the Trustee and it shall not be
responsible for any statement of the Company in this Indenture or any document
issued in connection with the sale of Securities or any statement in the
Securities other than the Trustee's certificate of authentication. The Trustee
makes no representations with respect to the effectiveness or adequacy of this
Indenture or the validity or perfection, if any, of Liens granted under this
Indenture. The Trustee shall not be responsible for independently ascertaining
or maintaining such validity or perfection, if any, and shall be fully
protected in relying upon certificates and opinions delivered to it in
accordance with the terms of this Indenture.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to each
Security holder, as their names and addresses appear on the Security holder
list described in Section 2.05, notice of the uncured Default or Event of
Default within 90 days after the Trustee receives such notice. Except in the
case of a Default or an Event of Default in payment of principal of, or
interest on, any Security, including the failure to make any payment due on (i)
the Change of Control Payment Date pursuant to a Change of Control Offer or
(ii) the Purchase Date pursuant to a Purchase Offer, the Trustee may withhold
the notice if and so long as the board of directors, the executive committee,
or a trust committee of directors and/or Responsible Officers, of the Trustee
in good faith determines that withholding the notice is in the interest of the
Security holders.
SECTION 7.06. Reports by Trustee to Holders.
This Section 7.06 shall not be operative as a part of this Indenture
until this Indenture is qualified under the TIA, and, until such qualification,
this Indenture shall be construed as if this Section 7.06 were not contained
herein.
Within 60 days after each April 15 beginning with April 15, 1998, the
Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Security holder a brief report dated as of such May 15 that complies with
TIA Section 313(a). The Trustee also shall comply with TIA Sections 313(b),
313(c) and 313(d).
A copy of each report at the time of its mailing to Security holders
shall be mailed to the Company and filed with the SEC and each securities
exchange, if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed on
any securities exchange or of any delisting thereof.
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SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder (which shall be agreed to from time to
time by the Company and the Trustee). The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall promptly reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for its
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 8.01 hereof.
The Company shall indemnify the Trustee and each predecessor trustee
for, and hold it harmless against, any loss, liability, claim, damage or
expense incurred by the Trustee without negligence or willful misconduct on its
part arising out of or in connection with the administration of this trust and
its duties under this Indenture, including the reasonable expenses and
attorneys' fees of defending itself against any claim of liability arising
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. However, the failure by
the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee
shall cooperate in the defense (and may employ its own counsel) at the
Company's expense. The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee as a result of the
violation of this Indenture by the Trustee if such violation arose from the
Trustee's negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a senior claim prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (6) or (7) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.07 and any claim arising hereunder shall survive the
resignation or removal of any Trustee, the discharge of the Company's
obligations pursuant to Article Eight and any rejection or termination under
any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee
in writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
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(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in principal
amount of the Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer, after payment of all sums then owing
to the Trustee pursuant to Section 7.07, all property held by it as Trustee to
the successor Trustee, subject to its rights under Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Security holder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Security holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another Person,
the resulting, surviving or transferee corporation without any further act
shall, if such resulting, surviving or transferee Person is otherwise eligible
hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirement
of TIA Sections 310(a)(1) and 310(a)(5). The Trustee and/or its ultimate
parent entity shall have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition. The
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Trustee shall have a combined capital and surplus of at least $150,000 as set
forth in its most recent published annual report of condition. The Trustee
shall comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding, if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee, in its capacity as Trustee hereunder shall comply with TIA
Section 311(a), excluding any creditor relationship listed in TIA Section
311(b). A Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at any time,
with respect to the Securities, elect to have either paragraph (b) or paragraph
(c) below be applied to the outstanding Securities upon compliance with the
conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company and the Subsidiary Guarantors
shall be deemed to have been released and discharged from their respective
obligations with respect to the outstanding Securities and the Subsidiary
Guarantees on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections and matters
under this Indenture referred to in (i) and (ii) below, and to have satisfied
all their respective obligations under such Securities, the Subsidiary
Guarantees and this Indenture, except for the following which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders
of outstanding Securities to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of and interest on such Securities when such payments
are due and (ii) obligations listed in Section 8.03, subject to compliance with
this Section 8.01. The Company may exercise its option under this paragraph
(b) notwithstanding the prior exercise of its option under paragraph (c) below
with respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company and the Subsidiary Guarantors
shall be released and discharged from their respective obligations under any
covenant contained in Article 5 and in Sections 4.03 through 4.22 with respect
to the outstanding Securities on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Securities
shall thereafter be deemed to be not "outstanding" for the purpose of any
direction, waiver, consent or declaration or act of Holders
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(and the consequences of any thereof) in connection with such covenants, but
shall continue to be deemed "outstanding" for all other purposes hereunder.
For this purpose, such Covenant Defeasance means that, with respect to the
outstanding Securities, the Company and any Subsidiary Guarantor may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 6.01(3), nor shall any event referred to in
Section 6.01(4) or (5) thereafter constitute a Default or an Event of Default
thereunder but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Company shall have irrevocably deposited or caused to
be deposited, in trust, with the Trustee, for the benefit of the
Holders, U.S. Legal Tender or direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit
of the United States of America is pledged ("U.S. Government
Obligations") maturing as to principal and interest in such amounts and
at such times as are sufficient, without consideration of the
reinvestment of such interest and after payment of all Federal, state
and local taxes or other charges or assessments in respect thereof
payable by the Trustee, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification
thereof (in form and substance reasonably satisfactory to the Trustee)
delivered to the Trustee, to pay the principal of, premium, if any, and
interest on all the outstanding Securities on the dates on which any
such payments are due and payable in accordance with the terms of this
Indenture and of the Securities (whether at stated maturity or on the
applicable redemption date);
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
(3) The Trustee shall have received Officers' Certificates
stating that no Default or Event of Default or event which with notice
or lapse of time or both would become a Default or an Event of Default
with respect to the Securities shall have occurred and be continuing on
the date of such deposit or, insofar as Section 6.01(6) or (7) is
concerned, at any time during the period ending on the 91st day after
the date of such deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period);
(4) The Trustee shall have received Officers' Certificates
stating that such deposit will not result in a Default under this
Indenture or a breach or violation of, or constitute a default under,
any other material instrument or agreement to which the Company or any
of its Subsidiaries is a party or by which it or its property is bound;
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(5) (i) In the event the Company elects paragraph (b) hereof,
the Company shall deliver to the Trustee an Opinion of Counsel in the
United States, in form and substance reasonably satisfactory to the
Trustee to the effect that (A) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (B)
since the Issue Date, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall state that Holders of the Securities will
not recognize income gain or loss for Federal income tax purposes as a
result of such deposit and the defeasance contemplated hereby and will
be subject to Federal income taxes in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred, or (ii) in the event the Company elects paragraph (c) hereof,
the Company shall deliver to the Trustee an Opinion of Counsel in the
United States, in form and substance reasonably satisfactory to the
Trustee, to the effect that Holders of the Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit and the defeasance contemplated hereby and will be subject to
Federal income tax in the same amounts and in the same manner and at the
same times as would have been the case if such deposit and defeasance
had not occurred;
(6) The deposit shall not result in the Company, the Trustee
or the trust becoming or being deemed to be an "investment company"
under the Investment Company Act of 1940;
(7) The Company shall have delivered to the Trustee an
Officer's Certificate, in form and substance reasonably satisfactory to
the Trustee, stating that the deposit under clause (1) was not made by
the Company or any Subsidiary with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or any
Subsidiary or others;
(8) The Company shall have delivered to the Trustee an Opinion
of Counsel, in form and substance reasonably satisfactory to the
Trustee, to the effect that, (A) the trust funds will not be subject to
any rights of holders of Indebtedness, including, without limitation,
those rights arising under this Indenture, and (B) the 91st day
following the deposit after the trust funds will not be subject to any
applicable Bankruptcy Law; provided, however, that if a court were to
rule under any such law in any case or proceeding that the trust funds
remained property of the Company, no opinion needs to be given as to the
effect of such laws on the trust funds except the following: (A)
assuming such trust funds remained in the Trustee's possession prior to
such court ruling to the extent not paid to Holders of Securities, the
Trustee will hold, for the benefit of the Holders of Securities, a valid
and enforceable security interest in such trust funds that is not
avoidable in bankruptcy or otherwise, subject only to principles of
equitable subordination, (B) the Holders of Securities will be entitled
to receive adequate protection of their interests in such trust funds if
such trust funds are used, and (C) no property, rights in property or
other interests granted to the Trustee or the Holders of Securities in
exchange for or with respect to any of such funds will be subject to any
prior rights of any other person, subject only to prior Liens granted
under Section 364 of Title 11 of the U.S. Bankruptcy Code (or any
section of any other Bankruptcy Law having the same effect), but still
subject to the foregoing clause (B); and
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(9) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by
this Section 8.01 have been complied with.
In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Company must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Company.
SECTION 8.02. Satisfaction and Discharge.
This Indenture shall upon the request of the Company cease to be of
further effect (except as provided in Section 8.03) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(a) either
(i) all Securities theretofore authenticated and delivered
(other than (A) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 2.07 and (B)
Securities for whose payment money has been deposited in trust with the
Trustee or any Paying Agent and thereafter paid to the Company or
discharged from such trust) have been delivered to the Trustee for
cancellation; or
(ii) all such Securities not theretofore delivered to the
Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their maturity
within one year, or
(C) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of clause (A), (B) or (C) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for such purpose money or U.S. Government
Obligations in an amount sufficient (as certified by an independent
public accountant designated by the Company) to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
have become due and payable) or the stated maturity or Redemption Date,
as the case may be;
(b) the Company has paid or caused to paid all other sums then
due and payable hereunder by the Company;
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(c) no Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit and after giving effect to such deposit; and
(d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
SECTION 8.03. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture and of
the Securities referred to in Section 8.01 or 8.02, the respective obligations
of the Company and the Trustee under Sections 2.02, 2.03, 2.04, 2.05, 2.06,
2.07, 2.08. 2.10, 2.12, 3.01, 3.02, 3.03, 3.04, 3.05, 3.06, 3.07(a), 4.02,
6.07, Article Seven, Sections 8.04, 8.05, 8.06 and 8.07 shall survive until the
Securities are no longer outstanding, and thereafter the obligations of the
Company and the Trustee under Sections 7.07, 8.04, 8.05, 8.06 and 8.07 shall
survive. Nothing contained in this Article Eight shall abrogate any of the
obligations or duties of the Trustee under this Indenture.
SECTION 8.04. Acknowledgment of Discharge by Trustee.
Subject to Section 8.07, after (i) the conditions of Section 8.01 or
8.02 have been satisfied, (ii) the Company has paid or caused to be paid all
other sums payable hereunder by the Company and (iii) the Company has delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified in Section 8.03.
SECTION 8.05. Application of Trust Assets.
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it pursuant to this Article Eight in the irrevocable
trust established pursuant to Section 8.01 or 8.02. The Trustee shall apply
the deposited U.S. Legal Tender or the U.S. Government Obligations, together
with earnings thereon, either directly or through the Paying Agent, in
accordance with this Indenture to the payment of principal of and interest on
the Securities. The U.S. Legal Tender or U.S. Government Obligations so held
in trust and deposited with the Trustee in compliance with Section 8.01 or 8.02
shall not be part of the trust estate under this Indenture, but shall
constitute a separate trust fund for the benefit of all Holders entitled
thereto.
SECTION 8.06. Repayment to the Company or Subsidiary Guarantors; Unclaimed
Money.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to the
Company, or if deposited with the Trustee by any Subsidiary Guarantor, to such
Subsidiary Guarantor, upon receipt by the Trustee of an Officers' Certificate,
any excess money, determined in accordance with Section 8.01, held by it at any
time. The Trustee and the Paying Agent shall pay to the Company or any
Subsidiary Guarantor, as the case may be, upon receipt by the Trustee or the
Paying Agent, as the
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case may be, of an Officers' Certificate, any money held by it for the payment
of principal, premium, if any, or interest that remains unclaimed for one year
after payment to the Holders is required; provided, however, that the Trustee
and the Paying Agent before being required to make any payment may, but need
not, at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that after a date
specified therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the Company of any Subsidiary
Guarantor, as the case may be, Security holders entitled to money must look
solely to the Company for payment as general creditors unless an applicable
abandoned property law designates another person, and all liability of the
Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
then and only then the Company's and each Subsidiary Guarantor's, if any,
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had been made pursuant to this Indenture until
such time as the Trustee is permitted to apply all such money or U.S.
Government Obligations in accordance with this Indenture provided, however,
that if the Company or the Subsidiary Guarantors, as the case may be, have made
any payment of principal of, premium, if any, or interest on any Securities
because of the reinstatement of its obligations, the Company or the Subsidiary
Guarantors, as the case may be, shall be, subrogated to the rights of the
holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company and each Subsidiary Guarantor, when authorized by a Board
Resolution, and the Trustee, together, may amend or supplement this Indenture
or the Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to evidence the succession in accordance with Article V
hereof of another Person to the Company and the assumption by any such
successor of the covenants of the Company herein and in the Securities;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
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(4) to make any other change that does not materially
adversely affect the rights of any Securityholders hereunder; or
(5) to comply with any requirements of the SEC in connection
with the qualification of this Indenture under the TIA; or
(6) to add or release any Subsidiary Guarantor pursuant to the
terms of this Indenture; or
(7) to evidence and provide for the acceptance or appointment
hereunder by a successor Trustee with respect to the Securities.
provided that the Company has delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company and each Subsidiary Guarantor, when
authorized by a Board Resolution, and the Trustee, together, with the written
consent of the Holder or Holders of at least a majority in aggregate principal
amount of the outstanding Securities, may amend or supplement this Indenture,
or the Securities, without notice to any other Securityholders. Subject to
Section 6.07, the Holder or Holders of a majority in aggregate principal amount
of the outstanding Securities may waive compliance by the Company with any
provision of this Indenture, or the Securities without notice to any other
Securityholder. Without the consent of each Securityholder affected hereby,
however, no amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may:
(1) reduce the principal amount of Securities whose Holders
must consent to an amendment, supplement or waiver of any provision of
this Indenture, the Securities or the Subsidiary Guarantees;
(2) reduce the rate or change the time for payment of
interest, including default interest, on any Security;
(3) reduce the principal amount of any Security;
(4) change the Maturity Date of any Security, or change the
date on which any Securities may be subject to redemption or repurchase
or reduce the redemption price or repurchase price therefor;
(5) make any change in provisions of this Indenture protecting
the right of each Holder to receive payment of principal of and interest
on such Security on or after the due date thereof or to bring suit to
enforce such payment, or permitting Holders of a majority in principal
amount of the Securities to waive Defaults or Events of Default;
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(6) make any changes in Section 6.04, 6.07 or this Section
9.02;
(7) make the principal of, or the interest on any Security
payable in money other than as provided for in this Indenture, the
Securities and the Guarantees as in effect on the date hereof;
(8) affect the ranking of the Securities or the Guarantees, in
each case in a manner adverse to the Holders;
(9) amend, modify or change the obligation of the Company to
make or consummate a Change of Control Offer, a Purchase Offer or waive
any default in the performance thereof or modify any of the provisions
or definitions with respect to any such offers; or
(10) release any Subsidiary Guarantor from any of its
obligations under its Subsidiary Guarantee or the Indenture otherwise
than in accordance with the terms of the Indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Compliance with TIA.
From the date on which this Indenture is qualified under the TIA, every
amendment, waiver or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those
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persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to revoke any consent
previously given, whether or not such persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 120
days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (10) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company
or the Trustee so determines, the Company in exchange for the Security shall
issue and the Trustee shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate notation or issue a new
security shall not affect the validity of such amendment, supplement or waiver.
SECTION 9.06. Trustee to Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine provided that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects
the Trustee's own rights, duties or immunities under this Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel and an Officers' Certificate each stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article Nine is authorized or permitted by this Indenture and constituted the
legal, valid and binding obligations of the Company enforceable in accordance
with its terms. Such Opinion of Counsel shall be at the expense of the
Company, and the Trustee shall have a lien under Section 7.07 for any such
expense.
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee.
Each Subsidiary Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Subsidiary
Guarantee") to each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, the Securities or
the Obligations of the Company hereunder or thereunder, that: (i) the
principal of and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue principal, if any,
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and interest on any interest, to the extent lawful, of the Securities and all
other Obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (ii) in case of any extension of time of
payment or renewal of any Securities or of any such other obligations, the same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, subject to any applicable grace period,
whether at stated maturity, by acceleration or otherwise, subject, however, in
the case of clauses (i) and (ii) above, to the limitations set forth in Section
10.03. Each Subsidiary Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, and action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that this
Subsidiary Guarantee will not be discharged except by complete performance of
the obligations contained in the Securities, this Indenture and in this
Subsidiary Guarantee. If any Security holder or the Trustee is required by any
court or otherwise to return to the Company, any Subsidiary Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or any Subsidiary Guarantor, any amount paid by the Company or any
Subsidiary Guarantor to the Trustee or such Security holder, the Subsidiary
Guarantees, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Subsidiary Guarantor further agrees that, as between
each Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of the Subsidiary
Guarantees, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any acceleration of such obligations as provided in
Article Six, such obligations (whether or not due and payable) shall forthwith
become due and payable by each Subsidiary Guarantor for the purpose of the
Subsidiary Guarantees. A Subsidiary Guarantee shall not become valid or
obligatory for any purpose with respect to a Security unless the certificate of
authentication on such Security shall have been signed by or on behalf of the
Trustee.
SECTION 10.02. Severability.
In case any provision of the Subsidiary Guarantees shall be invalid,
illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.03. Limitation of Subsidiary Guarantor's Liability.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar Federal or state law. To effectuate the foregoing intention,
the Holders and such
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Subsidiary Guarantor hereby irrevocably agree that the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Subsidiary Guarantee or pursuant to Section 10.05, result in the
obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not
constituting such fraudulent transfer or conveyance under federal or state law.
SECTION 10.04. Subsidiary Guarantors May Consolidate, etc., on Certain Terms.
(a) Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Subsidiary Guarantor with or
into the Company or another Subsidiary Guarantor or shall prevent any sale of
assets or conveyance of the property of a Subsidiary Guarantor as an entirety
or substantially as an entirety, to the Company or another Subsidiary
Guarantor. Upon any such consolidation, merger, sale or conveyance, the
Subsidiary Guarantee given by such Subsidiary Guarantor shall no longer have
any force or effect.
(b) Except as set forth in Article Four, Article Five hereof and
Section 10.04(c), nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Subsidiary Guarantor
with or into other Persons other than the Company or another Subsidiary
Guarantor (whether or not affiliated with the Subsidiary Guarantor) or shall
prevent any sale of assets, or conveyance of the property, of a Subsidiary
Guarantor as an entirety or substantially as an entirety, to Persons other than
the Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor); provided, however, that, (i) immediately after such
transaction, and giving effect thereto such transaction does not (a) violate
any covenants set forth herein or (b) result in a Default or Event of Default
under this Indenture that is continuing, and (ii) upon any such consolidation,
merger, sale or conveyance, the Subsidiary Guarantee set forth in this Article
Ten, and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed by such Subsidiary
Guarantor, shall be expressly assumed (in the event that the Subsidiary
Guarantor is not the surviving Person in the merger), by supplemental indenture
satisfactory in form to the Trustee, executed and delivered to the Trustee, by
the Person formed by such consolidation, or into which the Subsidiary Guarantor
shall have merged, or by the Person that shall have acquired such assets or
property. In the case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by supplemental indenture
executed and delivered to the Trustee and satisfactory in form to the Trustee
of the due and punctual performance of all of the covenants and conditions of
this Indenture to be performed by the Subsidiary Guarantor, such successor
Person shall succeed to and be substituted for the Subsidiary Guarantor with
the same effect as if it had been named herein as a Subsidiary Guarantor;
provided, however, that solely for purposes of computing amounts described in
subclause (iii) of the first paragraph of Section 4.03 any such successor
Person shall only be deemed to have succeeded to and be substituted for any
Subsidiary Guarantor with respect to periods subsequent to the effective time
of such merger, consolidation or transfer of assets.
(c) Upon the sale or disposition (whether by merger, stock purchase,
asset sale or otherwise) of a Subsidiary Guarantor (or all or substantially all
its assets) to an entity which is not a Subsidiary of the Company and which
sale or disposition is otherwise in compliance with the terms
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of this Indenture (including, without limitation, Sections 4.17, 4.20 and
4.21), such Subsidiary Guarantor shall be deemed released from all obligations
under this Article Ten without any further action required on the part of the
Trustee or any Holder; provided, however, that any such termination shall occur
only to the extent that all obligations of such Subsidiary Guarantor under all
of its guarantees of, and under all of its pledges of assets or other security
interests which secure, any other Indebtedness of the Company shall also
terminate upon such release, sale or transfer.
The Trustee shall deliver an appropriate instrument or instruments
evidencing such release upon receipt of a request by the Company accompanied by
an Officers' Certificate and Opinion of Counsel certifying as to the compliance
with this Section 10.04. Any Subsidiary Guarantor not so released remains
liable for the full amount of principal of and interest on the Securities as
provided in this Article Twelve.
SECTION 10.05. Contribution.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under the Subsidiary Guarantee, such Funding Guarantor
shall be entitled to a contribution from all other Subsidiary Guarantors in a
pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor
(including the Funding Guarantor) for all payments, damages and expenses
incurred by that Funding Guarantor in discharging the Company's obligations
with respect to the Securities or any other Subsidiary Guarantor's obligations
with respect to the Subsidiary Guarantee. "Adjusted Net Assets" of such
Subsidiary Guarantor at any date shall mean the lesser of the amount by which
(x) the fair value of the property of such Subsidiary Guarantor exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date (other than liabilities of such Subsidiary
Guarantor under Indebtedness Subordinated to such Subsidiary Guarantor's
Subsidiary Guarantee)), but excluding liabilities under the Subsidiary
Guarantee, of such Subsidiary Guarantor at such date and (y) the present fair
salable value of the assets of such Subsidiary Guarantor at such date exceeds
the amount that will be required to pay the probable liability of such
Subsidiary Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date and after giving effect
to any collection from any Subsidiary of such Subsidiary Guarantor in respect
of the obligations of such Subsidiary under the Subsidiary Guarantee),
excluding debt in respect of the Subsidiary Guarantee of such Subsidiary
Guarantor, as they become absolute and matured.
SECTION 10.06. Waiver of Subrogation.
Until all Subsidiary Guarantee Obligations are paid in full each
Subsidiary Guarantor hereby irrevocably waives any claims or other rights which
it may now or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of such Subsidiary Guarantor's
obligations under the Subsidiary Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Securities against the Company, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Company, directly or
indirectly, in cash or
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<PAGE> 76
other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to any
Subsidiary Guarantor in violation of the preceding sentence and the Securities
shall not have been paid in full, such amount shall have been deemed to have
been paid to such Subsidiary Guarantor for the benefit of, and held in trust
for the benefit of, the Holders of the Securities, and shall, forthwith be paid
to the Trustee for the benefit of such Holders to be credited and applied upon
the Securities, whether matured or unmatured, in accordance with the terms of
this Indenture. Each Subsidiary Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
this Indenture and that the waiver set forth in this Section 10.06 is knowingly
made in contemplation of such benefits.
SECTION 10.07. Execution of Subsidiary Guarantee.
To evidence their guarantee to the Security holders set forth in this
Article Ten, the Subsidiary Guarantors hereby agree to execute the Subsidiary
Guarantee in substantially the form included in Exhibit A-l and A-2, which
shall be endorsed on each Security ordered to be authenticated and delivered by
the Trustee. Each Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee set forth in this Article Ten shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Subsidiary Guarantee. Each such Subsidiary Guarantee shall be signed on behalf
of each Subsidiary Guarantor by an Officer (who shall, in each case, have been
duly authorized by all requisite corporate actions) prior to the authentication
of the Security on which it is endorsed, and the delivery of such Security by
the Trustee, after the authentication thereof hereunder, shall constitute due
delivery of such Subsidiary Guarantee on behalf of such Subsidiary Guarantor.
Such signature upon the Subsidiary Guarantee may be by manual or facsimile
signature of such Officer and may be imprinted or otherwise reproduced on the
Subsidiary Guarantee, and in case any such Officer who shall have signed the
Subsidiary Guarantee shall cease to be such officer before the Security on
which such Subsidiary Guarantee is endorsed shall have been authenticated and
delivered by the Trustee or disposed of by the Company, such Security
nevertheless may be authenticated and delivered or disposed of as though the
person who signed the Subsidiary Guarantee had not ceased to be such Officer of
the Subsidiary Guarantor.
SECTION 10.08. Waiver of Stay, Extension or Usury Laws.
Each Subsidiary Guarantor covenants (to the extent that it may lawfully
do so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive each such
Subsidiary Guarantor from performing its Subsidiary Guarantee as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) each such Subsidiary Guarantor hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
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<PAGE> 77
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Sections 310 to 318, inclusively of the TIA,
the imposed duties shall control.
SECTION 11.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
if to the Company or any Subsidiary Guarantor:
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Attention: President
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Attention: Alan Schoenbaum
Facsimile: (210) 224-2035
Telephone: (210) 270-0800
if to the Trustee:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, 27th Floor
Dallas, Texas 75201
Attention: Corporate Trust Department
Facsimile: (214) 754-1303
Telephone: (214) 754-1255
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<PAGE> 78
Each of the Company, the Subsidiary Guarantors and the Trustee by
written notice to each other such person may designate additional or different
addresses for notices to such person. Any notice or communication to the
Company and the Trustee, shall be deemed to have been given or made as of the
date so delivered if personally delivered; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and five (5) calendar days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Security holder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Security holder or any
defect in it shall not affect its sufficiency with respect to other Security
holders. If a notice or communication is mailed in the manner provided above,
it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Security holders may communicate pursuant to TIA Section 312(b) with
other Security holders with respect to their rights under this Indenture, the
Securities or the Subsidiary Guarantees. The Company, the Trustee, the
Registrar and any other person shall have the protection of TIA Section 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee at
the request of the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
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<PAGE> 79
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
provided, however, that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to such other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee, Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 11.07. Legal Holidays.
If a payment date is not a Business Day, payment may be made on the next
succeeding day that is a Business Day and no interest shall accrue for the
period from such Redemption Date to such succeeding Business Day.
SECTION 11.08. Governing Law.
THIS INDENTURE, THE SECURITIES AND THE SUBSIDIARY GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. Each
of the parties hereto agrees to submit to the non-exclusive jurisdiction of the
competent courts of the State of New York sitting in The City of New York in
any action or proceeding arising out of or relating to this Indenture or the
Securities.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
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<PAGE> 80
SECTION 11.10. No Recourse Against Others.
A director, officer, employee, stockholder, partner or incorporator, as
such, of the Company or any Subsidiary Guarantor whether past, present or
future shall not have any liability for any obligations of the Company or such
Subsidiary Guarantor under the Securities, this Indenture or the Subsidiary
Guarantees or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Security holder by accepting a Security
waives and releases all such liability. Such waiver and release are part of
the consideration for the issuance of the Securities.
SECTION 11.11. Successors.
All agreements of the Company and the Subsidiary Guarantors in this
Indenture, the Securities and the Subsidiary Guarantees, as the case may be,
shall bind their respective successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy or counterpart shall be an original, but all of them together shall
represent the same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture, in the
Securities or in the Guarantees shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
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<PAGE> 81
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
PACKAGED ICE, INC.
By:
----------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
U.S. TRUST COMPANY OF TEXAS, N.A., as
Trustee
By:
----------------------------------
Name:
Title:
THE SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC.
By:
----------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
SOUTHCO ICE, INC.
By:
----------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
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<PAGE> 82
PACKAGED ICE MISSION, INC.
By:
----------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
PACKAGED ICE STPI, INC.
By:
----------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
PACKAGED ICE SOUTHWESTERN, INC.
By:
----------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
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<PAGE> 83
SCHEDULE I
SPECIFIED AFFILIATE TRANSACTIONS
[To be Provided by the Company]
<PAGE> 84
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1993, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" ( AS DEFINED IN
RULE 144A PROMULGATED UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)(l), (2), (3) OR (7)
PROMULGATED UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS
BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS,
WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT WITHIN THE MEANING OF
SECTION 1273(a) OF THE INTERNAL REVENUE CODE OF 1986. THE ISSUE PRICE IS
$1,000.00 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE
DISCOUNT IS $171.93 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ISSUE
DATE IS APRIL 17, 1997. THE YIELD TO MATURITY IS APPROXIMATELY 12% COMPOUNDED
SEMIANNUALLY. ORIGINAL ISSUE DISCOUNT WILL BE ALLOCATED BASED ON ACCRUAL
PERIODS ENDING ON EACH DATE ON WHICH AN INTEREST PAYMENT IS DUE AND THE 360
DAYS PER YEAR CONVENTION.
<PAGE> 85
CUSIP No. 695148 AC 0
PACKAGED ICE, INC.
12% Senior Note
due April 15, 2004
No. $
PACKAGED ICE, INC., a Texas corporation (the "Company", which term
includes any successor corporation), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on April
15, 2004.
Interest Payment Dates: April 15 and October 15 commencing October 15,
1997
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
PACKAGED ICE, INC.
[SEAL] By:
----------------------------------
Name:
Title:
Attest:
- ------------------------
Secretary
-2-
<PAGE> 86
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
Dated: U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
By
-----------------------------------
Authorized Signatory
-3-
<PAGE> 87
PACKAGED ICE, INC.
12% Senior Note
due April 15, 2004
1. Interest.
PACKAGED ICE, INC., a Texas corporation (the "Company"), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above, which rate is subject to increase of up to 1.50% per annum in certain
circumstances described in the Registration Rights Agreement dated April 17,
1997 between the Company, the Initial Purchaser and the Subsidiary Guarantors.
The Company will pay interest semi-annually on April 15 and October 15 of each
year (the "Interest Payment Date"), commencing October 15, 1997. Interest on
the Securities will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from April 17, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment.
On each Interest Payment Date, the Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding such
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date, except as provided
in Section 2.17 of the Indenture with respect to defaulted interest. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in New York, New York in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay
principal and interest by wire transfer in same day funds, or, in the case of
Physical Securities, by check payable in such U.S. Legal Tender.
3. Paying Agent and Registrar.
Initially, U.S. Trust Company of Texas, N.A. will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders. The Company or any of its
Subsidiaries may act as Registrar or co-Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as of April
17, 1997 (the "Indenture"), among the Company, the Subsidiary Guarantors and
the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for a statement of them. The
Securities are general unsecured
-4-
<PAGE> 88
obligations of the Company limited in aggregate principal amount to
$50,000,000. Payment on each Security is guaranteed on a senior basis, jointly
and severally, by the Subsidiary Guarantors pursuant to Article Ten of the
Indenture.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after April 15, 2001 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on April 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 ......................... 107.00%
2002 ......................... 103.50%
2003 and thereafter .......... 100.00%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to April 15,
2000, the Company may redeem up to an aggregate of $17.5 million principal
amount of Securities at a redemption price of 112% of the principal amount
thereof, plus accrued and unpaid interest thereon, to the redemption date with
the net proceeds of any Public Equity Offering; provided that at least $32.5
million in aggregate principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and provided, further,
that such redemption occurs within 90 days of the date of the closing of such
Public Equity Offering.
6. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Securities
at a purchase price equal to 101% of the aggregate principal amount thereof
plus accrued and any unpaid interest thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Payment").
Within 30 days following the occurrence of a Change of Control, the Company
shall mail a notice to each Holder describing the transaction or transactions
and setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, the Indenture requires that certain proceeds be used, subject to the
limitations contained therein, to make an offer to all Holders of Securities
(an "Asset Sale Offer") pursuant to Section 4.17 of the Indenture to purchase
certain amounts of Securities in accordance with the procedures set forth in
the Indenture.
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<PAGE> 89
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of redemption
that relates to such Security shall state the portion of the principal amount
thereof to be redeemed. A new Security in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Security. On and after the redemption date,
interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Sinking Fund.
There will be no mandatory sinking fund payments for the Securities.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or
similar governmental charges payable in connection not register the transfer of
or exchange any securities or portions thereof selected for redemption, except
the unredeemed portion of any security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agents will repay the funds to the Company
at its request subject to terms of the Indenture. After that, all liability of
the Trustee and such Paying Agents with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof ("Legal Defeasance"),
and may be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities ("Covenant Defeasance"), in each
case upon satisfaction of certain conditions specified in the Indenture.
-6-
<PAGE> 90
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and its Restricted Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of subsidiaries, to sell assets, to permit restrictions on
dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are
subject to a number of important qualifications and exceptions. The Company
must annually report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of
Securities then outstanding may declare all the Securities to be due and
payable immediately in the manner and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated
to enforce the Indenture or the Securities unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of any
continuing Default or Event of Default (except a Default in payment of
principal or interest, including an accelerated payment) if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
-7-
<PAGE> 91
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The wavier and
release are part of the consideration for the issuance of the securities.
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
Packaged Ice, Inc., 8572 Katy Freeway, Suite 101, Houston, Texas 77024, Attn:
President.
-8-
<PAGE> 92
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the "Indenture")
referred to in the Security upon which this notation is endorsed and each
hereinafter referred to as a "Subsidiary Guarantor," which term includes any
successor Person under the Indenture) have unconditionally guaranteed on a
senior basis (such guarantee by each Subsidiary Guarantor being referred to
herein as the "Guarantee") (i) the due and punctual payment of the principal of
and interest on the Securities, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal
and interest, if any, on the Securities, to the extent lawful, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee all in accordance with the terms set forth in Article Ten of the
Indenture and (ii) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Subsidiary Guarantor shall have any liability under
the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC.
SOUTHCO ICE, INC.
PACKAGED ICE MISSION, INC.
PACKAGED ICE STPI, INC.
PACKAGED ICE SOUTHWESTERN, INC.
By:
----------------------------------
Name:
Title:
-9-
<PAGE> 93
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Security (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) ____________, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.15 of the Indenture shall have
been satisfied.
Dated: Signed:
---------------- --------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-10-
<PAGE> 94
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
---------------- ----------------------------------------------------
NOTICE: To be executed by an executive officer
-11-
<PAGE> 95
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 4.16 or 4.17 of the Indenture, check the appropriate box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by the
Company pursuant to Sections 4.16 or 4.17 of the Indenture, state the amount:
$ _______________________
(multiple of $1,000)
Date: Your Signature:
---------------- ------------------------------
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-12-
<PAGE> 96
EXHIBIT A-2
[FORM OF SERIES B SECURITY]
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT WITHIN THE MEANING OF
SECTION 1273(a) OF THE INTERNAL REVENUE CODE OF 1986. THE ISSUE PRICE IS
$1,000.00 FOR EACH $1,000 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE
DISCOUNT IS $171.93 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ISSUE
DATE IS APRIL 17, 1997. THE YIELD TO MATURITY IS APPROXIMATELY 12% COMPOUNDED
SEMIANNUALLY. ORIGINAL ISSUE DISCOUNT WILL BE ALLOCATED BASED ON ACCRUAL
PERIODS ENDING ON EACH DATE ON WHICH AN INTEREST PAYMENT IS DUE AND THE 360
DAYS PER YEAR CONVENTION.
PACKAGED ICE, INC. CUSIP No. 695148 AD 8
12% Senior Note
due April 15, 2004
No. $
PACKAGED ICE, INC., a Texas corporation (the "Company", which term
includes any successor corporation), for value received promises to pay to
or registered assigns, the principal sum of
Dollars, on April 15, 2004.
Interest Payment Dates: April 15 and October 15 commencing October 15,
1997
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
PACKAGED ICE, INC.
[SEAL] By:
----------------------------------
Name:
Attest: Title:
- ------------------------
Secretary
<PAGE> 97
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
Dated: U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
By
-----------------------------------
Authorized Signatory
-2-
<PAGE> 98
PACKAGED ICE, INC.
12% Senior Note
due April 15, 2004
1. Interest.
PACKAGED ICE, INC., a Texas corporation (the "Company"), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above. The Company will pay interest semi-annually on April 15 and October 15
of each year (the "Interest Payment Date"), commencing October 15, 1997.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from April 17, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
On each Interest Payment Date, the Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding such
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in New York, New York in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay
principal and interest by wire transfer in same day funds, or, in the case of
Physical Securities, by check payable in such U.S. Legal Tender.
3. Paying Agent and Registrar.
Initially, U.S. Trust Company of Texas, N.A. will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to the Holders. The Company or any of its
Subsidiaries may act as Registrar or co-Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as of April
17, 1997 (the "Indenture"), among the Company, the Subsidiary Guarantors and
the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for a statement of them. The
Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $50,000,000. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Subsidiary
Guarantors pursuant to Article Ten of the Indenture.
-3-
<PAGE> 99
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after April 15, 2001 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on April 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 ............................ 107.00%
2002 ............................ 103.50%
2003 and thereafter ............. 100.00%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to April 15,
2000, the Company may redeem up to an aggregate of $17.5 million principal
amount of Securities at a redemption price of 112% of the principal amount
thereof, plus accrued and unpaid interest thereon, to the redemption date with
the net proceeds of any Public Equity Offering; provided that at least $32.5
million in aggregate principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and provided, further,
that such redemption occurs within 90 days of the date of the closing of such
Public Equity Offering.
6. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Securities
at a purchase price equal to 101% of the aggregate principal amount thereof
plus accrued and any unpaid interest thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Payment").
Within 30 days following the occurrence of a Change of Control, the Company
shall mail a notice to each Holder describing the transaction or transactions
and setting forth the procedures governing the Change of Control Offer as
required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, the Indenture requires that certain proceeds be used, subject to the
limitations contained therein, to make an offer to all Holders of Securities
(an "Asset Sale Offer") pursuant to Section 4.17 of the Indenture to purchase
certain amounts of Securities in accordance with the procedures set forth in
the Indenture.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
-4-
<PAGE> 100
If any Security is to be redeemed in part only, the notice of redemption
that relates to such Security shall state the portion of the principal amount
thereof to be redeemed. A new Security in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Security. On and after the redemption date,
interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Sinking Fund.
There will be no mandatory sinking fund payments for the Securities.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or
similar governmental charges payable in connection not register the transfer of
or exchange any securities or portions thereof selected for redemption, except
the unredeemed portion of any security being redeemed in part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agents will repay the funds to the Company
at its request subject to terms of the Indenture. After that, all liability of
the Trustee and such Paying Agents with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof ("Legal Defeasance"),
and may be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities ("Covenant Defeasance"), in each
case upon satisfaction of certain conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
-5-
<PAGE> 101
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and its Restricted Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of subsidiaries, to sell assets, to permit restrictions on
dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are
subject to a number of important qualifications and exceptions. The Company
must annually report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of
Securities then outstanding may declare all the Securities to be due and
payable immediately in the manner and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated
to enforce the Indenture or the Securities unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of any
continuing Default or Event of Default (except a Default in payment of
principal or interest, including an accelerated payment) if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The wavier and
release are part of the consideration for the issuance of the securities.
-6-
<PAGE> 102
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
Packaged Ice, Inc., 8572 Katy Freeway, Suite 101, Houston, Texas 77024, Attn:
President.
-7-
<PAGE> 103
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the "Indenture")
referred to in the Security upon which this notation is endorsed and each
hereinafter referred to as a "Subsidiary Guarantor," which term includes any
successor Person under the Indenture) have unconditionally guaranteed on a
senior basis (such guarantee by each Subsidiary Guarantor being referred to
herein as the "Guarantee") (i) the due and punctual payment of the principal of
and interest on the Securities, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal
and interest, if any, on the Securities, to the extent lawful, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee all in accordance with the terms set forth in Article Ten of the
Indenture and (ii) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Subsidiary Guarantor shall have any liability under
the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC.
SOUTHCO ICE, INC.
PACKAGED ICE MISSION, INC.
PACKAGED ICE STPI, INC.
PACKAGED ICE SOUTHWESTERN, INC.
By:
----------------------------------
Name:
Title:
-8-
<PAGE> 104
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
---------------- --------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-9-
<PAGE> 105
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 4.16 or 4.17 of the Indenture, check the appropriate box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by the
Company pursuant to Sections 4.16 or 4.17 of the Indenture, state the amount: $
Date: Your Signature:
---------------- ------------------------------
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-10-
<PAGE> 106
EXHIBIT B
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE,
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
<PAGE> 107
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: ________% Senior Notes due 2004, (the "Securities") of Packaged Ice,
Inc.
This Certificate relates to _____ Securities held in* _____ book-entry
or* _____ certificated form by _____ (the "Transferor" ) .
The Transferor:*
[ ] has requested that the Registrar by written order to deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Security or Securities in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[ ] has requested that the Registrar by written order to exchange or
register the transfer of a Security or Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.15 of such
Indenture, and that the transfer of this Securities does not require
registration under the Securities Act of 1933, as amended (the "Act")
because[*]:
[ ] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.15(a)(II)(A) or Section
2.15(d)(i)(A) of the Indenture).
[ ] Such Security is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Act), in reliance on Rule 144A or in
accordance with Regulation S under the Act.
[ ] Such Security is being transferred in accordance with Rule 144
under the Act.
[ ] Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act,
other than Rule 144A or Rule 144 or Regulation S under the Act. An opinion of
counsel to the effect that such transfer does not require registration under
the Act accompanies this Certificate.
-------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
----------------------------------
Date:
----------------------
*Check applicable box.
<PAGE> 108
EXHIBIT D
Transferee Letter of Representation
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Ladies and Gentlemen:
In connection with our proposed purchase of 12% Senior Notes due 2004,
(the "Securities") of Packaged Ice, Inc. (the "Company") we confirm that:
1. We understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act") and,
unless so registered, may not be sold except as permitted in the
following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Securities to offer, sell
or otherwise transfer such Securities prior to the date which is three
years after the later of the date of original issue and the last date on
which the Company or any affiliate of the Company was the owner of such
Securities, or any predecessor thereto (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the
Securities Act, (c) so long as the Securities are eligible for resale
pursuant to Rule 144A, under the Securities Act, to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a
"QIB") that purchases for its own account or for the account of a QIB
and to whom notice is given that the transfer is being made in reliance
on Rule 144A, (d) pursuant to offers and sales that occur outside the
United States within the meaning of Regulation S under the Securities
Act, (e) to an institutional "accredited investor" within the meaning of
subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the Securities
Act that is purchasing for his own account or for the account of such an
institutional "accredited investor," or (f) pursuant to any other
available exemption from the registration requirements of the Securities
Act, subject in each of the foregoing cases to any requirement of law
that the disposition of our property or the property of such investor
account or accounts be at all times within our or their control and to
compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the
Securities is proposed to be made pursuant to clause (e) above prior to
the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to
the registrar under the Indenture pursuant to which the Securities were
issued (the "Registrar") which shall provide, among other things, that
the transferee is an institutional "accredited investor" within the
meaning of subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act and that it is acquiring such Securities for investment
purposes and not for distribution in violation of the Securities Act.
The Registrar and the Company reserve the right prior to any offer, sale
or other transfer prior to the Resale Restriction Termination Date of
the Securities pursuant to clause (e) or (f) above to require the
delivery of a written opinion of counsel, certifications, and or other
information satisfactory to the Company and the Registrar.
<PAGE> 109
2. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring the Securities
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act and
we have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment in
the Securities, and we and any accounts for which we are acting are each
able to bear the economic risk of our or its investment for an
indefinite period.
3. We are acquiring the Securities purchased by us for our
own account or for one or more accounts as to each of which we exercise
sole investment discretion.
4. You and your counsel are entitled to rely upon this letter
and you are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding
or official inquiry with respect to the matters covered hereby.
Very truly yours,
-------------------------------------
(Name of Purchaser)
By:
----------------------------------
Date:
--------------------------------
Upon transfer the Securities would be registered in the name of the new
beneficial owner as follows:
Name:
---------------------------------
Address:
------------------------------
Taxpayer ID Number:
-------------------
-2-
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
Dated as of April 17, 1997
by and among
PACKAGED ICE, INC.
THE SUBSIDIARY GUARANTORS
named herein
and
JEFFERIES & COMPANY, INC.,
as Initial Purchaser
------------------------------
$50,000,000
12% SENIOR NOTES DUE 2004
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . 7
4. Additional Interest . . . . . . . . . . . . . . . . . . . . . . 8
5. Registration Procedures . . . . . . . . . . . . . . . . . . . . 9
6. Registration Expenses . . . . . . . . . . . . . . . . . . . . 16
7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 17
8. Rules 144 and 144A . . . . . . . . . . . . . . . . . . . . . . 20
9. Underwritten Registrations . . . . . . . . . . . . . . . . . . 21
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) No Inconsistent Agreements . . . . . . . . . . . . . . 21
(b) Adjustments Affecting Registrable Notes . . . . . . . 21
(c) Amendments and Waivers . . . . . . . . . . . . . . . . 21
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . 22
(e) Successors and Assigns . . . . . . . . . . . . . . . . 23
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . 23
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . 23
(h) Governing Law . . . . . . . . . . . . . . . . . . . . 23
(i) Severability . . . . . . . . . . . . . . . . . . . . . 23
(j) Notes Held by the Issuers or Their Affiliates . . . . 24
(k) Third Party Beneficiaries . . . . . . . . . . . . . . 24
(l) Entire Agreement . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of April 17, 1997, by and among Packaged Ice, Inc., a Texas
corporation (the "Company"), each of the subsidiaries of the Company listed on
the signature pages hereto (collectively, the "Subsidiary Guarantors"), and
Jefferies & Company, Inc. (the "Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of April 11, 1997, by and among the Company, the Subsidiary
Guarantors and the Initial Purchaser (the "Purchase Agreement") which provides
for, among other things, the issuance and sale to the Initial Purchaser of
50,000 units (the "Units") consisting of an aggregate of $50,000,000 aggregate
principal amount of the Company's 12% Senior Notes due 2004, Series A (the
"Notes"), and 50,000 warrants to purchase an aggregate of 511,885 shares of
common stock, par value $ .01 per share, of the Company. In order to induce the
Initial Purchaser to enter into the Purchase Agreement, the Company and the
Subsidiary Guarantors have agreed to provide the registration rights set forth
in this Agreement for the benefit of the Initial Purchaser and their direct and
indirect transferees and assigns. The execution and delivery of this Agreement
is a condition to the Initial Purchaser's obligation to purchase the Units
under the Purchase Agreement. The Company and the Subsidiary Guarantors are
collectively referred to herein as the "Issuers."
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
Advice: See the last paragraph of Section 5.
Agreement: See the first introductory paragraph to this Agreement.
Applicable Period: See Section 2(b).
Business Day: A day that is not a Saturday, a Sunday, or a day on
which banking institutions in New York, New York are required to be closed.
Company: See the first introductory paragraph to this Agreement.
Effectiveness Date: The 120th day after the Issue Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
<PAGE> 4
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Filing Date: The 60th day after the Issue Date.
Holder: Any registered holder of Registrable Notes.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of April 17, 1997, by and among the
Company, the Subsidiary Guarantors and U.S. Trust Company of Texas, N.A., as
trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchaser: See the first introductory paragraph to this
Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date on which the Units were sold to the Initial
Purchaser pursuant to the Purchase Agreement.
Issuers: See the second introductory paragraph to this Agreement.
NASD: National Association of Securities Dealers, Inc.
Notes: See the second introductory paragraph to this Agreement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
Person: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Private Exchange: See Section 2(b).
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<PAGE> 5
Private Exchange Notes: See Section 2(b).
Prospectus: 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, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
Purchase Agreement: See the second introductory paragraph to this
Agreement.
Records: See Section 5(o).
Registrable Notes: Each Note upon original issuance thereof and at all
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance thereof and at all times subsequent
thereto and each Private Exchange Note upon original issuance thereof and at
all times subsequent thereto, until, in the case of any such Note, Exchange
Note or Private Exchange Note, as the case may be, the earliest to occur of (i)
a Registration Statement (other than, with respect to any Exchange Note as to
which Section 2(c)(iv) hereof is applicable, the Exchange Registration
Statement) covering such Note, Exchange Note or Private Exchange Note, as the
case may be, has been declared effective by the SEC and such Note, Exchange
Note or Private Exchange Note, as the case may be, has been disposed of in
accordance with such effective Registration Statement, (ii) such Note, Exchange
Note or Private Exchange Note, as the case may be, is sold in compliance with
Rule 144, (iii) in the case of any Note, such Note has been exchanged pursuant
to the Exchange Offer for an Exchange Note or Exchange Notes which may be
resold without restriction under state and federal securities laws, or (iv)
such Note, Exchange Note or Private Exchange Note, as the case may be, ceases
to be outstanding for purposes of the Indenture.
Registration Statement: Any registration statement of the Issuers
filed with the SEC under the Securities Act, including, but not limited to, the
Exchange Registration Statement, that covers any of the Registrable Notes
pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
Rule 144: 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.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
-3-
<PAGE> 6
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
Subsidiary Guarantors: See the first introductory paragraph to this
Agreement.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent, the trustee
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).
Underwritten registration or underwritten offering: A registration in
which securities of one or more of the issuers are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
(a) Each of the Issuers agrees to file with the SEC no later than
the Filing Date, an offer to exchange (the "Exchange Offer") any and all of the
Registrable Notes (other than Private Exchange Notes, if any) for a like
aggregate principal amount of debt securities of the Company, guaranteed by the
Subsidiary Guarantors, which are identical in all material respects to the
Notes (the "Exchange Notes") (and which are entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any requirements of the SEC to
effect or maintain the qualification thereof under the TIA) and which, in
either case, has been qualified under the TIA), except that the Exchange Notes
shall have been registered pursuant to an effective Registration Statement
under the Securities Act and shall contain no restrictive legend thereon. The
Exchange Offer shall be registered under the Securities Act on the appropriate
form (the "Exchange Registration Statement") and shall comply with all
applicable tender offer rules and regulations under the Exchange Act. Each of
the Issuers agrees to use its best efforts to (x) cause the Exchange
Registration Statement to be declared effective under the Securities Act on or
before the Effectiveness Date; (y) keep the Exchange Offer open for at least 30
calendar days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to Holders; and (z) consummate the
Exchange Offer on or prior to the 45th day following the date on which the
Exchange Registration Statement is declared effective. If after such Exchange
Registration Statement is initially declared effective by the SEC, the Exchange
Offer or the issuance of the Exchange Notes thereunder is interfered with by
any stop order, injunction or other order or
-4-
<PAGE> 7
requirement of the SEC or any other governmental agency or court, such Exchange
Registration Statement shall be deemed not to have become effective for
purposes of this Agreement. Each Holder who participates in the Exchange Offer
will be required to represent that any Exchange Notes received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the
Exchange Notes in violation of the provisions of the Securities Act, and that
such Holder is not an affiliate of any of the Issuers within the meaning of the
Securities Act. Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers, and the Issuers
shall have no further obligation to register Registrable Notes (other than
Private Exchange Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(iv) hereof applies) pursuant to Section 3 of this Agreement.
(b) The Issuers shall include within the Prospectus contained in
the Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in the
judgment of the Initial Purchaser, represent the prevailing views of the staff
of the SEC. Such "Plan of Distribution" section shall also allow, to the extent
permitted by applicable policies and regulations of the SEC, the use of the
Prospectus by all Persons subject to the prospectus delivery requirements of
the Securities Act, including, to the extent so permitted, all Participating
Broker-Dealers, and include a statement describing the manner in which
Participating Broker-Dealers may resell the Exchange Notes.
Each of the Issuers shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such Persons must comply with such
requirements in order to resell the Exchange Notes (the "Applicable Period").
If, upon consummation of the Exchange Offer, any Initial Purchaser
holds any Notes acquired by it and having the status of an unsold allotment in
the initial distribution, the Company upon the request of such Initial
Purchaser shall, simultaneously with the delivery of the Exchange Notes in the
Exchange Offer, issue and deliver to such Initial Purchaser, in exchange (the
"Private Exchange") for the Notes held by such Initial Purchaser, a like
principal amount of debt securities of the Company, guaranteed by the
Subsidiary Guarantors, that are identical in all material respects to the
Exchange Notes except for the existence of restrictions on transfer thereof
under the Securities Act and securities laws of the several states of the U.S.
(the "Private Exchange Notes") (and which are issued pursuant to the same
indenture as the Exchange Notes); provided, however, the Issuers shall not be
required to effect such exchange if, in the written opinion of counsel for the
Issuers (a copy of which shall be delivered to the Initial Purchaser and any
Holder affected thereby), such exchange
-5-
<PAGE> 8
cannot be effected without registration under the Securities Act. The Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date of such interest
payment date or (B) if no interest has been paid on the Notes, from the date of
the original issuance of the Notes.
In connection with the Exchange Offer, the Issuers shall:
(1) mail to each Holder a copy of the Prospectus forming
part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York, which may be the Trustee or an affiliate thereof;
(3) permit Holders to withdraw tendered Registrable Notes
at any time prior to the close of business, New York time, on the last
business day on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Issuers shall:
(1) accept for exchange all Registrable Notes validly
tendered and not validly withdrawn pursuant to the Exchange Offer or
the Private Exchange, as the case may be;
(2) deliver to the Trustee for cancellation all
Registrable Notes so accepted for exchange; and
(3) cause the Trustee to authenticate and deliver
promptly to each Holder tendering such Registrable Notes, Exchange
Notes or Private Exchange Notes, as the case may be, equal in
principal amount to the Notes of such Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall be subject to the
following conditions: (i) the Exchange Offer or the Private Exchange, as the
case may be, does not violate applicable law or any applicable interpretation
of the staff of the SEC, (ii) no action or proceeding is instituted or
threatened in any court or by any governmental agency which might materially
impair the ability of the Issuers to proceed with the Exchange Offer or the
Private Exchange and no material adverse development has occurred in any
existing action or proceeding with respect to the Issuers and (iii) all
-6-
<PAGE> 9
governmental approvals have been obtained, which approvals the Issuers deem
necessary for the consummation of the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture identical in all material respects to
the Indenture, which in either event will provide that the Exchange Notes will
not be subject to the transfer restrictions set forth in the Indenture and that
the Exchange Notes, the Private Exchange Notes and the Notes, if any, will vote
and consent together on all matters as one class and that none of the Exchange
Notes, the Private Exchange Notes or the Notes, if any, will have the right to
vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Issuers are not
permitted to effect an Exchange Offer, (ii) the Exchange Offer is not
consummated within 150 days of the Issue Date, (iii) any holder of Private
Exchange Notes so requests in writing to the Issuers within 120 days after the
consummation of the Exchange Offer or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under state
and federal securities laws (other than due solely to the status of such Holder
as an affiliate of any of the Issuers within the meaning of the Securities Act)
and so notifies the Company within 60 days after such Holder first becomes
aware of such restrictions and providing a reasonable basis for its
conclusions, in the case of each of clauses (i)-(iv), then the Issuers shall
promptly deliver to the Holders and the Trustee written notice thereof (the
"Shelf Notice") and shall file a Shelf Registration pursuant to Section 3.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Shelf Registration. The Issuers shall as promptly as
reasonably practicable file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Notes (the "Initial Shelf Registration"). If the Issuers shall
not have yet filed the Exchange Registration Statement, each of the Issuers
shall use its best efforts to file with the SEC the Initial Shelf Registration
on or prior to the Filing Date and shall use its best efforts to cause such
Initial Shelf Registration to be declared effective under the Securities Act on
or prior to the Effectiveness Date. Otherwise, each of the Issuers shall use
its best efforts to file with the SEC the Initial Shelf Registration within 30
days of the delivery of the Shelf Notice and shall use its best efforts to
cause such Shelf Registration to be declared effective under the Securities Act
as promptly as practicable thereafter. The Initial Shelf Registration shall be
on Form S-l or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). The
Issuers shall not permit any securities other than the Registrable Notes to be
included in any Shelf Registration (as defined below). The Issuers shall use
their best efforts to keep the Initial Shelf Registration continuously
effective under the Securities Act until the date which is 36 months from the
effective date of such Initial Shelf Registration (subject to extension
pursuant to the last paragraph of Section 5 hereof) (the "Effectiveness
Period"), or such shorter period ending when (i) all Registrable Notes covered
by the Initial Shelf Registration have been sold in the manner
-7-
<PAGE> 10
set forth and as contemplated in the Initial Shelf Registration or (ii) a
Subsequent Shelf Registration (as defined below) covering all of the
Registrable Notes has been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for
any reason at any time during the Effectiveness Period (other than because of
the sale of all of the securities registered thereunder), each of the Issuers
shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend such Shelf Registration in a manner to
obtain the withdrawal of the order suspending the effectiveness thereof, or
file an additional "shelf" Registration Statement pursuant to Rule 415 covering
all of the Registrable Notes (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, each of the Issuers shall use its best
efforts to cause the Subsequent Shelf Registration to be declared effective as
soon as practicable after such filing and to keep such Subsequent Shelf
Registration continuously effective for a period equal to the number of days in
the Effectiveness Period less the aggregate number of days during which the
Initial Shelf Registration or any Subsequent Shelf Registrations was previously
continuously effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Shelf Registration or by any underwriter of
such Registrable Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchaser agree that the Holders
of Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Issuers, jointly and severally, agree to pay, as liquidated damages,
additional interest on the Notes ("Additional Interest") under the
circumstances and to the extent set forth below (each of which shall be given
independent effect):
(i) if the Exchange Registration Statement has not been
filed on or prior to the Filing Date, then commencing on the day after
the Filing Date, Additional Interest shall accrue on the Notes over
and above the stated interest at a rate of 0.50% per annum for the
first 90 days immediately following the Filing Date, such Additional
Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period;
(ii) if the Exchange Registration Statement is not
declared effective on or prior to the Effectiveness Date, then
commencing on the day after the Effectiveness Date, Additional
Interest shall accrue on the Notes over and above the stated interest
at a rate of 0.50% per annum for the first 90 days immediately
following the day after the Effectiveness Date, such Additional
Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 90-day period; and
-8-
<PAGE> 11
(iii) if (A) the Issuers have not exchanged Exchange Notes
for all Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to the 60th day after the date on which the
Exchange Registration Statement is declared effective or (B) the
Initial Shelf Registration, if required to be filed hereunder, is not
declared effective on or prior to the 120th day after the Issue Date
or (C) if applicable, a Shelf Registration has been declared effective
and such Shelf Registration ceases to be effective at any time during
the Effectiveness Period, then Additional Interest shall accrue on the
Notes over and above the stated interest at a rate of 0.50% per annum
for the first 90 days commencing on the (x) 60th day after the date on
which the Exchange Registration Statement is declared effective, in
the case of (A) or (B) above, or (y) the day such Shelf Registration
ceases to be effective in the case of (C) above, such Additional
Interest rate increasing by an additional 0.50% per annum at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not
exceed at any one time in the aggregate 1.5% per annum; and provided further,
that (1) upon the filing of the Exchange Registration Statement (in the case of
(i) above), (2) upon the effectiveness of the Exchange Registration Statement
(in the case of (ii) above), or (3) upon the exchange of Exchange Notes for all
Notes tendered (in the case of (iii)(A) above), upon the effectiveness of the
Initial Shelf Registration (in the case of (iii)(B) above) or upon the
effectiveness of a Shelf Registration which had ceased to remain effective (in
the case of (iii)(C) above), Additional Interest on the Notes as a result of
such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue.
(b) The Issuers shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable semi-annually by wire transfer of immediately available funds
or by federal funds check on each regular interest payment date specified in
the Indenture (to the Holders of record on the regular record date therefor
(specified in the Indenture) immediately preceding such dates), commencing with
the first such regular interest payment date occurring after any such
Additional Interest commences to accrue, subject to Section 2.17 of the
Indenture with respect to defaulted interest. The amount of Additional Interest
will be determined by multiplying the applicable Additional Interest rate by
the principal amount of the Notes, multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate was applicable during
such period (determined on the basis of a 360-day year comprised of twelve
30-day months and, in the case of a partial month, the actual number of days
elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant
to Section 2 or 3 hereof, the Issuers shall effect such registrations to permit
the sale of such securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuers hereunder, the
Issuers shall:
(a) Prepare and file with the SEC prior to the Filing
Date, the Exchange Registration Statement or if the Exchange
Registration Statement is not filed because of the circumstances
contemplated by Section 2(c)(i), a Shelf Registration as prescribed by
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<PAGE> 12
Section 2 or 3, and use their best efforts to cause each such
Registration Statement to become effective and remain effective as
provided herein; provided that, if (1) a Shelf Registration is filed
pursuant to Section 3, or (2) a Prospectus contained in an Exchange
Registration Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period, before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Issuers shall, if requested, furnish to and
afford the Holders of the Registrable Notes to be registered pursuant
to such Shelf Registration or each such Participating Broker-Dealer,
as the case may be, covered by such Registration Statement, their
counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies
of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (in each case at least five
business days prior to such filing). The Issuers shall not file any
such Registration Statement or Prospectus or any amendments or
supplements thereto if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement, or any such Participating Broker-Dealer, as the case may
be, their counsel, or the managing underwriters, if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to
keep such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be;
cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions
of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any
such Prospectus. The Company shall be deemed not to have used its best
efforts to keep a Registration Statement effective during the
Applicable Period if it voluntarily takes any action that would result
in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being
able to sell such Registrable Notes or such Exchange Notes during that
period unless such action is required by applicable law or unless the
Company complies with this Agreement, including, without limitation,
the provisions of paragraph 5(k) hereof and the last paragraph of this
Section 5.
(c) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period from whom the
Company has received written notice that it will be a Participating
Broker-Dealer in the Exchange Offer, notify the selling Holders of
Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriters, if any,
promptly (but in any event within two 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
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<PAGE> 13
Statement or any posteffective 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, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by
the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the
use of any Prospectus or the initiation 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 Notes the representations and warranties of the Issuers
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) hereof cease to be true and correct, (iv)
of the receipt by the Issuers of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale
in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of any event, the
existence of any condition or any information becoming known that
makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires
the making of any changes in, or amendments or supplements to, such
Registration Statement, Prospectus or documents so that, in the case
of the Registration Statement, 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 the Prospectus, 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 any of the Issuers'
reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, use their best
efforts to prevent the issuance of any order suspending the
effectiveness of a 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 Notes or
the Exchange Notes to be sold by any Participating Broker-Dealer, for
sale in any jurisdiction, and, if any such order is issued, to use
their best efforts to obtain the withdrawal of any such order at the
earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section
3 and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering, (i)
promptly as practicable incorporate in a prospectus supplement or
post-effective amendment such information or revisions to information
therein relating to such underwriters or selling Holders as the
managing underwriters, if any, or such Holders or their counsel
reasonably request to be included or made therein and (ii) make all
required filings of such prospectus
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<PAGE> 14
supplement or such post-effective amendment as soon as practicable
after the Issuers have received notification of the matters to be
incorporated in such prospectus supplement or post-effective
amendment.
(f) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, furnish to each
selling Holder of Registrable Notes and to each such Participating
Broker-Dealer who so requests and to counsel and each managing
underwriter, if any, without charge, one conformed copy of the
Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, deliver to each
selling Holder of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, their respective counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus
and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, each
Issuer hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the
case may be, and the underwriters or agents, if any, and dealers (if
any), in connection with the offering and sale of the Registrable
Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Notes or
any delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, to use their best efforts
to register or qualify, and to cooperate with the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the
case may be, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Notes or
Exchange Notes, as the case may be, for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United
States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters, if any, reasonably request in
writing; provided that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Issuers agree to cause their counsel to
perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h);
keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to
be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions
of the Exchange Notes held by Participating Broker-Dealers or the
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<PAGE> 15
Registrable Notes covered by the applicable Registration Statement;
provided that none of the Issuers shall be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
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) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so
subject.
(i) If a Shelf Registration is filed pursuant to Section
3, cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Notes to be sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable Notes to be in
such denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may reasonably
request.
(j) Use their best efforts to cause the Registrable Notes
covered by any Registration Statement to be registered with or
approved by such governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriters,
if any, to consummate the disposition of such Registrable Notes,
except as may be required solely as a consequence of the nature of
such selling Holder's business, in which case each of the Issuers will
cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, upon the
occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi)
hereof, as promptly as practicable prepare and (subject to Section
5(a) hereof) file with the SEC, at the joint and several expense of
each of the Issuers, 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, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any
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.
(l) Use their best efforts to cause the Registrable Notes
covered by a Registration Statement to be rated with the appropriate
rating agencies, if so requested by the Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement or the managing underwriter or underwriters, if
any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with printed certificates for the Registrable Notes
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<PAGE> 16
in a form eligible for deposit with The Depository Trust Company and
(ii) provide a CUSIP number for the Registrable Notes.
(n) In connection with an underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of
debt securities similar to the Notes 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
the disposition of such Registrable Notes and, in such connection, (i)
make such representations, warranties to, and covenants with, the
underwriters, with respect to the business of the Issuers and their
respective subsidiaries and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of debt securities similar to
the Notes, and confirm the same in writing if and when requested; (ii)
obtain the opinion of counsel to the Issuers and updates thereof in
form and substance reasonably satisfactory to the managing underwriter
or underwriters, addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings of
debt securities similar to the Notes and such other matters as may be
reasonably requested by underwriters; (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters from the
independent certified public accountants of the Issuers (and, if
necessary, any other independent certified public accountants of any
subsidiary of any of the Issuers or of any business acquired by any of
the Issuers 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 of debt securities
similar to the Notes and such other matters as reasonably requested by
the managing underwriter or underwriters; and (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable than those set forth in
Section 7 hereof (or such other provisions and procedures acceptable
to Holders of a majority in aggregate principal amount of Registrable
Notes 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.
(o) If (1) a Shelf Registration is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, make available
for inspection by any selling Holder of such Registrable Notes being
sold, or each such Participating Broker-Dealer, as the case may be,
any underwriter participating in any such disposition of Registrable
Notes, if any, and any attorney, accountant or other agent retained by
any such selling Holder or each such Participating Broker-Dealer, as
the case may be, 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
Issuers and their respective subsidiaries (collectively, the
"Records") as shall be reasonably necessary to
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<PAGE> 17
enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Issuers and
their respective subsidiaries to supply all information reasonably
requested by any such Inspector in connection with such Registration
Statement. Such Records shall be kept confidential by each Inspector
and shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a material
misstatement or omission in such Registration Statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction. Each selling Holder of
such Registrable Notes and each such Participating Broker-Dealer will
be required to agree 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
Issuers unless and until such is made generally available to the
public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to further agree that it
will, upon learning that disclosure of such Records is sought in a
court of competent jurisdiction, give notice to the Issuers and allow
the Issuers to undertake appropriate action to prevent disclosure of
the Records deemed confidential at their expense.
(p) Provide an indenture trustee for the Registrable
Notes or the Exchange Notes, as the case may be, and cause the
Indenture or the trust indenture provided for in Section 2(a), as the
case may be, to be qualified under the TIA not later than the
effective date of the Exchange Offer or the first Registration
Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the
Holders of the Registrable Notes, to effect such changes to such
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best
efforts to cause such trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(q) Comply with all applicable rules and regulations of
the SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the
end of any 12-month period (or 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 Notes are sold to underwriters
in a firm commitment or best efforts underwritten offering and (ii) if
not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of the Company after the effective
date of a Registration Statement, which statements shall cover said
12-month periods.
(r) Upon consummation of the Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers, in a form
customary for underwritten transactions, addressed to the Trustee for
the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, that the
Exchange Notes or the Private Exchange Notes, as the case may be, and
the related indenture constitute legally valid and binding obligations
of each of the Issuers, enforceable against each of the Issuers in
accordance with their respective terms subject to customary exceptions
and qualifications.
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<PAGE> 18
(s) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Issuers (or to such other Person as directed by the Issuers) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Issuers shall mark, or caused to be marked, on such
Registrable Notes that such Registrable Notes are being canceled in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be; in no event shall such Registrable Notes be marked as
paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the NASD.
(u) Use their best efforts to take all other steps
reasonably necessary to effect the registration of the Registrable
Notes covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Issuers such information
regarding such seller and the distribution of such Registrable Notes as the
Issuers may, from time to time, reasonably request. The Issuers may exclude
from such registration the Registrable Notes of any seller who fails to furnish
such information within a reasonable time after receiving such request. Each
seller as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Issuers all information required to be disclosed in
order to make the information previously furnished to the Issuers by such
seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuers of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by a Registration
Statement and such Participating Broker Dealer will forthwith discontinue
disposition of such Exchange Notes pursuant to any Prospectus and, in each
case, forthwith discontinue dissemination of such Prospectus until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k), or until it is
advised in writing (the "Advice") by the Issuers 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 Issuers, such Holder or
Participating Broker-Dealer, as the case may be, will deliver to the Issuers
all copies, other than permanent file copies, then in such Holder's or
Participating Broker-Dealer's possession, of the Prospectus covering such
Registrable Securities current at the time of the receipt of such notice. In
the event the Issuers shall give any such notice, each of the Effectiveness
Period and the Applicable Period 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 Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
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<PAGE> 19
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers,
jointly and severally, whether or not the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without limitation, (i)
all registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions (x) where the holders of Registrable Notes are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Notes or Exchange Notes to be sold by a Participating
Broker-Dealer during the Applicable Period)), (ii) printing expenses,
including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
or by the Holders of a majority in aggregate principal amount of the
Registrable Notes included in any Registration Statement or by any
Participating Broker-Dealer during the Applicable Period, as the case may be,
(iii) reasonable messenger, telephone and delivery expenses incurred in
connection with the Exchange Registration Statement and any Shelf Registration,
(iv) fees and disbursements of counsel for the Issuers and reasonable fees and
disbursements of special counsel for the sellers of Registrable Notes (subject
to the provisions of Section 6(b)), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(n)(iii)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) rating
agency fees, (vii) Securities Act liability insurance, if the Issuers desire
such insurance, (viii) fees and expenses of all other Persons retained by the
Issuers, (ix) internal expenses of the Issuers (including, without limitation,
all salaries and expenses of officers and employees of the Issuers performing
legal or accounting duties), (x) the expense of any annual audit, (xi) the fees
and expenses incurred in connection with the listing of the securities to be
registered on any securities exchange and (xii) the expenses relating to
printing, word processing and distributing all Registration Statements,
underwriting agreements, securities sales agreements, indentures and any other
documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the
Issuers, jointly and severally, shall reimburse the Holders of the Registrable
Notes being registered in such registration for the fees and disbursements, not
to exceed $25,000, of not more than one counsel (in addition to appropriate
local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Registrable Notes to be included in such Shelf Registration and
other out-of-pocket expenses of Holders of Registrable Notes incurred in
connection with the registration and sale of Registrable Notes.
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to
indemnify and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange Notes during the Applicable
Period, the officers and directors of each such Person, and each Person, if
any, who
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<PAGE> 20
controls any such Person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other reasonable 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 Issuers shall have
furnished any amendments or supplements thereto) or caused by, arising out of
or based upon 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
Issuers shall have furnished any amendments or supplements thereto) or caused
by, arising out of or based upon any omission or alleged omission to state
therein 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 untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Issuers in writing by or on behalf of such
Participant 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, liability, claim, damage or expense
suffered or incurred by the Participants resulted from any action, claim or
suit by any Person who purchased Registrable Notes or Exchange Notes which are
the subject thereof from such Participant and it is established in the related
proceeding that such Participant 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 Notes or Exchange Notes 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 Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective directors and
officers and each Person who controls any of the Issuers within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Issuers to each Participant, but
only with reference to information relating to such Participant furnished to
the Issuers in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by such Participant
from sales of Registrable Notes or Exchange Notes giving rise to such
obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of
the two preceding paragraphs, such Person (the "Indemnified Person") shall
promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to
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<PAGE> 21
represent the Indemnified Person and any others the Indemnifying Person may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses actually incurred by such counsel related to such proceeding;
provided, however, that the failure to so notify the Indemnifying Person 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 the Indemnifying
Person and the Indemnifying Person was not otherwise aware of such action or
claim). In any such proceeding, any Indemnified Person 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 Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties) include both
the Indemnifying Person and the Indemnified Person 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 is a
conflict among Indemnified Persons, the Indemnifying Person shall not, in
connection with any proceeding or related proceeding in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly after receipt of the invoice therefor as
they are incurred. Any such separate firm for the Participants and such control
Persons of Participants shall be designated in writing by Participants who sold
a majority in interest of Registrable Notes sold by all such Participants and
any such separate firm for the Issuers, their directors, their officers and
such control Persons of the Issuers shall be designated in writing by the
Company. The Indemnifying Person 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 Person is entitled to indemnification pursuant to this
Agreement, the Indemnifying Person agrees to indemnify any Indemnified Person
from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested an Indemnifying Person to reimburse the Indemnified
Person for reasonable fees and expenses actually incurred by counsel as
contemplated by the third sentence of this paragraph, the Indemnifying Person
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 Person of the aforesaid request
and (ii) such Indemnifying Person shall not have reimbursed the Indemnified
Person in accordance with such request prior to the date of such settlement;
provided, however, that the Indemnifying Person shall not be liable for any
settlement effected without its consent pursuant to this sentence if the
Indemnifying Person is contesting, in good faith, the request for
reimbursement. No Indemnifying Person shall, without the prior written consent
of the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement (A) includes an unconditional release of such
indemnified Person, in form and substance satisfactory to such Indemnified
Person, from all liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of an Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is unavailable (other than by reason of the
exceptions specifically provided therein) to, or insufficient
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<PAGE> 22
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to
the amount paid or payable by such Indemnified Person 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 Indemnifying Person or
Persons on the one hand and the Indemnified Person or Persons on the other from
the offering of the Registrable Notes or Exchange Notes, as the case may be or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person
or Persons 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 parties 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 Issuers on the one hand or
by the Participants or such other Indemnified Person, as the case may be, on
the other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission and any other
equitable considerations appropriate under the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) 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 Person 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 Person
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay 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 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers 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 it is not required to file such reports, it will, upon the request of any
Holder of Registrable Notes, make publicly available other information so long
as necessary to permit sales pursuant to Rule 144 and Rule 144A. Each of the
Issuers further covenants, for so
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<PAGE> 23
long as any Registrable Notes remain outstanding, to make available to any
Holder or beneficial owner of Registrable Notes in connection with any sale
thereof and any prospective purchaser of such Registrable Notes from such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Securities Act in order to permit resales of such Registrable Notes
pursuant to Rule 144A.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf 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 a majority in aggregate principal amount of such Registrable
Notes included in such offering and reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. None of the Issuers has entered,
as of the date hereof, and none of the Issuers shall enter, after the date of
this Agreement, into any agreement with respect to any of its securities that
is inconsistent with the rights granted to the Holders of Registrable Notes in
this Agreement or otherwise conflicts with the provisions hereof. None of the
Issuers has entered and none of the Issuers will enter into any agreement with
respect to any of its securities which will grant to any Person piggy-back
rights with respect to a Registration Statement.
(b) Adjustments Affecting Registrable Notes. Neither the Company
nor the Subsidiary Guarantors shall, directly or indirectly, take any action
with respect to the Registrable Notes as a class that would adversely affect
the ability of the Holders of Registrable Notes to include such Registrable
Notes 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, otherwise than with the prior
written consent of (A) the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable Notes and (B) in
circumstances that would adversely affect Participating Broker-Dealers, the
Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating
Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may
not be amended, modified or supplemented without the prior written consent of
each Holder and each Participating Broker-Dealer (including any Person who was
a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes,
as the case may be, 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 Notes whose securities are being tendered
pursuant to the Exchange Offer or sold
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<PAGE> 24
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being tendered or being sold by such Holders
pursuant to such Registration Statement.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
1. if to a Holder of Registrable Notes or any
Participating Broker-Dealer, at the most current address of such
Holder or Participating Broker-Dealer, as the case may be, set forth
on the records of the registrar under the Indenture, with a copy in
like manner to the Initial Purchase s as follows:
JEFFERIES & COMPANY, INC.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, CA 90025
Facsimile No.: (310) 575-5165
Attention: Corporate Finance Department
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Facsimile No.: (713) 758-2346
Attention: T. Mark Kelly
2. if to the Initial Purchaser, at the address specified
in Section 10(d)(1);
3. if to an Issuer, as follows:
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Facsimile No.: (713) 464-4681
Attention: President
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<PAGE> 25
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street
Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
Attention: Alan Schoenbaum
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed, one business day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; and when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(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 Notes.
(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 NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, 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 NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(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.
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<PAGE> 26
(j) Notes Held by the Issuers or Their Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes
is required hereunder, Registrable Notes held by the Issuers or their
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.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(l) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Initial
Purchaser on the one hand and the Issuers on the other, or between or among any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof
and thereof are merged herein and replaced hereby.
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<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PACKAGED ICE, INC.
By:
--------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
PACKAGED ICE LEASING, INC.
By:
--------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
SOUTHCO ICE, INC.
By:
--------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
PACKAGED ICE MISSION, INC.
By:
--------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
PACKAGED ICE STPI, INC.
By:
--------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
PACKAGED ICE SOUTHWESTERN, INC.
By:
--------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
JEFFERIES & COMPANY, INC.
By:
--------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4.3
PACKAGED ICE, INC.
50,000 Units
Consisting of
$50,000,000
12% Senior Notes due 2004
and
50,000 Common Stock Purchase Warrants
PURCHASE AGREEMENT
April 11, 1997
JEFFERIES & COMPANY, INC.
11100 Santa Monica Blvd.
10th Floor
Los Angeles, California 90025
Ladies and Gentlemen:
Packaged Ice, Inc., a Texas corporation (the "Company"), and the
Subsidiary Guarantors (as defined below) hereby confirm their agreement with
you (the "Initial Purchaser"), as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchaser
50,000 Units (as defined below) consisting of an aggregate of $50,000,000
aggregate principal amount of its 12% Senior Notes due 2004, Series A (the
"Senior Notes") and 50,000 warrants (the "Warrants") to purchase initially an
aggregate of 511,885 shares of the Company's Common Stock, par value $0.01 per
share (the "Common Stock"). The Senior Notes are to be issued under an
indenture (the "Indenture") to be dated as of April 17, 1997 by and among the
Company, the Subsidiary Guarantors and U.S. Trust Company of Texas, N.A., as
Trustee (the "Trustee"). The Senior Notes will be unconditionally guaranteed
(the "Guarantees") on a joint and several basis by Packaged Ice Leasing, Inc.,
a Nevada corporation, Southco Ice, Inc., a Texas corporation, Packaged Ice
Mission, Inc. a Texas corporation, Packaged Ice STPI, Inc., a Texas
corporation, and Packaged Ice Southwestern, Inc., a Texas corporation
(collectively, the "Subsidiary Guarantors"). The Warrants are to be issued
under a Warrant Agreement to be dated as of April 17, 1997 (the "Warrant
Agreement") of the Company for the benefit of the holders from time to time of
the Certificates evidencing the Warrants. The shares of Common Stock issuable
upon exercise of the Warrants are herein referred to as the "Warrant Shares."
The Senior Notes and the Warrants will initially be represented by 50,000 units
("Units"), each Unit consisting of $1,000 principal amount of Senior Notes and
one Warrant to purchase
<PAGE> 2
10.2377 Warrant Shares at an initial exercise price of $0.01 per Warrant Share.
The Senior Notes, the Guarantees, the Warrants and the Units are collectively
referred to herein as the "Securities."
The Securities will be offered and sold to the Initial Purchaser
without Registration under the Securities Act of 1933, as amended (the "Act"),
in reliance on an exemption pursuant to Section 4(2) under the Act.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering circular dated March 26, 1997 (the "Preliminary
Circular"), and a final offering circular dated April 11, 1997 (the "Final
Circular"; the Preliminary Circular and the Final Circular each herein being
referred to as a "Circular"), setting forth or including a description of the
terms of the Securities, the terms of the offering of the Securities, and a
description of the business of the Company and the Subsidiary Guarantors. Any
references herein to the Preliminary Circular and the Final Circular shall be
deemed to include all amendments and supplements thereto.
The Initial Purchaser and its direct and indirect transferees of the
Securities will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company and the
Subsidiary Guarantors shall agree, among other things, (i) to file a
registration statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") registering the Senior Notes or the
Exchange Notes (as defined in the Registration Rights Agreement) under the Act
and (ii) the Securityholders' and Registration Rights Agreement, substantially
in the form attached hereto as Exhibit B (the "Securityholders' Agreement" and,
together with the Registration Rights Agreement, the "Rights Agreements").
2. Representations and Warranties. The Company and the Subsidiary
Guarantors, jointly and severally, represent and warrant to and agree with the
Initial Purchaser that:
(a) The Preliminary Circular and Final Circular with respect to
the Securities have been prepared by the Company for use by the Initial
Purchaser in connection with resales of the Securities. No order or decree
preventing the use of the Preliminary Circular or the Final Circular, or any
order asserting that the transactions contemplated by this Agreement are
subject to the registration requirements of the Act, has been issued and no
proceeding for that purpose has commenced or is pending or, to the knowledge of
the Company and the Subsidiary Guarantors, is contemplated.
(b) The Preliminary Circular and the Final Circular as of their
respective dates and the Final Circular as of the Closing Date (as defined in
Section 3 below) did not or will not at any time contain an untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 2(b) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to the Initial Purchaser
furnished to the Company or the Subsidiary Guarantors in writing by the Initial
Purchaser expressly for use in the Preliminary Circular or Final Circular.
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<PAGE> 3
(c) The Company has the authorized capitalization set forth in the
Final Circular; all of the outstanding shares of capital stock of the Company
and the Subsidiary Guarantors have been, and as of the Closing Date will be,
duly authorized and validly issued, are fully paid and nonassessable and were
not issued in violation of any preemptive or similar rights; except as set
forth in the Final Circular, all of the outstanding shares of capital stock of
each of the Subsidiary Guarantors are, and as of the Closing Date will be,
owned, directly or indirectly, by the Company, free and clear of all liens,
encumbrances, equities and claims or restrictions on transferability (other
than those imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions and except for pledged shares of Southco Ice, Inc.) or voting;
except as set forth in the Final Circular (or, if the Final Circular is not in
existence, the most recent Circular), there are no outstanding (i) options,
warrants or other rights to purchase from the Company or the Subsidiary
Guarantors, (ii) agreements or other obligations of the Company or any
Subsidiary Guarantors to issue or (iii) other rights to convert any obligation
into, or exchange any securities for, in the case of each clause (i)-(iii)
shares of capital stock of the Company or any Subsidiary Guarantor. The Company
does not have any Subsidiaries (as defined in the Indenture) except for the
Subsidiary Guarantors; except for the capital stock of the Subsidiary
Guarantors and as otherwise disclosed in the Final Circular (or, if the Final
Circular is not in existence, the most recent Circular), the Company does not
own, directly or indirectly, any shares of capital stock or any other equity or
long-term debt securities or have any equity interest in any firm, partnership,
joint venture or other entity.
(d) Each of the Company and the Subsidiary Guarantors has been
duly incorporated, is validly existing and is in good standing as a corporation
under the laws of its jurisdiction of incorporation, with all requisite
corporate power and authority to own its properties and conduct its business as
now conducted, and as described in the Preliminary Circular and the Final
Circular; each of the Company and the Subsidiary Guarantors is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the general affairs, management, business, condition (financial or
otherwise), prospects or results of operations of the Company and the
Subsidiary Guarantors, taken as a whole (any such event, a "Material Adverse
Effect").
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Senior Notes,
the Exchange Notes and the Private Exchange Notes (as defined in the
Registration Rights Agreement). The Senior Notes, the Exchange Notes and the
Private Exchange Notes have each been duly and validly authorized by the
Company and, when executed by the Company and authenticated by the Trustee in
accordance with the provisions of the Indenture and, in the case of the Senior
Notes, when delivered to and paid for by the Initial Purchaser in accordance
with the terms of this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company, entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except that the enforcement thereof may
be subject to (i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be brought.
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<PAGE> 4
(f) Each of the Subsidiary Guarantors has all requisite corporate
power and authority to execute, deliver and perform each of its obligations
under the Guarantees. The Guarantees to be endorsed on each of the Senior
Notes, the Exchange Notes and the Private Exchange Notes have been duly and
validly authorized by each of the Subsidiary Guarantors and, when the Senior
Notes, the Exchange Notes and the Private Exchange Notes are executed by the
Company and authenticated by the Trustee in accordance with the provisions of
the Indenture and, in the case of the Senior Notes, delivered to and paid for
by the Initial Purchaser in accordance with the terms of this Agreement, will
constitute a valid and legally binding obligation of each of the Subsidiary
Guarantors, entitled to the benefits of the Indenture and enforceable against
the Subsidiary Guarantors in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(g) The Company and each of the Subsidiary Guarantors have all
requisite corporate power and authority to execute, deliver and perform each of
their obligations under the Indenture. The Indenture meets the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the "TIA").
The Indenture has been duly and validly authorized by the Company and each of
the Subsidiary Guarantors and, when executed and delivered by the Company and
each of the Subsidiary Guarantors a party thereto (assuming the due
authorization, execution and delivery by the Trustee if the Trustee is required
to execute any such document), each will constitute a valid and legally binding
agreement of the Company and each of the Subsidiary Guarantors, enforceable
against the Company and each of the Subsidiary Guarantors in accordance with
its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(h) The Company and each of the Subsidiary Guarantors have all
requisite corporate power and authority to execute, deliver and perform each of
their obligations under the Rights Agreements to which they are a party. Each
of the Rights Agreements has been duly and validly authorized by the Company
and each of the Subsidiary Guarantors and, when executed and delivered by the
Company and each of the Subsidiary Guarantors a party thereto (assuming the due
authorization, execution and delivery by the Initial Purchaser), will
constitute a valid and legally binding agreement of the Company and each such
Subsidiary Guarantor, enforceable against the Company and each such Subsidiary
Guarantor in accordance with its terms, except that (A) the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations.
(i) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Warrant
Agreement. The Warrant Agreement has been duly and validly authorized by the
Company and, when executed and delivered by the Company, will
-4-
<PAGE> 5
constitute a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors; rights generally and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be brought.
(j) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Warrants and the
Additional Warrants (as defined in Section 3 below). The Warrants and the
Additional Warrants have been duly and validly authorized by the Company and,
when executed by the Company and countersigned by the Warrant Agent in
accordance with the provisions of the Warrant Agreement and when delivered to
and paid for by the Initial Purchaser in accordance with the terms of this
Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company, entitled to
the benefits of the Warrant Agreement and enforceable against the Company in
accordance with their terms, except that the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and (ii)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(k) The Warrant Shares have been duly and validly authorized for
issuance by the Company and when issued in accordance with the terms and
conditions contained in the Warrant Agreement upon exercise of the Warrants,
the Warrant Shares will be duly authorized, validly issued, fully paid and
non-assessable and will not be subject to any preemptive or similar rights. The
Warrant Shares have been duly reserved for issuance in accordance with the
terms of the Warrants and the Warrant Agreement.
(l) The Company and each of the Subsidiary Guarantors have all
requisite corporate power and authority to execute, deliver and perform each of
their obligations under this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by the Company and each of the Subsidiary Guarantors. No
consent, approval, authorization or order of any court or governmental agency
or body, or third party is required for the performance of this Agreement by
the Company or the Subsidiary Guarantors or the consummation by the Company or
the Subsidiary Guarantors of the transactions contemplated hereby, except such
as have been obtained. The execution, delivery and performance by the Company
and each of the Subsidiary Guarantors of this Agreement and the consummation by
the Company and each of the Subsidiary Guarantors of the transactions
contemplated hereby, and the fulfillment of the terms hereof, will not conflict
with or constitute or result in a breach of or a default under (or an event
which with notice or passage of time or both would constitute as a default
under) or violation of any of (i) the terms or provisions of any indenture,
mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate, contract or other agreement or instrument to
which the Company or any of the Subsidiary Guarantors is a party or to which
any of them or their respective properties or assets is subject (other than the
loan agreement dated March 29, 1996 with Bank One of Texas, N.A. ("Bank One"),
as amended, and the promissory note issued by the Company thereunder and the
collateral documents ancillary thereto), (ii) the certificate of incorporation
or bylaws (or similar organizational document) of the Company or any of the
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<PAGE> 6
Subsidiary Guarantors, or (iii) (assuming the accuracy of the representations
and warranties of the Initial Purchaser in Section 8 hereof) any statute,
judgment, decree, order, rule or regulation applicable to the Company or any of
the Subsidiary Guarantors or any of their respective properties or assets.
(m) None of the Company or the Subsidiary Guarantors is (i) in
violation of its certificate of incorporation or bylaws, (ii) in breach or
violation of any statute, judgment, decree, order, rule or regulation
applicable to any of them or any of their respective properties or assets,
except for any such breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect, or (iii) except as disclosed in the
Final Circular (or, if the Final Circular is not in existence, the most recent
Circular), in breach of or default under (nor has any event occurred which,
with notice or passage of time or both, would constitute a default under) or in
violation of any of the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement, permit,
certificate, contract or other agreement or instrument to which any of them is
a party or to which any of them or their respective properties or assets is
subject, except for any such breach, default, violation or event which would
not, individually or in the aggregate, have a Material Adverse Effect.
(n) The audited consolidated financial statements of the Company
and its subsidiaries included in the Final Circular (or, if the Final Circular
is not in existence, the most recent Circular) present fairly in all material
respects the consolidated financial position, the consolidated results of their
operations and their cash flows at the dates and for the periods to which they
relate and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated therein.
The summary and selected consolidated historical financial data in the Final
Circular (or, if the Final Circular is not in existence, the most recent
Circular) present fairly in all material respects the financial information
shown therein and have been prepared and compiled on a basis consistent with
the audited financial statements included therein, except as otherwise stated
therein. Deloitte & Touche L.L.P. and Arthur Andersen LLP (the "Independent
Accountants") are independent public accounting firms within the meaning of the
Act and the rules and regulations promulgated thereunder.
(o) The pro forma financial statements under the headings
"Unaudited Pro Forma Combined Condensed Financial Statements," "Selected
Historical and Unaudited Pro Forma Combined Financial Data," and "Unaudited Pro
Forma and Projected Combined Financial Data" (including the notes thereto) and
the other pro forma financial information (but excluding all projected or
forecasted financial information) included in the Final Circular (or, if the
Final Circular is not in existence, the most recent Circular) (i) comply as to
form in all material respects with the applicable requirements of Regulation
S-X promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) have been prepared in accordance with the Commission's
rules and guidelines with respect to pro forma financial statements, and (iii)
have been properly computed on the bases described therein; the assumptions
used in the preparation of the pro forma financial data and other pro forma
financial information included in the Final Circular (or, if the Final Circular
is not in existence, the most recent Circular) are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein.
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<PAGE> 7
(p) Except as described in the Final Circular (or, if the Final
Circular is not in existence, the most recent Circular), there is not pending
or, to the best knowledge of the Company or any Subsidiary Guarantors,
threatened, any action, suit, proceeding, inquiry or investigation to which the
Company or any of the Subsidiary Guarantors is a party, or to which the
property or assets of the Company or any of the Subsidiary Guarantors are
subject, before or brought by any court or governmental agency or body which,
if determined adversely to the Company or the Subsidiary Guarantors, would
result, individually or in the aggregate, in any material adverse change in the
general affairs, management, business, condition (financial or otherwise),
prospects or results of operations of the Company and the Subsidiary
Guarantors, taken as a whole (any such event, a "Material Adverse Change"), or
which seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Securities to be sold hereunder or the
consummation of the other transactions described in the Final Circular (or, if
the Final Circular is not in existence, the most recent Circular).
(q) Each of the Company and the Subsidiary Guarantors owns or
possesses adequate licenses or other rights to use all trademarks, service
marks, trade names and know-how necessary to conduct the businesses now or
proposed to be operated by it as described in the Final Circular (or, if the
Final Circular is not in existence, the most recent Circular), and since
December 31, 1995, none of the company or the Subsidiary Guarantors has
received any notice of conflict with (or knows of any such conflict with)
asserted rights of others with respect to any trademarks, service marks, trade
names or know-how which, if such assertion of conflict were sustained, would,
individually or in the aggregate, have a Material Adverse Effect.
(r) Each of the Company and the Subsidiary Guarantors possesses
all licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, presently required or
necessary to own or lease, as the case may be, and to operate its respective
properties and to carry on its respective businesses as now or proposed to be
conducted as set forth in the Final Circular (or, if the Final Circular is not
in existence, the most recent Circular), except where the failure to obtain
such licenses, permits, certificates, consents, orders, approvals and other
authorizations, or to make all declarations and filings, would not,
individually or in the aggregate, have a Material Adverse Effect, and none of
the Company or any of the Subsidiary Guarantors has received any notice of any
proceeding relating to revocation or modification of any such license, permit,
certificate, consent, order, approval or other authorization, except as
described in the Final Circular (or, if the Final Circular is not in existence,
the most recent Circular) and except where such revocation or modification
would not, individually or in the aggregate, have a Material Adverse Effect.
(s) Since the respective dates as of which information is given in
the Final Circular (or, if the Final Circular is not in existence, the most
recent Circular), except as described therein, (i) none of the Company or any
of the Subsidiary Guarantors has incurred any liabilities or obligations,
direct or contingent, or entered into or agreed to enter into any transactions
or contracts (written or oral) not in the ordinary course of business and (ii)
none of the Company or any of the Subsidiary Guarantors has purchased any of
its outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock (other than with
respect to any such Subsidiary Guarantor, the purchase of, or dividend or
distribution on, capital stock owned by the Company).
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<PAGE> 8
(t) Each of the Company and the Subsidiary Guarantors have filed
all necessary federal, state and foreign income and franchise tax returns,
except where the failure to so file such returns would not, individually or in
the aggregate, have a Material Adverse Effect, and has paid all taxes shown as
due thereon; and other than tax deficiencies which the Company or any
Subsidiary Guarantor is contesting in good faith and for which the Company or
such Subsidiary Guarantor has provided adequate reserves, there is no tax
deficiency that has been asserted against the Company or any of the Subsidiary
Guarantors that would have, individually or in the aggregate, a Material
Adverse Effect.
(u) The projected financial and operating data included in the
Final Circular (or, if the Final Circular is not in existence, the most recent
Circular) are based on assumptions which the Company and the Subsidiary
Guarantors believe to be reasonable in light of current circumstances.
(v) None of the Company, the Subsidiary Guarantors or any agent
acting on their behalf has taken or will take any action that might cause this
Agreement or the same of the Securities to violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System, in each case as in
effect, or as the same may hereafter be in effect, on the Closing Date.
(w) Each of the Company and the Subsidiary Guarantors has good and
defensible title to all real property and good title to all personal property
described in the Final Circular (or, if the Final Circular is not in existence,
the most recent Circular) as being owned by it and good and defensible title to
a leasehold estate in the real and personal property described in the Final
Memorandum (or, if the Final Circular is not in existence, the most recent
Circular) as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Final Circular (or, if
the Final Circular is not in existence, the most recent Circular) or to the
extent the failure to have such title or the existence of such liens, charges,
encumbrances or restrictions would not, individually or in the aggregate, have
a Material Adverse Effect.
(x) There are no legal or governmental proceedings involving or
affecting the Company or any Subsidiary Guarantor or any of their respective
properties or assets which would be required to be describe in a prospectus
pursuant to the Act that are not described in the Final Circular (or, if the
Final Circular is not in existence, the most recent Circular), nor are there
any material contracts or other documents which would be required to be
described in the Final Circular (or, if the Final Circular is not in existence,
the most recent Circular) that are not so described.
(y) To the best knowledge of the Company, except as described in
the Final Circular (or, if the Final Circular is not in existence, the most
recent Circular), each of the Company and the Subsidiary Guarantors is in
compliance in all respects with all laws, rules or regulations relating to
pollution or protection of public or employee health or the environment
("Environmental Law") and with the terms and conditions of any permit, license
or approval required thereunder in connection with the ownership, operation or
use of its business, property and assets except where the failure to be in such
compliance would not, individually or in the aggregate, have a Material Adverse
Effect;
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<PAGE> 9
except as disclosed in the Final Circular (or, if the Final Circular is not in
existence, the most recent Circular), none of the Company or the Subsidiary
Guarantors is subject to any known liability, absolute or contingent, under any
Environmental Law except for any such liability which would not, individually
or in the aggregate, have a Material Adverse Effect; except as disclosed in the
Final Circular (or, if the Final Circular is not in existence, the most recent
Circular), there is no civil, criminal or administrative action, suit, demand,
hearing, notice of violation or deficiency, investigation, proceeding or notice
of potential responsibility or demand letter or request for information pending
or, to their knowledge, threatened against the Company or any of the Subsidiary
Guarantors under any Environmental Law which, if determined adversely to the
Company or any such Subsidiary would, individually or in the aggregate, result
in a Material Adverse Effect.
(z) Each of the Company or its Subsidiaries carries insurance
(including self insurance) in such amounts and covering such risks as in its
reasonable determination is adequate for the conduct of its business and the
value of its properties.
(aa) There is no strike, labor dispute, slowdown or work stoppage
with the employees of the Company or any of the Subsidiary Guarantors which is
pending or, to the best knowledge of the Company or any Subsidiary Guarantor,
threatened.
(bb) None of the Company or the Subsidiary Guarantors has any
liability for any prohibited transaction or funding deficiency or any complete
or partial withdrawal liability with respect to any pension, profit sharing or
other plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or any Subsidiary Guarantor
makes or ever has made a contribution and in which any employee of the Company
or any Subsidiary Guarantor is or has ever been a participant. With respect to
such plans, the Company and each Subsidiary Guarantor is in compliance in all
material respects with all applicable provisions of ERISA.
(cc) After giving effect to the offering and sale of the
Securities neither the Company nor any of the Subsidiary Guarantors will be an
"investment company" or "promoter" or "principal underwriter" for an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
(dd) The Senior Notes, the Exchange Notes, the Warrants, the
Warrant Shares, the Common Stock, the Units, the Indenture, the Warrant
Agreement, the Additional Warrants (hereinafter defined) and the Rights
Agreements will, and this Agreement does, conform in all material respects to
the descriptions thereof in the Final Circular (or, if the Final Circular is
not in existence, the most recent Circular).
(ee) Except as disclosed in the Final Circular (or, if the Final
Circular is not in existence, the most recent Circular), no holder of
securities of the Company or any Subsidiary Guarantor will be entitled to have
such securities registered under the registration statements required to be
filed by the Company pursuant to the Rights Agreements other than as expressly
permitted thereby.
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<PAGE> 10
(ff) Immediately after the consummation of the transactions
contemplated by this Agreement, the Company believes that the fair value and
current fair saleable value of the assets of each of the Company and the
Subsidiary Guarantors (each on a consolidated basis) will exceed the sum of its
stated liabilities and identified contingent liabilities; neither the Company
nor any of the Subsidiary Guarantors (each on a consolidated basis) is, nor
will either the Company or any of the Subsidiary Guarantors (each on a
consolidated basis) be, after giving effect to the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, (a) left with unreasonably small capital with which to
carry on its business as it is proposed to be conducted, (b) unable to pay its
debts (contingent or otherwise) as they mature or (c) otherwise insolvent.
(gg) Neither the Company nor any person acting on its behalf has
offered or sold the Securities by means of any general solicitation or general
advertising within the meaning of Rule 502(c) under the Act or, with respect to
Securities sold outside the United States to non-U.S. persons (as defined in
Rule 902 under the Securities Act), by means of any directed selling efforts
within the meaning of Rule 902 under the Act and the Company, any affiliate of
the Company and any person acting on its or their behalf (other than the
Initial Purchaser) has complied with and will implement the "offering
restriction" within the meaning of such Rule 902.
(hh) Within the six months preceding the date hereof, neither the
Company nor any other person acting on behalf of the Company (other than the
Initial Purchaser) has offered or sold to any person any Securities, or any
securities of the same or a similar class as the Securities, other than
Securities offered or sold to the Initial Purchaser hereunder; and the Company
will take reasonable precautions designed to insure that any offer or sale,
direct or indirect, in the United States or to any U.S. person (as defined in
Rule 902 under the Act) of any Securities or any substantially similar security
issued by the Company, within six months subsequent to the date on which the
distribution of the Securities has been completed (as notified to the Company
by Jefferies & Company, Inc.), is made under restrictions and other
circumstances reasonably designed not to affect the status of the offer and
sale of the Securities in the United States and to U.S. persons contemplated by
this Agreement as transactions exempt from the registration provisions of the
Act;
(ii) Assuming the accuracy of the representations and warranties of
the Initial Purchaser in Section 8 hereof, it is not necessary in connection
with the offer, sale and delivery of the Securities to the Initial Purchaser in
the manner contemplated by this Agreement to register any of the Securities
under the Act or to qualify the Indenture under the TIA.
(jj) No securities of the Company or any Subsidiary Guarantor are
of the same class (within the meaning of Rule 144A under the Act) as the
Securities and listed on a national securities exchange registered under
Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer
quotation system.
(kk) None of the Company or the Subsidiary Guarantors have taken,
nor will any of them take, directly or indirectly, any action designed to, or
that might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities.
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<PAGE> 11
Any certificate signed by any officer of the Company or any
Subsidiary Guarantor and delivered to the Initial Purchaser or to counsel for
the Initial Purchaser shall be deemed a joint and several representation and
warranty by the Company and each of the Subsidiary Guarantors to the Initial
Purchaser as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company and the
Subsidiary Guarantors agree to issue and sell to the Initial Purchaser, and the
Initial Purchaser agrees to purchase from the Company and the Subsidiary
Guarantors 50,000 Units at a purchase price of $960.00 per Unit. One or more
certificates in definitive form for the Securities that the Initial Purchaser
has agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or names as Jefferies & Company, Inc. requests upon
notice to the Company at least 24 hours prior to the Closing Date, shall be
delivered by or on behalf of the Company and the Subsidiary Guarantors to the
Initial Purchaser, against payment by or on behalf of the Initial Purchaser of
the purchase price therefor by wire transfer (same day funds) to such account
or accounts as the Company shall specify prior to the Closing Date. Such
delivery of and payment for the Securities shall be made at 10:00 a.m., New
York time, on April 17, 1997, or at such other place, time or date as the
Initial Purchaser, on the one hand, and the Company, on the other hand, may
agree upon, such time and date of delivery against payment being herein
referred to as the "Closing Date." The Company has requested that the Closing
Date be scheduled to occur five business days after the date of this Agreement
in order to provide sufficient time to satisfy the conditions for closing set
forth in Section 7 below. With respect to Securities to be delivered in
definitive certificated form, the Company and the Subsidiary Guarantors will
make certificates for such Securities available for checking and packaging by
the Initial Purchaser at the offices of Jefferies & Company, Inc. in New York,
New York, or at such other place as Jefferies & Company, Inc. may designate, at
least 24 hours prior to the Closing Date. Securities to be represented by one
or more definitive global Securities in book-entry form will be deposited on
the Closing Date, by or on behalf of the Company, with The Depository Trust
Company ("DTC") or its designated custodian.
As additional compensation to the Initial Purchaser, the Company
agrees to issue to the Initial Purchaser (in such denomination or denominations
and registered in such name or names as the Initial Purchaser requests upon
notice to the Company at least 24 hours prior to the Closing Date) at the
Closing Date, for no additional consideration, warrants to purchase initially
127,972 shares of Common Stock at an initial exercise price of $.01 per share
of Common Stock (the "Additional Warrants").
4. Offering by the Initial Purchaser. The Initial Purchaser
proposes to make an offering of the Securities at the price and upon the terms
set forth in the Final Circular, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchaser is advisable.
5. Covenants of the Company and the Subsidiary Guarantors. Each
of the Company and the Subsidiary Guarantors jointly and severally covenants
and agrees with the Initial Purchaser that:
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<PAGE> 12
(a) The Company and the Subsidiary Guarantors will not amend or
supplement the Final Circular or any amendment or supplement thereto of which
the Initial Purchaser shall not previously have been advised and furnished a
copy for a reasonable period of time prior to the proposed amendment or
supplement and as to which the Initial Purchaser shall not have given their
consent. The Company and the Subsidiary Guarantors will promptly, upon the
reasonable request of the Initial Purchaser or counsel for the Initial
Purchaser, make any amendments or supplements to the Preliminary Circular or
the Final Circular that may be necessary or advisable in connection with the
resale of the Securities by the Initial Purchaser.
(b) The Company and the Subsidiary Guarantors will cooperate with
the Initial Purchaser in arranging for the qualification of the Securities for
offering and sale under the securities or "Blue Sky" laws of such jurisdictions
as the Initial Purchaser may designate and will continue such qualifications in
effect for as long as may be necessary to complete the resale of the
Securities; provided, however, that in connection therewith, neither of the
Company nor any Subsidiary Guarantors shall be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation in excess of a nominal dollar amount
in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the initial resale
by the Initial Purchaser of the Securities to persons other than affiliates of
the Initial Purchaser (as determined by the Initial Purchaser), any event
occurs as a result of which the Final Circular as then amended or supplemented
would include any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any other
reason it is necessary at any time to amend or supplement the Final Circular to
comply with applicable law, the Company and the Subsidiary Guarantors will
promptly notify the Initial Purchaser thereof and will prepare, at the expense
of the Company and the Subsidiary Guarantors, an amendment or supplement to the
Final Circular that corrects such statement or omission or effects such
compliance.
(d) The Company will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the
Preliminary Circular and the Final Circular or any amendment or supplement
thereto as the Initial Purchaser may reasonable request.
(e) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Final Circular.
(f) For and during the period ending on the date no Securities are
outstanding, the Company will furnish to the Initial Purchaser copies of all
reports and other communications (financial or otherwise) furnished by the
Company or the Subsidiary Guarantors to the Trustee, Warrant Agent or the
holders of the Securities and, as soon as available, copies of any reports or
financial statements furnished to or filed by the Company or the Subsidiary
Guarantors with the Commission or any national securities exchange on which any
class of securities of the Company or the Subsidiary Guarantors may be listed.
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<PAGE> 13
(g) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared, if at all, a copy of any
unaudited interim financial statements of the Company for any period subsequent
to the period covered by the most recent financial statements appearing in the
Final Circular.
(h) None of the Company or any of its Affiliates will sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Securities in a manner which would require the registration under the Act
of the Securities.
(i) The Company and the Subsidiary Guarantors will not solicit any
offer to buy or offer to sell the Securities by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Act.
(j) For so long as any of the Securities remain outstanding, the
Company and the Subsidiary Guarantors will make available, upon request, to any
seller of such Securities the information specified in Rule 144A(d)(4) under
the Act, unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.
(k) Each of the Company and the Subsidiary Guarantors will use its
best efforts to (i) permit the Securities to be designated PORTAL securities in
accordance with the rules and regulations adopted by the NASD relating to
trading in the Private Offerings, Resales and Trading through Automated
Linkages market (the "PORTAL Market") and (ii) permit the Securities to be
eligible for clearance and settlement through DTC.
(l) The Company and the Subsidiary Guarantors agree that prior to
any registration of the Securities pursuant to the Registration Rights
Agreement, or at such earlier time as may be required, the Indenture shall be
qualified under the TIA and will cause to be entered into any necessary
supplemental indentures in connection therewith.
6. Expenses. The Company and the Subsidiary Guarantors agree,
jointly and severally, to pay all costs and expenses incident to the
performance of their obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Preliminary Circular and the Final Circular and any amendment or
supplement thereto, (ii) all arrangements relating to the delivery to the
Initial Purchaser of copies of the foregoing documents (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (iv) preparation, issuance and delivery to the Initial
Purchaser of the Securities, (v) the qualification of the Securities under
state securities and "Blue Sky" laws, including filing fees and fees and
disbursements of counsel for the Initial Purchaser relating thereto, (vi) the
fees and expenses of counsel to the Initial Purchaser in connection with the
transactions contemplated hereby, (vii) expenses in connection with any
meetings with prospective investors in the Securities, (viii) fees and expenses
of the Trustee, the
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<PAGE> 14
Warrant Agent and the transfer agent for the Common Stock including fees and
expenses of their respective counsel, (viii) all expenses and listing fees
incurred in connection with the application for quotation of the Securities on
the PORTAL Market and (ix) any fees charged by investment rating agencies for
the rating of the Securities. The Company and the Subsidiary Guarantors agree
that they will pay in full on the Closing Date the fees and expenses referred
to in clause (vi) by delivery to counsel for the Initial Purchaser on such date
a deck payable to such counsel in the requisite amount. The Company and the
Subsidiary Guarantors shall not be liable to the Initial Purchaser for loss of
contemplated profits from the transactions covered by this Agreement.
7. Conditions of the Initial Purchaser's Obligations. The
obligation of the Initial Purchaser to purchase and pay for the Securities
shall, in its sole discretion, be subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the
Company and the Subsidiary Guarantors, in form and substance satisfactory to
counsel for the Initial Purchaser, to the effect that:
(i) Each of the Company and the Subsidiary Guarantors is
duly incorporated, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Final
Circular. Each of the Company and the Subsidiary Guarantors is duly
qualified as a foreign corporation and in good standing in each
jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect.
(ii) As of the date thereof, the Company has the
authorized, issued and outstanding capitalization set forth in the
Final Circular; all of the outstanding shares of capital stock of the
Subsidiary Guarantors are owned, directly or indirectly, by the
Company, and, to the knowledge of such counsel and except as set forth
in the Final Circular, free and clear of all liens, encumbrances,
equities and claims or restrictions on transferability or voting.
(iii) Except as set forth in the Final Circular, to the
knowledge of such counsel (A) no options, warrants or other rights to
purchase from the Company or any Subsidiary Guarantors shares of
capital stock in the Company or any Subsidiary Guarantors are
outstanding, (B) no agreements or other obligations of the Company or
any Subsidiary Guarantors to issue, or other rights to cause the
Company or any Subsidiary Guarantors to convert, any obligation into,
or exchange any securities for, shares of capital stock in the Company
or any Subsidiary Guarantors are outstanding and (C) no holder of
securities of the Company or any Subsidiary Guarantors is entitled to
have such securities registered under a registration statement filed
by the Company or any Subsidiary Guarantors under the Act with respect
to the Securities or the Warrant Shares.
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<PAGE> 15
(iv) The Senior Notes have been duly and validly
authorized and executed by the Company and when delivered by the
Company (assuming the due authorization, execution, and delivery of
the Indenture by the Trustee and the due authentication of the Senior
Notes by the Trustee in accordance with the Indenture) and paid for by
the Initial Purchaser in accordance with the terms of this Agreement,
will constitute the valid and legally binding obligations of the
Company enforceable against the Company in accordance with their
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought.
(v) Each of the Subsidiary Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Guarantees. The Guarantees endorsed on each
Senior Note have been duly and validly authorized and executed by each
of the Subsidiary Guarantors and, when the Senior Notes are
authenticated by the Trustee in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, will constitute the valid
and legally binding obligations of each of the Subsidiary Guarantors,
enforceable against each of the Subsidiary Guarantors in accordance
with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor
may be brought.
(vi) Each of the Company and each of the Subsidiary
Guarantors has all requisite corporate power and authority to execute,
deliver and perform its respective obligations under the Indenture;
the Indenture is in sufficient form for qualification under the TIA;
the Indenture has been duly and validly authorized, executed and
delivered by the Company and each of the Subsidiary Guarantors and
(assuming the due authorization, execution and delivery thereof by the
Trustee), constitutes the valid and legally binding agreement of the
Company and each of the Subsidiary Guarantors, enforceable against the
Company and the Subsidiary Guarantors in accordance with its terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought.
(vii) Each of the Company and each of the Subsidiary
Guarantors has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Registration Rights
Agreements; the Registration Rights Agreements have been duly and
validly authorized, executed and delivered by the Company and each of
the Subsidiary Guarantors (assuming the due authorization, execution
and delivery thereof by the Initial Purchaser), constitute the valid
and legally binding agreement of the Company and each such Subsidiary
Guarantors, enforceable against the Company and each such Subsidiary
Guarantors in accordance with their terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now
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<PAGE> 16
or hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (B) any rights
to indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
(viii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Warrant Agreement. The Warrant Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes the
valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(ix) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Warrants and the Additional Warrants. The Warrants and the Additional
Warrants have been duly and validly authorized and executed by the
Company and when countersigned by the Warrant Agent in accordance with
the provisions of the Warrant Agreement and delivered to and paid for
by the Initial Purchaser in accordance with the terms of this
Agreement, will have been duly issued and delivered and will
constitute the valid and legally binding obligations of the Company,
entitled to the benefits of the Warrant Agreement, and enforceable
against the Company in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(x) When issued in accordance with the terms and
conditions contained in the Warrant Agreement, upon exercise of the
Warrants and upon exercise of the Additional Warrants, the Warrant
Shares and the Additional Warrant Shares, as the case may be, will be
duly authorized, validly issued, fully paid and non-assessable and
will not be subject to any preemptive or similar rights. The Warrant
Shares and the Additional Warrant Shares, as the case may be, have
been duly reserved for issuance in accordance with the terms of the
Warrants, the Warrant Agreement and the Additional Warrants, as the
case may be.
(xi) Each of the Company and the Subsidiary Guarantors has
all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby; the execution, delivery and
performance of this Agreement by the Company and the Subsidiary
Guarantors and the consummation by the Company and the Subsidiary
Guarantors of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of
the Company and each of the Subsidiary Guarantors. This Agreement has
been duly executed and delivered by the Company and the Subsidiary
Guarantors.
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<PAGE> 17
(xii) The Indenture, the Senior Notes, the Guarantees, the
Warrants, the Additional Warrants, the Warrant Shares, the Common
Stock, the Registration Rights Agreements and the Warrant Agreement
conform in all material respects to the descriptions thereof contained
in the Final Circular.
(xiii) To the knowledge of such counsel, no legal or
governmental proceedings are pending or threatened to which any of the
Company or any of its Subsidiaries is a party or to which the property
or assets of the Company or any Subsidiary is subject which, if
determined adversely to the Company or the Subsidiary, would result,
individually or in the aggregate, in a Material Adverse Effect, or
which seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to be sold
hereunder or the consummation of the other transactions described in
the Final Circular under the caption "Use of Proceeds."
(xiv) The execution and delivery of the Exchange Notes and
the Private Exchange Notes by the Company have been duly authorized by
all necessary corporate action of the Company, and when the Exchange
Notes and Private Exchange Notes have been duly executed and delivered
by the Company in accordance with the terms of the Registration Rights
Agreement and the Indenture, and assuming due authentication by the
Trustee, the Exchange Notes and the Private Exchange Notes will
constitute the legal, valid, binding and enforceable obligations of
the Company, entitled to the benefits of the Indenture, except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(xv) The Guarantees to be endorsed on each of the Exchange
Notes and the Private Exchange Notes by the Subsidiary Guarantors have
been duly authorized by all necessary corporate action of the
Subsidiary Guarantors, and when the Exchange Notes and the Private
Exchange Notes have been duly executed and delivered by the Company
and the Subsidiary Guarantors in accordance with the terms of the
Registration Rights Agreement and the Indenture, and assuming due
authentication by the Trustee, the Guarantees will constitute the
legal, valid, binding and enforceable obligations of the Subsidiary
Guarantors, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought.
(xvi) The execution and delivery of this Agreement, the
Indenture, the Warrant Agreement and the Registration Rights
Agreements and the consummation of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and
sale of the Securities to the Initial Purchaser) will not, after
giving effect to the repayment of indebtedness to Bank One, conflict
with or constitute or result in a breach or violation of or a default
under (or an event which with notice or passage of time or both would
constitute a default under) or violation of any of (i) the terms or
provisions of any indenture, mortgage,
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<PAGE> 18
deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate, contract or other agreement or
instrument known to such counsel (including in any event any of the
foregoing which have been filed by the Company with the Commission) to
which the Company or any of the Subsidiary Guarantors is a party or to
which any of them or their respective properties or assets is subject,
except for any such conflict, breach, violation, default or event
which would not, individually or in the aggregate, have a Material
Adverse Effect, (ii) the certificate of incorporation or bylaws of the
Company or any of the Subsidiary Guarantors, or (iii) (assuming the
accuracy of the representations and warranties of the Initial
Purchaser in Section 8 hereof) any statute, judgment, decree, order,
rule or regulation known to such counsel to be applicable to the
Company or any of the Subsidiary Guarantors or any of their respective
properties or assets, except for any such conflict, breach or
violation which would not, individually or in the aggregate, have a
Material Adverse Effect.
(xvii) To the knowledge of such counsel, no consent,
approval, authorization or order of any governmental authority is
required for the issuance and sale by the Company and the Subsidiary
Guarantors of the Securities to the Initial Purchaser or the other
transactions contemplated hereby.
(xviii) No registration under the Act of the Securities is
required in connection with the sale of the Securities to the Initial
Purchaser as contemplated by this Agreement and the Final Circular or
in connection with the initial resale of the Securities by the Initial
Purchaser in accordance with Section 8 of this Agreement, and prior to
the commencement of the Exchange Offer (as defined in the Registration
Rights Agreement) or the effectiveness of the Shelf Registration
Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be qualified under the TIA, in each case
assuming (i) that the purchasers who buy such Securities in the
initial resale thereof are qualified institutional buyers as defined
in Rule 144A promulgated under the Act ("QIBs" or "Qualified
Institutional Buyers"), accredited investors as defined in Rule
501(a)(1), (2), (3) or (7) promulgated under the Act ("Accredited
Investors"), or foreign purchasers (as defined in Section 8), (ii) the
accuracy of the Initial Purchaser's representations in Section 8 and
those of the Company and the Subsidiary Guarantors contained in this
Agreement regarding the absence of a general solicitation in
connection with the sale of such Securities to the Initial Purchaser
and the initial resale thereof and (iii) the due performance by the
Initial Purchaser of the agreements set forth in Section 8 hereof.
(xix) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Securities will violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
(xx) Neither the Company nor any of the Subsidiary
Guarantors is an "investment company" or "promotor" or "principal
underwriter" for an "investment company" as such terms are defined in
the Investment Company Act of 1946, as amended, and the rules and
regulations thereunder.
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<PAGE> 19
At the time the foregoing opinion is delivered, Akin, Gump, Strauss,
Hauer & Feld, L.L.P. shall additionally state that it has participated in
conferences with officers and other representatives of the Company and the
Subsidiary Guarantors, representatives of the independent public accountants
for the Company, representatives of the Initial Purchaser and counsel for the
Initial Purchaser, at which conferences the contents of the Final Circular and
related matters were discussed, and, although it has not independently verified
and is not passing upon and assumes no responsibility for the accuracy,
completeness or fairness of the statements contained in the Final Circular
(except to the extent specified in subsection 7(a)(ii) and (xii)), no facts
have come to its attention which lead it to believe that the Final Circular, on
the date thereof or at the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such firm need express no opinion with respect to the financial statements
and related notes thereto and the other financial or statistical data included
in the Final Circular). The opinion of Akin, Gump, Strauss, Hauer & Feld,
L.L.P. described in this subsection (a) shall be rendered to the Initial
Purchaser at the request of the Company and the Subsidiary Guarantors and shall
so state therein.
(b) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser, dated
as of the Closing Date and addressed to the Initial Purchaser, of Vinson &
Elkins L.L.P., counsel for the Initial Purchaser, with respect to certain legal
matters relating to this Agreement and such other related matters as the
Initial Purchaser may require. In rendering such opinion, Vinson & Elkins
L.L.P. shall have received and may rely upon such certificates and other
documents and information as it may reasonably request to pass upon such
matters.
(c) The Initial Purchaser shall have received from the Independent
Accountants a comfort letter or letters dated the date hereof and the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to the
effect set forth in Exhibit C hereto.
(d) The representations and warranties of each of the Company and
the Subsidiary Guarantors contained in this Agreement shall be true and correct
in all material respects on and as of the date hereof and on and as of the
Closing Date as if made on and as of the Closing Date; the statements of the
Company's and the Subsidiary Guarantors' officers made pursuant to any
certificate delivered in accordance with the provisions hereof shall be true
and correct in all material respects on and as of the date made and on and as
of the Closing Date; the Company and the Subsidiary Guarantors shall have
complied in all material respects with all agreements and satisfied hereunder
at or prior to the Closing Date; and, except as described in the Final Circular
(exclusive of any amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial statements in such Final
Circular, there shall have been no Material Adverse Change or any development
that, singly or in the aggregate, is reasonably likely to cause a Material
Adverse Change.
(e) The sale of the Securities hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
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<PAGE> 20
(f) Subsequent to the date of the most recent financial statements
in the Final Circular (exclusive of any amendment or supplement thereto after
the date hereof), other than as described in such Final Circular, none of the
Company or the Subsidiary Guarantors shall have incurred any liabilities or
obligations, direct or contingent (other than in the ordinary course of
business), that are material to the Company or the Subsidiary Guarantors, taken
as a whole, or entered into any transactions not in the ordinary course of
business that are material to the business, condition (financial or other) or
results of operations or prospects of the Company or the Subsidiary Guarantors,
taken as a whole, and there shall not have been any adverse change in the
capital stock or long-term indebtedness of the Company or the Subsidiary
Guarantors that is material to the business, condition (financial or other) or
results of operations or prospects of the Company and the Subsidiary
Guarantors, taken as a whole.
(g) Subsequent to the date of the most recent financial statements
in the Final Circular (exclusive of any amendment or supplement thereto after
the date hereof), the conduct of the business and operations of the Company or
the Subsidiary Guarantors shall not have been interfered with by strike, fire,
flood, hurricane, accident or other calamity (whether or not insured) or by any
court or governmental action, order or decree, and, except as otherwise stated
therein, the properties of the Company or the Subsidiary Guarantors shall not
have sustained any loss or damage (whether or not insured) as a result of any
such occurrence, except any such interference, loss or damage which would not,
individually or in the aggregate, have a Material Adverse Effect.
(h) The Initial Purchaser shall have received certificates of the
Company and each of the Subsidiary Guarantors, dated the Closing Date, signed
on behalf of the Company and each of the Subsidiary Guarantors by their
respective Chairman of the Board and Chief Executive Officer and the President
and Chief Operating Officer, to the effect that:
(i) the representations and warranties of the Company and
each of the Subsidiary Guarantors contained in this Agreement are true
and correct in all material respects as of the date hereof and as of
the Closing Date, and the Company and each of the Subsidiary
Guarantors have performed all covenants and agreements and satisfied
hereunder all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date;
(ii) at the Closing Date, since the date hereof or since
the date of the most recent financial statements in the Final Circular
(exclusive of any amendment or supplement thereto after the date
hereof), no event or events have occurred, no information has become
known nor does any condition exist that, individually or in the
aggregate, would have a Material Adverse Effect;
(iii) since the date hereof or since the date of the most
recent financial statements in the Final Circular (exclusive of any
amendment or supplement thereto after the date hereof), none of the
Company or any of the Subsidiary Guarantors has incurred any
liabilities or obligations, direct or contingent (other than in the
ordinary course of business), that are material to the Company or the
Subsidiary Guarantors or entered into any transactions not in the
ordinary course of business that are material to the business,
condition (financial or other) or results of operations or prospects
of the Company or the Subsidiary Guarantors and
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<PAGE> 21
there has not been any change in the capital stock or long-term
indebtedness of the Company or the Subsidiary Guarantors that is
material to the business, condition (financial or other) or results of
operations or prospects of the Company or the Subsidiary Guarantors,
taken as a whole; and
(iv) the sale of the Securities hereunder has not been
enjoined (temporarily or permanently.
(i) On the Closing Date, the Initial Purchaser shall have received
the Rights Agreements executed by the Company and the Subsidiary Guarantors a
party thereto executed by the Company and shall have received the Additional
Warrants, and such agreements shall be in full force and effect at all times
from and after the Closing Date.
On or before the Closing Date, the Initial Purchaser and counsel for
the Initial Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiary
Guarantors as they shall have heretofore reasonably requested from the Company
and the Subsidiary Guarantors.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Initial Purchaser and counsel for the Initial Purchaser. The
Company and the Subsidiary Guarantors shall furnish to the Initial Purchaser
such conformed copies of such documents, opinions, certificates, letters,
schedules and instruments in such quantities as the Initial Purchaser shall
reasonably request.
8. Offering of Securities; Restrictions on Transfer. The Initial
Purchaser represents and agrees (as to itself only) that it is a qualified
institutional buyer as defined in Rule 144A promulgated under the Act (a
"QIB"). The Initial Purchaser agrees with the Company and the Subsidiary
Guarantors that (a) it has not and will not solicit offers for, or offer or
sell, the Securities by any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act; and
(b) it has and will solicit offers for the Securities only from, and will offer
the Securities only to (i) persons whom the Initial Purchaser reasonably
believes to be QIBs, if any such person is buying for one or more institutional
accounts for which such person is acting as fiduciary or agent, only when such
person has represented to the Initial Purchaser that each such account is a
QIB, to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A under the Act ("Rule 144A"), and, in each case, in
transactions under Rule 144A or (ii) a limited number of other institutional
investors reasonably believed by the Initial Purchaser to be Accredited
Investors that, prior to their purchase of the Securities, deliver to the
Initial Purchaser a letter containing the representations and agreements set
forth in Appendix A to the Final Circular (or, if the Final Circular is not in
existence, in the most recent Circular); provided, however, that, in the case
of this clause (b), in purchasing such Securities such persons are deemed to
have represented and agreed as provided under the caption "Transfer
Restrictions" contained in the Final Circular (or, if the Final Circular is not
in existence, in the most recent Circular).
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<PAGE> 22
9. Indemnification and Contribution. (a) The Company and the
Subsidiary Guarantors, jointly and severally, agree to indemnify and hold
harmless the Initial Purchaser, and each person, if any, who controls the
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, against any losses, claims, damages or liabilities to which
any Initial Purchaser or such controlling person may become subject under the
Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of
any material fact contained in any Circular or any amendment or
supplement thereto; or
(ii) the omission or alleged omission to state, in any
Circular or any amendment or supplement thereto, a material fact
required to be stated therein or necessary to make the statements
therein not misleading,
and will reimburse, as incurred, the Initial Purchaser and each such
controlling person for any legal or other expenses incurred by the Initial
Purchaser or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action in respect thereof; provided,
however, the Company and the Subsidiary Guarantors will not be liable in any
such case to the extent that any such loss, claim, damage, or liability arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in any Circular or any amendment or
supplement thereto in reliance upon and in conformity with written information
concerning the Initial Purchaser furnished to the Company or the Subsidiary
Guarantors by the Initial Purchaser specifically for use therein. This
indemnity agreement will be in addition to any liability that the Company or
the Subsidiary Guarantors may otherwise have to the indemnified parties.
Neither the Company nor the Subsidiary Guarantors shall be liable under this
Section 9 for any settlement of any claim or action effected without their
prior written consent, which shall not be unreasonably withheld.
(b) The Initial Purchaser agrees to indemnify and hold harmless
each of the Company, the Subsidiary Guarantors, their directors, their officers
and each person, if any, who controls the Company or the Subsidiary Guarantors
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any losses, claims, damages or liabilities to which the Company or the
Subsidiary Guarantors or any such director, officer or controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in any Circular or any amendment or supplement
thereto or (ii) the omission or the alleged omission to state therein a
material fact required to be stated in any Circular or any amendment or
supplement thereto or necessary to make the statements therein no misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon an in conformity with written information concerning the Initial
Purchaser, furnished to the Company by the Initial Purchaser specifically for
use therein; and subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses incurred by
the Company or the Subsidiary Guarantors or any such director, officer or
controlling person in connection with
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<PAGE> 23
investigating or defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof. This indemnity agreement will be in addition to any liability that the
Initial Purchaser may otherwise have to the indemnified parties. The Initial
Purchaser shall not be liable under this Section 9 for any settlement of any
claim or action effected without their consent, which shall not be unreasonably
withheld. None of the Company or any of the Subsidiary Guarantors shall,
without the prior written consent of the Initial Purchaser, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which the Initial Purchaser is or could have been a party, or indemnity could
have been sought hereunder by the Initial Purchaser, unless such settlement (A)
includes an unconditional written release of the Initial Purchaser, in form and
substance reasonably satisfactory to the Initial Purchaser, from all liability
on claims that are the subject matter of such proceeding and (B) does not
include any statement as to an admission of fault, culpability or failure to
act by or on behalf of the Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such
indemnified party is entitled to indemnification under this Section 9, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9, notify the indemnifying party of the
commencement thereof in writing; but the omission to so notify the indemnifying
party (i) will not relieve it from any liability under paragraph (a) or (b)
above unless and to the extent such failure results in the forfeiture by the
indemnifying party or substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraphs (a) and
(b) above. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in
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<PAGE> 24
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Initial Purchaser in the case
of paragraph (a) of this Section 9 or the Company or the Subsidiary Guarantors
in the case of paragraph (b) of this Section 9, representing the indemnified
parties under such paragraph (a) or paragraph (b), as the case may be, who are
parties to such action or actions) or (ii) the indemnifying party has
authorized in writing the employment of counsel for the indemnified party at
the expense of the indemnifying party. After such notice from the indemnifying
party to such indemnified party, the indemnifying party will not be liable for
the costs and expenses of any settlement of such action effected by such
indemnified party without the prior written consent of the indemnifying party
(which consent shall not be unreasonably withheld), unless such indemnified
party waived in writing its rights under this Section 9, in which case the
indemnified party may effect such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 9 is unavailable to, or
insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, 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 (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party 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). The relative benefits received by the Company and
the Subsidiary Guarantors on the one hand and the Initial Purchaser on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (before deducting expenses) received by the Company and the
Subsidiary Guarantors bear to the total discounts and commissions received by
the Initial Purchaser. The relative fault of the parties 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 the Subsidiary
Guarantors on the one hand, or the Initial Purchaser on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission or alleged statement or omission, and any
other equitable considerations appropriate in the circumstances.
(e) The Company, the Subsidiary Guarantors and the Initial
Purchaser agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of the immediately preceding
paragraph (d). Notwithstanding the provisions of this paragraph 9, no Initial
Purchaser shall be obligated to make contributions hereunder that in the
aggregate exceed the total discounts, commissions and other compensation
received by the Initial Purchaser under this Agreement, less the aggregate
amount of any damages that the Initial Purchaser has otherwise been required to
pay by reason of the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and no
-24-
<PAGE> 25
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of the immediately
preceding paragraph (d), each person, if any, who controls the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribute as the Initial Purchaser,
and each director of the Company and the Subsidiary Guarantors, each officer of
the Company and the Subsidiary Guarantors and each person, if any, who controls
the Company and the Subsidiary Guarantors within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company and the Subsidiary Guarantors.
10. Survival Clause. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company and the
Subsidiary Guarantors, their respective officers and the Initial Purchaser set
forth in this Agreement or made by or on behalf of them pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company and the Subsidiary
Guarantors, any of their respective officers or directors, the Initial
Purchaser or any controlling person referred to in Section 9 hereof and (ii)
delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 9 and 14
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchaser by notice to the Company given prior to the
Closing Date in the event that the Company or any of the Subsidiary Guarantors
shall have failed, refused or been unable to perform all obligations and
satisfy all conditions on their respective part to be performed or satisfied
hereunder at or prior thereto or, if at or prior to the Closing Date:
(i) any of the Company or the Subsidiary Guarantors shall
have sustained any loss or interference with respect to its businesses
or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any strike, labor
dispute, slow down or work stoppage or any legal or governmental
proceeding, which loss or interference, in the sole judgment of the
Initial Purchaser, has had nor has a Material Adverse Effect, or there
shall have been, in the sole judgment of the Initial Purchaser, any
Material Adverse Change, or any event or development involving or
reasonably likely to cause or result in a Material Adverse Change
(including without limitation a change in management or control of the
Company or the Subsidiary Guarantors), except in each case as
described in the Final Circular (exclusive of any amendment or
supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the Nasdaq National Market shall
have been suspended or minimum or maximum prices shall have been
established on any such exchange or market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
-25-
<PAGE> 26
(iv) there shall have been (A) an outbreak or escalation
of hostilities between the United States and any foreign power, or (B)
an outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A), (B) or (C)
above and in the sole judgment of the Initial Purchaser, makes it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Securities as contemplated by the Final Circular;
or
(v) any securities of the Company shall have been
downgraded or placed on any "watch list" for possible downgrading by
any nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided
in Section 10 hereof.
12. Information Supplied by the Initial Purchaser. The statements
set forth in the last paragraph on the front cover page and in the final two
sentences of the third paragraph under the heading "Private Placement" in the
Final Circular (to the extent such statements relate to the Initial Purchaser)
constitute the only information furnished by the Initial Purchaser to the
Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be in writing and,
if sent to the Initial Purchaser, shall be mailed or delivered or telecopied
and confirmed in writing to (i) Jefferies & Company, Inc.,11100 Santa Monica
Blvd., 10th Floor, Los Angeles, CA 90025, Attention: David J. Losito, Telecopy
No.: (310) 575-5200; and if sent to the Company or the Subsidiary Guarantors,
shall be mailed or delivered or telecopied and confirmed in writing to the
Company at 8572 Katy Freeway, Suite 101, Houston, Texas 77024.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
14. Successors. This Agreement shall inure to the benefit of and
be binding upon the Initial Purchaser, the Company and the Subsidiary
Guarantors and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provisions herein
contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (i) the indemnities of the
Company and the Subsidiary Guarantors contained in Section 9 of this Agreement
shall also be for the benefit of any person or persons who control the Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchaser contained in
Section 9 of this Agreement shall also be for the benefit of the directors of
the Company and the Subsidiary Guarantors, their respective officers and any
person or persons who control the Company
-26-
<PAGE> 27
or the Subsidiary Guarantors within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Securities from the Initial
Purchaser will be deemed a successor because of such purchase.
15. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-27-
<PAGE> 28
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company,
the Subsidiary Guarantors and the Initial Purchaser.
Very truly yours,
PACKAGED ICE, INC.
By:
------------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
PACKAGED ICE LEASING, INC.
By:
------------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
SOUTHCO ICE, INC.
By:
------------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
PACKAGED ICE MISSION, INC.
By:
------------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
PACKAGED ICE STPI, INC.
By:
------------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
-28-
<PAGE> 29
PACKAGED ICE SOUTHWESTERN, INC.
By:
------------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
JEFFERIES & COMPANY, INC.
By:
---------------------------------
Name:
Title:
-29-
<PAGE> 30
EXHIBIT C
Pursuant to Section 7(C) of the Purchase Agreement, Deloitte & Touche
L.L.P. shall furnish letters to the Initial Purchaser to the effect that:
(i) They are independent public accountants with respect
to the Company within the meaning of the Securities Act of 1933, as
amended (the "Act"), and the applicable published rules and
regulations thereunder;
(ii) In their opinion, the consolidated financial
statements audited by them and included in the Offering Circular
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the related published rules
and regulations;
(iii) The unaudited summary historical financial
information with respect to the consolidated results of operations and
financial position of the Company for the five most recent fiscal
years included in the Offering Circular agrees with the corresponding
amounts (after restatements where applicable) in the audited
consolidated financial statements for such five fiscal years;
(iv) On the basis of limited procedures not constituting
an audit in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements of the
Company included in the Offering Circular, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) the unaudited consolidated statements of
operations, consolidated balance sheets, consolidated
statements of shareholders' equity and consolidated statements
of cash flows included in the Offering Circular are not in
conformity with generally accepted accounting principles
applied on the basis substantially consistent with the basis
for the audited consolidated statements of operations,
consolidated balance sheets, consolidated statements of
shareholders' equity and consolidated statements of cash flows
included in the Offering Circular;
(B) any other unaudited income statement data and
balance sheet items of the Company included in the Offering
Circular do not agree with the corresponding items in the
unaudited consolidated financial statements from which such
data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent
with the basis for the corresponding
C-1
<PAGE> 31
amounts in the audited consolidated financial statements
included in the Offering Circular;
(C) any unaudited pro forma consolidated
financial statements included in the Offering Circular do not
comply as to form in all material respects with the applicable
accounting requirements or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(D) as of a specified date not more than five
days prior to the date of such letter, there have been any
changes in the consolidated capital stock (other than
issuances of capital stock upon exercise of options or
warrants, in each case which were outstanding on the date of
the latest financial statements included in the Offering
Circular) or any increase in the consolidated long-term debt
of the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or
other items specified by the Initial Purchaser, or any changes
in any other items specified by the Initial Purchaser, in each
case as compared with amounts shown in the latest balance
sheet of the Company included in the Offering Circular, except
in each case for changes, increases or decreases which the
Offering Circular discloses have occurred or may occur or
which are described in such letter; and
(E) for the period from the date of the latest
financial statements included in the Offering Circular to the
specified date referred to in clause (D) there were any
decreases in consolidated net revenues or operating income or
income before income taxes or the total or per share amounts
of consolidated net income or other items specified by the
Initial Purchaser, or any increases in any items specified by
the Initial Purchaser, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the Initial
Purchaser, except in each case for decreases or increases
which the Offering Circular discloses have occurred or may
occur or which are described in such letter; and
(v) In addition to the examination referred to in their
report(s) included in the Offering Circular and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (iv) above, they have carried out
certain specified procedures, not constituting an audit in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Initial Purchaser, which are derived from the general accounting
records of the Company and its subsidiaries, which appear in the
Offering Circular, and have compared certain of such amounts,
percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in
agreement.
C-2
<PAGE> 1
EXHIBIT 4.4
[FORM OF SERIES B SECURITY]
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT WITHIN THE MEANING OF
SECTION 1273(a) OF THE INTERNAL REVENUE CODE OF 1986. THE ISSUE PRICE IS
$1,000.00 FOR EACH $1,000 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE
DISCOUNT IS $171.93 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ISSUE
DATE IS APRIL 17, 1997. THE YIELD TO MATURITY IS APPROXIMATELY 12% COMPOUNDED
SEMIANNUALLY. ORIGINAL ISSUE DISCOUNT WILL BE ALLOCATED BASED ON ACCRUAL
PERIODS ENDING ON EACH DATE ON WHICH AN INTEREST PAYMENT IS DUE AND THE 360
DAYS PER YEAR CONVENTION.
PACKAGED ICE, INC. CUSIP No. 695148 AD 8
12% Senior Note
due April 15, 2004
No. $
PACKAGED ICE, INC., a Texas corporation (the "Company", which term
includes any successor corporation), for value received promises to pay
to or registered assigns, the principal sum of Dollars,
on April 15, 2004.
Interest Payment Dates: April 15 and October 15 commencing October 15,
1997
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
PACKAGED ICE, INC.
[SEAL] By:
--------------------------------
Name:
Attest: Title:
- --------------------------------
Secretary
<PAGE> 2
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned Indenture.
Dated: U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
By
-----------------------------------
Authorized Signatory
<PAGE> 3
PACKAGED ICE, INC.
12% Senior Note
due April 15, 2004
1. Interest.
PACKAGED ICE, INC., a Texas corporation (the "Company"), promises to
pay interest on the principal amount of this Security at the rate per annum
shown above. The Company will pay interest semi-annually on April 15 and
October 15 of each year (the "Interest Payment Date"), commencing October 15,
1997. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from April 17, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
On each Interest Payment Date, the Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding such
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in New York, New York in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal
and interest by wire transfer in same day funds, or, in the case of Physical
Securities, by check payable in such U.S. Legal Tender.
3. Paying Agent and Registrar.
Initially, U.S. Trust Company of Texas, N.A. will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may act as Registrar or co-Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as of
April 17, 1997 (the "Indenture"), among the Company, the Subsidiary Guarantors
and the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for a statement of them. The
Securities are general unsecured obligations of the Company limited in
aggregate principal amount to $50,000,000. Payment on each Security is
guaranteed on a senior basis, jointly and severally, by the Subsidiary
Guarantors pursuant to Article Ten of the Indenture.
<PAGE> 4
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole
at any time or in part from time to time, on and after April 15, 2001 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on April 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . 107.00%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . 103.50%
2003 and thereafter . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to April 15,
2000, the Company may redeem up to an aggregate of $17.5 million principal
amount of Securities at a redemption price of 112% of the principal amount
thereof, plus accrued and unpaid interest thereon, to the redemption date with
the net proceeds of any Public Equity Offering; provided that at least $32.5
million in aggregate principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and provided, further,
that such redemption occurs within 90 days of the date of the closing of such
Public Equity Offering.
6. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required
to make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Securities
at a purchase price equal to 101% of the aggregate principal amount thereof
plus accrued and any unpaid interest thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Payment"). Within
30 days following the occurrence of a Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions and setting
forth the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, the Indenture requires that certain proceeds be used, subject to
the limitations contained therein, to make an offer to all Holders of
Securities (an "Asset Sale Offer") pursuant to Section 4.17 of the Indenture to
purchase certain amounts of Securities in accordance with the procedures set
forth in the Indenture.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
<PAGE> 5
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
redemption date, interest will cease to accrue on Securities or portions
thereof called for redemption.
8. Sinking Fund.
There will be no mandatory sinking fund payments for the Securities.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection not register the
transfer of or exchange any securities or portions thereof selected for
redemption, except the unredeemed portion of any security being redeemed in
part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agents will repay the funds to the Company
at its request subject to terms of the Indenture. After that, all liability of
the Trustee and such Paying Agents with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof ("Legal Defeasance"),
and may be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities ("Covenant Defeasance"), in each
case upon satisfaction of certain conditions specified in the Indenture.
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in
<PAGE> 6
aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of subsidiaries, to sell assets, to permit restrictions
on dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of
Securities then outstanding may declare all the Securities to be due and
payable immediately in the manner and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of any
continuing Default or Event of Default (except a Default in payment of
principal or interest, including an accelerated payment) if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The wavier and
release are part of the consideration for the issuance of the securities.
<PAGE> 7
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
Packaged Ice, Inc., 8572 Katy Freeway, Suite 101, Houston, Texas 77024, Attn:
President.
<PAGE> 8
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Subsidiary Guarantor," which term
includes any successor Person under the Indenture) have unconditionally
guaranteed on a senior basis (such guarantee by each Subsidiary Guarantor being
referred to herein as the "Guarantee") (i) the due and punctual payment of the
principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent
lawful, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set
forth in Article Ten of the Indenture and (ii) in case of any extension of time
of payment or renewal of any Securities or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Subsidiary Guarantor shall have any liability under
the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC.
SOUTHCO ICE, INC.
PACKAGED ICE MISSION, INC.
PACKAGED ICE STPI, INC.
PACKAGED ICE SOUTHWESTERN, INC.
By:
--------------------------------
Name:
Title:
<PAGE> 9
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint
---------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
---------------------- -------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 4.16 or 4.17 of the Indenture, check the appropriate box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Sections 4.16 or 4.17 of the Indenture, state the
amount: $
Date: Your Signature:
------------------- -------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 1
EXHIBIT 4.5
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1993, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" ( AS DEFINED IN RULE 144A
PROMULGATED UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501 (a)(l), (2), (3) OR (7) PROMULGATED UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND
IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER)
TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT WITHIN THE MEANING OF
SECTION 1273(a) OF THE INTERNAL REVENUE CODE OF 1986. THE ISSUE PRICE IS
$1,000.00 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ORIGINAL ISSUE
DISCOUNT IS $171.93 FOR EACH $1,000.00 OF STATED PRINCIPAL AMOUNT. THE ISSUE
DATE IS APRIL 17, 1997. THE YIELD TO MATURITY IS APPROXIMATELY 12% COMPOUNDED
SEMIANNUALLY. ORIGINAL ISSUE DISCOUNT WILL BE ALLOCATED BASED ON ACCRUAL
PERIODS ENDING ON EACH DATE ON WHICH AN INTEREST PAYMENT IS DUE AND THE 360
DAYS PER YEAR CONVENTION.
<PAGE> 2
CUSIP No. 695148 AC 0
PACKAGED ICE, INC.
12% Senior Note
due April 15, 2004
No. $
PACKAGED ICE, INC., a Texas corporation (the "Company", which term
includes any successor corporation), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on April 15, 2004.
Interest Payment Dates: April 15 and October 15 commencing October 15,
1997
Record Dates: April 1 and October 1
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
PACKAGED ICE, INC.
[SEAL] By:
-------------------------------
Name:
Title:
Attest:
- --------------------------------
Secretary
-2-
<PAGE> 3
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned Indenture.
Dated: U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
By
---------------------------------
Authorized Signatory
-3-
<PAGE> 4
PACKAGED ICE, INC.
12% Senior Note
due April 15, 2004
1. Interest.
PACKAGED ICE, INC., a Texas corporation (the "Company"), promises to
pay interest on the principal amount of this Security at the rate per annum
shown above, which rate is subject to increase of up to 1.50% per annum in
certain circumstances described in the Registration Rights Agreement dated
April 17, 1997 between the Company, the Initial Purchaser and the Subsidiary
Guarantors. The Company will pay interest semi-annually on April 15 and October
15 of each year (the "Interest Payment Date"), commencing October 15, 1997.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from April 17, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
On each Interest Payment Date, the Company shall pay interest on the
Securities (except defaulted interest) to the persons who are the registered
Holders at the close of business on the Record Date immediately preceding such
Interest Payment Date even if the Securities are canceled on registration of
transfer or registration of exchange after such Record Date, except as provided
in Section 2.17 of the Indenture with respect to defaulted interest. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal and interest in New York, New York in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal
and interest by wire transfer in same day funds, or, in the case of Physical
Securities, by check payable in such U.S. Legal Tender.
3. Paying Agent and Registrar.
Initially, U.S. Trust Company of Texas, N.A. will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may act as Registrar or co-Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as of
April 17, 1997 (the "Indenture"), among the Company, the Subsidiary Guarantors
and the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and said Act for a statement of them. The
Securities are general unsecured
-4-
<PAGE> 5
obligations of the Company limited in aggregate principal amount to
$50,000,000. Payment on each Security is guaranteed on a senior basis, jointly
and severally, by the Subsidiary Guarantors pursuant to Article Ten of the
Indenture.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole
at any time or in part from time to time, on and after April 15, 2001 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on April 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.00%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.50%
2003 and thereafter . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to April 15,
2000, the Company may redeem up to an aggregate of $17.5 million principal
amount of Securities at a redemption price of 112% of the principal amount
thereof, plus accrued and unpaid interest thereon, to the redemption date with
the net proceeds of any Public Equity Offering; provided that at least $32.5
million in aggregate principal amount of Securities remain outstanding
immediately after the occurrence of such redemption; and provided, further,
that such redemption occurs within 90 days of the date of the closing of such
Public Equity Offering.
6. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required
to make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Securities
at a purchase price equal to 101% of the aggregate principal amount thereof
plus accrued and any unpaid interest thereon, if any, to the Change of Control
Payment Date (as hereinafter defined) (the "Change of Control Payment"). Within
30 days following the occurrence of a Change of Control, the Company shall mail
a notice to each Holder describing the transaction or transactions and setting
forth the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales, the Indenture requires that certain proceeds be used, subject to
the limitations contained therein, to make an offer to all Holders of
Securities (an "Asset Sale Offer") pursuant to Section 4.17 of the Indenture to
purchase certain amounts of Securities in accordance with the procedures set
forth in the Indenture.
-5-
<PAGE> 6
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
redemption date, interest will cease to accrue on Securities or portions
thereof called for redemption.
8. Sinking Fund.
There will be no mandatory sinking fund payments for the Securities.
9. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection not register the
transfer of or exchange any securities or portions thereof selected for
redemption, except the unredeemed portion of any security being redeemed in
part.
10. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
11. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
one year, the Trustee and the Paying Agents will repay the funds to the Company
at its request subject to terms of the Indenture. After that, all liability of
the Trustee and such Paying Agents with respect to such funds shall cease.
12. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof ("Legal Defeasance"),
and may be discharged from its obligations to comply with certain covenants
contained in the Indenture and the Securities ("Covenant Defeasance"), in each
case upon satisfaction of certain conditions specified in the Indenture.
-6-
<PAGE> 7
13. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
14. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of subsidiaries, to sell assets, to permit restrictions
on dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
15. Defaults and Remedies.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of
Securities then outstanding may declare all the Securities to be due and
payable immediately in the manner and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee is not obligated to
enforce the Indenture or the Securities unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of any
continuing Default or Event of Default (except a Default in payment of
principal or interest, including an accelerated payment) if it determines that
withholding notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries or their respective Affiliates as if it were
not the Trustee.
-7-
<PAGE> 8
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The wavier and
release are part of the consideration for the issuance of the securities.
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
19. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
Packaged Ice, Inc., 8572 Katy Freeway, Suite 101, Houston, Texas 77024, Attn:
President.
-8-
<PAGE> 9
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Subsidiary Guarantor," which term
includes any successor Person under the Indenture) have unconditionally
guaranteed on a senior basis (such guarantee by each Subsidiary Guarantor being
referred to herein as the "Guarantee") (i) the due and punctual payment of the
principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent
lawful, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set
forth in Article Ten of the Indenture and (ii) in case of any extension of time
of payment or renewal of any Securities or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of any Subsidiary Guarantor shall have any liability under
the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
SUBSIDIARY GUARANTORS:
PACKAGED ICE LEASING, INC.
SOUTHCO ICE, INC.
PACKAGED ICE MISSION, INC.
PACKAGED ICE STPI, INC.
PACKAGED ICE SOUTHWESTERN, INC.
By:
---------------------------------
Name:
Title:
-9-
<PAGE> 10
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of 1933,
as amended (the "Securities Act") covering resales of this Security (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) ____________, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act provided
by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Security and
the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.15 of the Indenture shall have
been satisfied.
Dated: Signed:
-------------------- -------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-10-
<PAGE> 11
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
------------------------ ----------------------------------------------
NOTICE: To be executed by an executive officer
-11-
<PAGE> 12
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Sections 4.16 or 4.17 of the Indenture, check the appropriate box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Sections 4.16 or 4.17 of the Indenture, state the
amount: $ _______________________
(multiple of $1,000)
Date: Your Signature:
------------------ -------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
-12-
<PAGE> 1
EXHIBIT 4.6
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
DATED AS OF APRIL 17, 1997
AMONG
PACKAGED ICE, INC.,
AND
JEFFERIES & COMPANY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 (a) Demand Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Effective Registration . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Restrictions on Sale by Holders . . . . . . . . . . . . . . . . . . . . 5
(d) Underwritten Registrations . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Priority in Demand Registration . . . . . . . . . . . . . . . . . . . . 6
2.2 (a) Piggy-Back Registration . . . . . . . . . . . . . . . . . . . . . . . . 7
(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 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . . 10
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 . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(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
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT
THIS SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is made and entered into as of April 17, 1997, among PACKAGED ICE,
INC., a Texas corporation (the "Company") and JEFFERIES & COMPANY, INC.
(the"Initial Purchaser").
This Agreement is entered into in connection with the Purchase
Agreement, dated April 11, 1997, among the Company, the Subsidiary Guarantors
named therein, and the Initial Purchaser (the "Purchase Agreement"), which
provides for the issuance and sale to the Initial Purchaser of (i) 50,000 units
consisting of an aggregate of $50,000,000 aggregate principal amount 12% Senior
Notes due 2004 and 50,000 warrants (the "Note Warrants"), initially exercisable
for an aggregate of 511,885 of shares of common stock, par value $.01 per
share, of the Company (the "Common Stock") and (ii) 127,972 warrants (the
"Purchaser Warrants" and, together with the Note Warrants, the "Warrants")
initially exercisable for an equal number of shares of Common Stock. In order
to induce the Initial Purchaser to enter into the Purchase Agreement, the
Company has agreed to provide to the Initial Purchaser and the Holders (as
defined herein), among other things, the registration rights for the Warrant
Shares (as defined herein) set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchaser under the Purchase Agreement.
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.
"Agreement" has the meaning ascribed to such term in the
preamble of this Agreement.
"Business Day" shall mean a day that is not a Legal Holiday.
"Common Stock" has the meaning ascribed to such term in the
preamble of this Agreement.
"Company" shall have the meaning ascribed to that term in the
preamble of this Agreement and shall also include the Company's
successors and assigns.
"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.
<PAGE> 4
"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 the Initial Purchaser, for so long as it owns
any Warrants and/or Warrant Shares, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of such Warrants or Warrant Shares.
"Included Securities" has the meaning ascribed to such term in
Section 2.1(a) hereof.
"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.
"Initial Purchaser" means Jefferies & Company, Inc.
"Inspectors" has the meaning ascribed to such term in Section
3(n) hereof.
"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.
"Notes" means the $50,000,000 aggregate principal amount of
12% Senior Notes due 2004 of the Company.
"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.
"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).
"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.
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<PAGE> 5
"Purchase Agreement" has the meaning ascribed to such term in
the preamble of this Agreement.
"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
by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. 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 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 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.
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<PAGE> 6
"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.
"Rule 144A" shall mean Rule 144A promulgated under the
Securities Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144") or regulation hereafter adopted by
the SEC.
"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.
"Securityholder" means, collectively, each Holder and their
respective successors and assigns.
"Selling Holder" shall mean a Holder who is selling
Registrable Securities in accordance with the provisions of Section
2.1 or 2.2 hereof.
"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 Common Stock Warrants and the Preferred Stock
deliverable upon exercise of the Preferred Stock 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
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<PAGE> 7
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 two 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 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 an additional 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.
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<PAGE> 8
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, 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
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<PAGE> 9
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) 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. 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 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
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<PAGE> 10
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 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.
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:
(i) 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,
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<PAGE> 11
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 two Demand Registrations the
Company is required to effect pursuant to Section 2.1 hereof.
(ii) 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 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.
(iii) 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.
(iv) 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.
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<PAGE> 12
2.5 Rule 144 and Rule 144A. 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 and Rule 144A (to the extent Registrable Securities may
then be sold pursuant to Rule 144A). The Company further covenants for so long
as any Registrable Securities remain outstanding to make available to any
Holder or beneficial owner of Registrable Securities in connection with any
sale thereof and any prospective purchaser of such Registrable Securities from
such Holder or beneficial owner, the information required by Rule 144A(d)(y)
under the Securities Act in order to permit resales of such Registrable
Securities pursuant to Rule 144A. 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 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
provisions 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.
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<PAGE> 13
(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.
(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 underwriting 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.
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(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, and of 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); 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
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.
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<PAGE> 15
(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.
(1) 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 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;
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<PAGE> 16
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 (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 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.
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<PAGE> 17
(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.
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
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<PAGE> 18
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 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, liability,
claim, damage 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 mended 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 "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
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<PAGE> 19
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 (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 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
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<PAGE> 20
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.
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.
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<PAGE> 21
(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 Warrants and/or 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
departure 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 and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder at the most current address of such
Holder as set forth in the register for the Warrants or the Warrant Shares,
which address initially is, with respect to the Initial Purchasers, the address
set forth in the Purchase Agreement and (ii) if to the Company, initially at
the Company's address set forth in the Purchase Agreement and thereafter at
such other address, notice of which is given in accordance with the provisions
of this Section (d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
(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 NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW
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<PAGE> 22
YORK, 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 NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(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, together with the
Purchase Agreement and the Warrant Agreement, is intended by the parties as a
final expression of their agreement, 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, the
Purchase Agreement and the Warrant Agreement supersede 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 or Warrants is required hereunder, Registrable
Securities or Warrants 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.
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<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PACKAGED ICE, INC.
By:
--------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
JEFFERIES & COMPANY, INC.
By:
--------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 5.1
June 16, 1997
Packaged Ice, Inc.
Subsidiary Guarantors (as defined below)
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Dear Sirs:
We have acted as counsel for Packaged Ice, Inc., a Texas corporation (the
"Company"), and the Subsidiary Guarantors (defined below) in connection with
the proposed offer by the Company to exchange (the "Exchange Offer") for all
outstanding 12% Senior Notes Due 2004, Series A ($50 million principal amount
outstanding) (the "Old Notes") 12% Senior Notes Due 2004, Series B ($50 million
principal amount) (the "Exchange Notes"). The Old Notes have been, and the
Exchange Notes will be, issued pursuant to an Indenture dated as of April 17,
1997 (the "Indenture") among the Company, the Subsidiary Guarantors (defined
below) and U.S. Trust Company of Texas, N.A., as trustee (the "Trustee").
Mission Party Ice, Inc., Packaged Ice Leasing, Inc., Southco Ice, Inc.,
Southwest Texas Packaged Ice, Inc., and Southwestern Ice, Inc. are collectively
referred to as the "Subsidiary Guarantors," and the guarantees by the
Subsidiary Guarantors with respect to the Exchange Notes are collectively
referred to as the "Subsidiary Guarantees."
In connection with such matters we have examined the Indenture, the
Registration Statement on Form S-4, filed by the Company with the Securities
and Exchange Commission, for the registration of the Exchange Notes and the
Subsidiary Guarantees thereof (collectively referred to as the "Securities")
under the Securities Act of 1933 (the Registration Statement, as amended at the
time it becomes effective, being referred to as the "Registration Statement")
and such corporate records of the Company and the Subsidiary Guarantors,
certificates of public officials and such other documents as we have deemed
necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, subject to the qualifications hereinafter set forth,
and having regard for such legal considerations as we deem relevant, we are of
the opinion that the Securities proposed to be issued pursuant to the Exchange
Offer have been duly authorized for issuance and, subject to the Registration
Statement becoming effective under the Securities Act of 1933, and to
compliance with any applicable state securities laws, when issued, delivered
and sold in accordance with the Exchange Offer and the Indenture, will be valid
and legally binding obligations of the Company and the Subsidiary Guarantors,
enforceable against the Company and the Subsidiary Guarantors in accordance
with their respective terms.
The opinions expressed herein are subject to the following: the enforceability
of the Securities may be limited or affected by (i) bankruptcy, insolvency,
reorganization, moratorium, liquidation, rearrangement, fraudulent transfer,
fraudulent conveyance and other similar laws (including court decisions) now or
hereafter in effect and affecting the rights and remedies of creditors
generally or providing for the relief of debtors, (ii) the refusal of a
particular court to grant equitable remedies, including without limitation
specific performance and injunctive relief, and (iii) general principles of
Packaged Ice, Inc.
<PAGE> 2
June 16, 1997--Page 2
equity (regardless of whether such remedies are sought in a proceeding in
equity or at law).
The opinions expressed herein are limited exclusively to the laws of the State
of New York, the Texas Business Corporation Act, and the Nevada Corporation
Laws.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to Akin, Gump, Strauss, Hauer &
Feld, L.L.P. under "Legal Matters" in the Prospectus forming a part of the
Registration Statement. In giving this consent, we do not thereby admit that
we are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933 and the rules and regulations of the Securities
and Exchange Commission thereunder.
Very truly yours,
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
<PAGE> 1
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of March
25, 1997, by and among Packaged Ice, Inc., a Texas corporation ("Parent"),
Packaged Ice Mission, Inc., a Texas corporation ("Newco") and a direct
wholly-owned subsidiary of Parent, Mission Party Ice, Inc., a Texas corporation
(the "Company") and A. J. Lewis III ("Shareholder").
R E C I T A L S :
WHEREAS, the respective Boards of Directors of Parent, Newco and the
Company have each approved the merger of the Company with and into Newco (the
"Merger"), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein the parties hereto covenant and agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUISITION PRICE" has the meaning set forth in Section 2.5(d).
"APPLICABLE CONTRACT" means any Contract to which the Company is a party or
bound (a) under which the Company has or may acquire any rights, (b) under
which the Company has or may become subject to any obligation or liability, or
(c) by which the Company or any of the assets owned or used by it is or may
become bound.
"BALANCE SHEET" has the meaning set forth in Section 3.4.
"BASKET" has the meaning set forth in Section 10.6.
"BEST EFFORTS" means the efforts that a reasonably prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as reasonably practicable; provided,
however, that an obligation to use Best Efforts under this Agreement does not
require the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions.
"BREACH" means that a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in such representation or warranty or breach
<PAGE> 2
of, or any failure to perform or comply with any covenant, obligation, or other
provision contained herein.
"CAP" has the meaning set forth in Section 10.6.
"CASH AMOUNT" has the meaning set forth in Section 2.5(e).
"CLOSING" has the meaning set forth in Section 2.7.
"CLOSING BALANCE SHEET" means the audited balance sheet of the Company as at
December 31, 1996.
"CLOSING DATE" means the date and time as of which the Closing actually takes
place.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by this
Agreement, including:
(a) the Merger;
(b) the execution, delivery, and performance of the Noncompetition
Agreement, the Registration Rights Agreement and the Escrow Agreement;
(c) the performance by the parties of their respective covenants
and obligations under this Agreement; and
(d) Newco's acquisition of the Company through the Merger.
"CONTRACT" means any agreement, contract, obligation, promise, or undertaking
(whether written or oral) that is legally binding.
"DAMAGES" has the meaning set forth in Section 10.2.
"EFFECTIVE DATE" has the meaning set forth in Section 2.3.
"ENCUMBRANCE" means any charge, claim, community property interest, condition,
equitable interest including any equitable servitude, lien, option, pledge,
security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENDING DATE" has the meaning set forth in Section 9.1(e).
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"ENVIRONMENT" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwater, drinking water supply, stream sediments, ambient air,
plant and animal life, and any other environmental medium or natural resource.
"ENVIRONMENTAL CLAIM" has the meaning set forth in Section 10.13.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL INDEMNIFICATION RIGHTS" has the meaning set forth in Section
10.13.
"ENVIRONMENTAL LAW" means any law, regulation, ordinance, order, injunction,
decree, consent decree, judgement or administrative directive relating to the
Environment, public health and safety, occupational health and safety and
transportation including without limitation all such standards of conduct or
bases of obligations relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, control or cleanup of any waste,
hazardous materials, substances, chemical substances or mixtures, pesticides,
toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
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"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGENT" shall mean Texas Commerce Bank National Association.
"STPI" means Southwest Texas Packaged Ice, Inc., a Texas corporation.
"STPI AGREEMENT" has the meaning set forth in Section 10.6.
"ESCROW AGREEMENT" has the meaning set forth in Section 2.8(c).
"ESCROW AMOUNT" has the meaning set forth in Section 2.5(e).
"EXCLUDED ASSETS" means (i) the assets of the Company relating to MIECO more
particularly described in Part 3.6 of the Shareholder's Disclosure Letter under
the subheading "Equipment Rental Business"(excluding the accounts receivable
owed by STPI to the Company) which assets were transferred to Southwest Texas
Equipment Distributors on January 2, 1997, (ii) the Company's real property
which is described in Part 3.6 of the Shareholder's Disclosure Letter under the
subheading "Excluded Real Property" and (iii) one painting more particularly
described in Part 3.6 of the Shareholder's Disclosure Letter under the
subheading "Excluded Personal Property."
"FACILITIES" means any real property, leaseholds, or other interests currently
or formerly owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Company.
"GAAP" means generally accepted accounting principles as employed in the United
States of America. Wherever in this Agreement reference is made to a
calculation to be made in accordance with GAAP, such reference shall be deemed
to be to the GAAP from time to time applicable as at the date on which such
calculation is made or required to be made in accordance with GAAP.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or other
legally recognized jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other legally
recognized government;
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(c) governmental or legally recognized quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body legally exercising, or legally entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release,
storage, transfer, transportation, treatment, or use (including any withdrawal
or other use of groundwater) of Hazardous Materials in, on, under, about, or
from the Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that increases the danger or poses an
unreasonable risk of harm to persons or property on or off the Facilities or
that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic under or pursuant to any Environmental Law,
including any admixture or solution thereof having hazardous characteristics,
and specifically including petroleum and any derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade names, copyrights,
technology, trade secrets, know-how, formulas and processes which are owned or
used by the Company.
"INTERIM BALANCE SHEET" has the meaning set forth in Section 3.4.
"IRC" means the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" means the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a reasonably prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonable investigation concerning the existence of such fact or
other matter.
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A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as a
director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has Knowledge of such fact or other matter; provided,
however, the Company will be deemed to have Knowledge of a particular fact or
other matter if Shareholder has such Knowledge.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, existing principle of common law, regulation, statute, or treaty.
"MASTER LEASE" has the meaning set forth in Section 5.4.
"MERGER" has the meaning set forth in Section 2.1.
"MIECO" means the former division operated by the Company under the name
"Mission Ice Equipment Company, the assets of which were transferred to, and
the liabilities of which were assumed by STED effective January 2, 1997 in
exchange for a promissory note in the principal amount of $316,520.00.
"NONCOMPETITION AGREEMENT" has the meaning set forth in Section 2.8(a)(ii).
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement (other than
common law principles) designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards, and any
governmental program designed to provide safe and healthful working conditions.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" An action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority).
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a
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limited partnership; (d) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
"PARENT'S CLOSING DOCUMENTS" has the meaning set forth in Section 4.2.
"PARENT'S DISCLOSURE LETTER" means the disclosure schedule delivered by Parent
to Shareholder concurrently with the execution and delivery of this Agreement,
and any supplements thereto delivered to the Shareholder prior to or
concurrently with the Closing, which schedule and supplements are incorporated
herein by reference.
"PARENT STOCK" has the meaning set forth in Section 2.5(d).
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" has the meaning set forth in Section 3.13.
"PLAN OF MERGER" shall have the meaning set forth in 2.8(c)(ii).
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the close of
business on the Closing Date.
"PROCEEDING" means any action, arbitration, audit, hearing, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.
"REAL ESTATE CONTRACT" has the meaning set forth in Section 5.4.
"RELATED PERSON" means, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
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Related Person also means, with respect to a specified Person other
than an individual:
(e) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(f) any Person that holds a Material Interest in such specified
Person;
(g) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(h) any Person in which such specified Person holds a Material
Interest;
(i) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and
(j) any Related Person of any individual described in clause (b)
or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 10% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"RELEASE" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section 6.10.
"REPRESENTATIVE" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" means the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SHARE PRICE" has the meaning set forth in Section 2.5(c).
"SHAREHOLDER'S CLOSING DOCUMENTS" has the meaning set forth in Section 3.2.
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"SHAREHOLDER'S DISCLOSURE LETTER" means the disclosure schedule, delivered by
the Company and the Shareholder to Parent concurrently with the execution and
delivery of this Agreement, and any supplements thereto delivered prior to or
concurrently with the Closing, which schedule and supplements are incorporated
herein by reference.
"SHARES" means all of the shares of the $.01 par value common stock of the
Company owned by the Shareholder.
"STED" means South Texas Equipment Distributors, Inc., a Texas corporation.
"STOCK AMOUNT" has the meaning set forth in Section 2.5(e).
"STPI" means Southwest Texas Packaged Ice, Inc., a Texas corporation.
"STPI AGREEMENT" has the meaning set forth in Section 10.6.
"SUBSIDIARY" means, with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to
elect a majority of that corporation's or other Person's board of directors or
similar governing body, or otherwise having the power to direct the business
and policies of that corporation or other Person (other than securities or
other interests having such power only upon the happening of a contingency that
has not occurred) are held, directly or indirectly by the Owner; when used
without reference to a particular Person, "Subsidiary" means a Subsidiary of
the Company.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.1.
"TAX" means any tax (including without limitation any tax on gross income, net
income, franchise, gross receipts, royalty, capital gains, value added, sales,
property, ad valorem, transfer, license, use, profits, windfall profits,
withholding on amounts paid to or by the Company, payroll, employment, excise,
severance, stamp, occupation, premium, gift, or estate), levy, assessment,
tariff, duty (including customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency, or fee.
"TAX RETURN" means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment
of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" means a substantial likelihood of a Release that would
require action in order to prevent or mitigate damage to the Environment
resulting from such Release.
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"THREATENED" means a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
(to the extent of Shareholder's Knowledge) if any other event has occurred or
any other circumstances exist, with respect to which the Shareholder would
reasonably conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
SECTION 2. MERGER; CLOSING
2.1 Merger. In accordance with the provisions of the business
corporation laws of the States of Texas, at the Effective Date, the Company
shall be merged (the "Merger") into Newco and Newco shall be the surviving
corporation (the "Surviving Corporation) and as such shall continue to be
governed by the laws of the State of Texas. For federal income tax purposes, it
is intended that the Merger shall qualify as a reorganization pursuant to
Sections 368(a)(1)(A) and (a)(2)(D) of the IRC.
2.2. Continuing of Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of Newco, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of the Company, with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and into that
of Newco, and the Surviving Corporation shall be vested fully therewith and the
separate corporate existence and identity of the Company shall thereafter cease
except to the extent continued by statute.
2.3. Effective Date. The Merger shall become effective upon the
occurrence of the issuance of the certificate of merger (the "Effective Date")
by the Secretary of State of the State of Texas upon filing on the Closing Date
of the articles of merger (with the Plan of Merger attached thereto) with the
Secretary of the State of Texas pursuant to Article 5.04 of the Texas Business
Corporation Act (the "Articles of Merger").
2.4. Corporate Government.
(a) The Articles of Incorporation of Newco as in effect
on the Effective Date, shall continue in full force and effect and
shall be the Articles of Incorporation of the Surviving Corporation;
provided, however, Article I of the Articles of Incorporation of Newco
shall be amended to read in its entirety as follows:
"The name of the corporation shall be "Mission Party Ice, Inc."
(b) The Bylaws of Newco, as in effect as of the Effective
Date, shall continue in full force and effect and shall be the Bylaws
of the Surviving Corporation.
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(c) The members of the Board of Directors and the
officers of the Surviving Corporation shall be the persons holding
such offices with Newco as of the Effective Date.
2.5. Conversion of Shares. The manner and basis of converting the
Shares shall be as follows:
(a) Each Share which is issued and outstanding
immediately prior to the Effective Date shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
automatically converted into the right to receive the Share Price
which shall be payable, without interest thereon, upon the surrender
of the certificate formerly representing such Share, in accordance
with Section 2.5(e) below.
(b) Each Share shall, by virtue of the Merger and without
any action on the part of the holder thereof, be canceled and retired
and cease to exist.
(c) As used herein, the term "Share Price" shall mean an
amount equal to (x)/(y), where (x) is the Acquisition Price (as
defined below), and where (y) is the total number of outstanding
Shares.
(d) As used herein, the term "Acquisition Price" shall
mean $5,575,660, approximately 51.23% of which will be paid to the
Shareholder in the form of Parent's common stock, par value $.01 per
share ("Parent Stock"), valued at $10.00 per share.
(e) At the Closing, Parent will pay to Shareholder the
Acquisition Price as follows: (i) $2,719,160 in cash (the "Cash
Amount") and (ii) 285,650 newly issued shares of Parent Stock valued
at $10 per share (the "Stock Amount"). Five percent (5%) of the
Acquisition Price will be placed in escrow (the "Escrow Amount") for a
period of twelve months, to be held by the Escrow Agent in accordance
with the Escrow Agreement, approximately 51.2% of which (14,283
shares) shall be in the form of Parent Stock and approximately 48.8%
of which ($135,953) shall be cash.
(f) Each share of common stock, par value $.01 per share,
of Newco ("Newco Stock") which shall be outstanding immediately prior
to the Effective Date shall, at the Effective Date, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into one share of common stock of the Surviving Corporation.
(g) The stock transfer books of the Company shall be
closed as of the close of business on the Effective Date, and no
transfer of record of any of the Shares shall take place thereafter.
(h) No fractional shares of Parent Stock and no
certificates or scrip therefor shall be issued.
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(i) All of the Parent Stock, when delivered pursuant to
the provisions of this Agreement, shall be validly issued, fully paid
and nonassessable.
(j) At the Effective Date, the holders of certificates
representing Shares shall thereupon cease to have any rights with
respect to such Shares and shall surrender certificates representing
the Shares to Parent whereupon such holders shall receive a
certificate or certificates for the number of shares of Parent Stock
and/or cash to which such holder is entitled under this Section 2.5.
2.6 Rights and Liabilities of the Surviving Corporation. As of
the Effective Date, the Surviving Corporation shall have the following rights
and obligations, pursuant to Article 5.06 of the Texas Business Corporation
Act:
(a) All rights, title and interests to all real estate
and other property owned by the Company and Newco shall be allocated
to and vested in the Surviving Corporation without reservation or
impairment, without further act or deed, and without any transfer or
assignment having occurred, but subject to any existing liens or other
encumbrances thereon.
(b) All liabilities and obligations of the Company and Newco shall
be allocated to the Surviving Corporation, and the Surviving Corporation shall
be the primary obligor therefor and, except as otherwise provided by law or
contract, no other party to the merger, other than the Surviving Corporation,
shall be liable thereon.
(c) A proceeding pending by or against the Company may be
continued as if the Merger did not occur, or the Surviving Corporation to which
the liability, obligation, asset or right associated with such proceeding is
allocated to and vested in may be substituted in the proceeding.
(d) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the laws of the State of Texas.
2.7 Closing. Consummation of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Parent's
counsel at 1500 NationsBank Plaza, San Antonio, Texas 78205, at 10:00 a.m.
(local time) on the first business day following ten (10) days after the
conditions set forth in Section 7 and Section 8 have been met or waived, or at
such other time and place as the parties may agree. Subject to the provisions
of Section 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.7 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
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2.8 Closing Obligations. At the Closing:
(a) Shareholder will deliver to Parent:
(i) certificates representing the Shares, to be
surrendered to Newco and Parent;
(ii) Noncompetition Agreement in the form of Exhibit
2.8(a)(ii), executed by Shareholder (the "Noncompetition
Agreement");
(iii) a certificate executed by Shareholder
representing and warranting to Parent and Newco that
Shareholder's representations and warranties in this Agreement
are accurate in all respects as of the Closing Date as if made
on the Closing Date (giving full effect to any supplements to
the initial disclosure of the Shareholder's Disclosure Letter
which were delivered by Shareholder to Parent prior to the
Closing Date in accordance with Section 5.6); and
(iv) investment letter executed by Shareholder in the
form attached hereto as Exhibit 2.8(a)(iv), (the "Investment
Letter").
(b) Parent will deliver to Shareholder:
(i) the Cash Amount (less the amount to be placed in
escrow) by bank cashier's or certified check payable to the
order of Shareholder or wire transfer in immediately available
funds to an account designated by Shareholder, as may be
selected by Shareholder;
(ii) the Stock Amount (less the amount to be placed
in escrow), issued to Shareholder;
(iii) the Noncompetition Agreement executed by
Parent;
(iv) a certificate executed by Parent to the effect
that, except as otherwise stated in such certificate, each of
Parent's representations and warranties in this Agreement is
accurate in all respects as of the Closing Date as if made on
the Closing Date ("Parent's Certificate"); and
(v) the Registration Rights Agreement executed by
Parent.
(c) Parent and Shareholder will enter into:
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(i) an escrow agreement substantially in the form of
Exhibit 2.8(c)(i) with such revisions and modifications as may
be required by the Escrow Agent and are reasonably acceptable
to Shareholder and Parent (the "Escrow Agreement"); and
(ii) the Articles of Merger, together with the Plan
of Merger in the form attached hereto as Exhibit 2.8(c)(ii)
(the "Plan of Merger"), shall be executed by Newco and the
Company and filed with the Secretary of State of the State of
Texas.
(d) Parent will deliver to the Escrow Agent to the held
in escrow pursuant to the Escrow Agreement;
(i) approximately 5% of the Cash Amount; and
(ii) approximately 5% of the Stock Amount issued
in the name of the Shareholder.
SECTION 3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SHAREHOLDER
Except as set forth in Shareholder's Disclosure Letter, which shall
indicate the Section to which such exception relates, the Company and
Shareholder represent and warrant to Parent and Newco as follows:
3.1 Organization and Good Standing.
(a) Part 3.1 of the Shareholder's Disclosure Letter contains a
complete and accurate list for the Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is
authorized to do business. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of
its jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and
to perform all its obligations under Applicable Contracts. The Company
is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by
it, or the nature of the activities conducted by it, requires such
qualification. The Company has no Subsidiaries.
(b) Shareholder has delivered to Parent copies of the
Organizational Documents of the Company, as currently in effect.
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3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Company and the Shareholder, enforceable against the
Company and the Shareholder in accordance with its terms. Upon the
execution and delivery by Shareholder of the Escrow Agreement and the
Noncompetition Agreement (collectively, the "Shareholder's Closing
Documents"), the Shareholder's Closing Documents will constitute the
legal, valid, and binding obligations of Shareholder, enforceable
against Shareholder in accordance with their respective terms. The
Company and the Shareholder have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement
and the Shareholder's Closing Documents and to perform their
respective obligations under this Agreement and the Shareholder's
Closing Documents. The Shareholder has held a shareholder meeting (or
has executed a consent) and has duly adopted all resolutions required
by law to approve the Merger.
(b) Except as set forth in Part 3.2 of the Shareholder'
Disclosure Schedule, neither the execution and delivery of this
Agreement by Shareholder and the Company nor the consummation or
performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the board of
directors or the shareholders of the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person a
valid basis to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under, any
Legal Requirement or any Order to which the Company or
Shareholder, or any of the assets owned or used by the
Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the
Company;
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Company.
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Except as set forth in Part 3.2 of the Shareholder's
Disclosure Letter, neither Shareholder nor Company is required to give any
notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
(c) Shareholder is acquiring the Parent Stock for his own
account and not with a view to the distribution thereof within the
meaning of Section 2(11) of the Securities Act. The Shareholder is
an "accredited investor" as such term is defined in Rule 501(a) under
the Securities Act.
3.3 Capitalization. The authorized equity securities of the
Company consist of 1,000,000 shares of common stock, par value $.01 per share,
of which 1,000 shares are issued and outstanding and constitute the Shares.
Shareholder is the record and beneficial owner and holder of the Shares, free
and clear of all Encumbrances. Except as set forth in Part 3.3 of the
Shareholder's Disclosure Letter, no legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in violation of the
Securities Act or any other Legal Requirement. The Company does not own and has
no Contract to acquire, any equity securities or other securities of any Person
(other than the Company) or any direct or indirect equity or ownership interest
in any other business.
3.4 Financial Statements. Shareholder has delivered to Parent:
(a) unaudited balance sheets of the Company as at December 31, 1993 and
December 31, 1994, and the related unaudited statements of income, changes in
shareholders' equity, and cash flow for each of the fiscal years then ended,
(b) a balance sheet of the Company as at December 31, 1995 (including the
notes thereto, if any, the "Balance Sheet"), and the related statements of
income, changes in shareholders' equity, and cash flow for the fiscal year then
ended, (c) an unaudited balance sheet of the Company as at September 30, 1996
(the "Interim Balance Sheet") and the related unaudited statements of income,
changes in shareholders' equity, and cash flow for the nine months then ended,
including in each case the notes thereto, if any, and (d) the audited Closing
Balance Sheet, and the audited statements of income, changes in shareholder's
equity, and cash flow for the fiscal year then ended, including in each case
the notes thereto, if any. Such financial statements and notes fairly present
the financial condition and the results of operations, changes in shareholders'
equity, and cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, and, with respect to the
Closing Balance Sheet, in accordance with GAAP, subject, in the case of
unaudited financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse), the absence of notes and such other differences as are described in
Part 3.4 of Shareholder's Disclosure Letter; the financial statements referred
to in this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements, or in
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<PAGE> 17
Part 3.4 of the Shareholder's Disclosure Letter. Notwithstanding the
foregoing, such financial statements do not reflect the assets, liabilities or
results of operations of MIECO.
3.5 Books and Records. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Parent, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the Boards of Directors, and committees of
the Boards of Directors of the Company, and no meeting of any such
shareholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. All of those
books and records are in the possession of the Company.
3.6 Title to Properties; Encumbrances. Part 3.6 of the
Shareholder's Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned or previously owned
by the Company. Shareholder has delivered or made available to Parent copies
of the deeds and other instruments (as recorded) by which the Company acquired
or disposed of such real property and interests, and copies of all title
insurance policies, opinions, abstracts, and surveys in the possession of
Shareholder or the Company and relating to such property or interests. Except
for the real property described in Part 3.6 of the Shareholder's Disclosure
Letter under the subheading "Excluded Real Property" which will be distributed
to the Shareholder, or its assigns, prior to Closing, the Company does not own
any real property. The Company owns (with good and indefeasible title in the
case of real property, subject only to the matters permitted by the following
sentence) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) reflected as owned in the books and records of
the Company, including all of the properties and assets reflected in the
Closing Balance Sheet (except for assets held under capitalized leases
disclosed or not required to be disclosed in Part 3.6 of the Shareholder's
Disclosure Letter and personal property sold since the date of the Closing
Balance Sheet in the Ordinary Course of Business, or otherwise as permitted
herein), and all of the properties and assets purchased or otherwise acquired
by the Company since the date of the Closing Balance Sheet (except for personal
property acquired and sold since the date of the Closing Balance Sheet in the
Ordinary Course of Business and consistent with past practice or otherwise as
permitted herein), which subsequently purchased or acquired properties and
assets (other than accounts receivable, inventory and short-term investments)
are listed in Part 3.6 of the Shareholder's Disclosure Letter. All material
properties and assets reflected in the Closing Balance Sheet are free and clear
of all Encumbrances and are not, in the case of real property, subject to any
rights of way, building use restrictions, exceptions, variances, reservations,
or limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Closing Balance Sheet
as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute
a default) exists, (b) mortgages or security interests incurred in connection
with the purchase of property or assets after the date of the Closing Balance
Sheet (such mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, (c) liens
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for current taxes not yet due, and (d) statutory and nonstatutory landlord
liens, and (e) liens on property which do not materially affect the operation
of the business of the Company.
3.7 Condition and Sufficiency of Assets. Except as set forth in
Part 3.7 of the Shareholder's Disclosure Letter, the property and assets of the
Company are in good operating condition and repair (ordinary wear and tear
excepted) and are adequate for the uses to which they are being put, and none
of such property and assets is in need of repairs except for ordinary, routine
repairs that are due to ordinary wear and tear, or are not material in nature
or cost. The property and assets of the Company are sufficient for the
continued conduct of the Company's business after the Closing in substantially
the same manner as conducted prior to the Closing.
3.8 Accounts Receivable.
(a) All accounts receivable of the Company that are reflected on
the Closing Balance Sheet (collectively, the "Accounts Receivable") represent
valid obligations arising from sales actually made or services actually
performed in the Ordinary Course of Business. Unless paid prior to the Closing
Date, the Accounts Receivable are current and collectible net of the respective
reserves shown on the Closing Balance Sheet. Subject to such reserves, each of
the Accounts Receivable either has been or will be collected in full, without
any set-off, within one hundred eighty (180) days after the day on which it
first becomes due and payable. There is no contest, claim, or right of
set-off, other than returns in the Ordinary Course of Business, under any
Contract with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable.
(b) Part 3.8(b) of the Shareholder's Disclosure Letter lists all
accounts receivable which the Company has written off during the last three
fiscal years ending December 31, 1996. Parent agrees to reimburse Shareholder
for any amounts which the Surviving Corporation receives after the Closing for
such accounts, less any costs incurred after the Closing Date in collecting
such payments.
3.9 Inventory. The inventory of the Company, whether or not
reflected in the Closing Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, all of which have been written off
or written down to net realizable value in the Closing Balance Sheet. All
inventories not written off have been priced at the lower of cost or net
realizable value on a first in, first out basis. The quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company.
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10
of the Shareholder's Disclosure Letter and obligations and liabilities arising
under the Applicable Contracts, the Company has no liabilities or obligations
of the type required to be reflected as liabilities on a balance sheet prepared
in accordance with GAAP, except for liabilities or obligations reflected or
reserved against in the Balance Sheet, the Interim Balance Sheet or the Closing
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
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3.11 Taxes.
(a) The Company has filed or caused to be filed (on a
timely basis since inception) all Tax Returns that are or were
required to be filed by or with respect to any of them, either
separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. Shareholder has delivered or made
available to Parent copies of all such Tax Returns relating to income
or franchise taxes filed since inception. The Company has paid, or
made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to
any assessment received by Shareholder or the Company, except such
Taxes, if any, as are listed in Part 3.11 of the Shareholder's
Disclosure Letter and are being contested in good faith and as to
which adequate reserves have been provided in the Closing Balance
Sheet.
(b) The United States federal income and state franchise
Tax Returns of the Company subject to such Taxes have been audited by
the IRS or relevant state tax authorities as set forth on Part 3.11 of
the Disclosure Letter. Part 3.11 of the Shareholder's Disclosure
Letter contains a complete and accurate list of all audits of all such
Tax Returns, including a reasonably detailed description of the nature
and outcome of each audit. All deficiencies proposed as a result of
such audits have been paid, reserved against, settled, or, as
described in Part 3.11 of the Shareholder's Disclosure Letter, are
being contested in good faith by appropriate proceedings. Part 3.11 of
the Shareholder's Disclosure Letter describes all adjustments to the
United States federal income Tax Returns filed by the Company or any
group of corporations including the Company for all taxable years
since December 31, 1993, and the resulting deficiencies proposed by
the IRS. Except as described in Part 3.11 of the Shareholder's
Disclosure Letter, neither the Shareholder nor the Company has given
or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of the Company
or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to
Taxes on the respective books of the Company are adequate and are at
least equal to that Company's liability for Taxes. There exists no
proposed tax assessment against the Company except as disclosed in the
Closing Balance Sheet or in Part 3.11 of the Shareholder's Disclosure
Letter. No consent to the application of Section 341(f)(2) of the IRC
has been filed with respect to any property or assets held, acquired,
or to be acquired by the Company. All Taxes that the Company is or was
required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to
the proper Governmental Body or other Person. The Shareholder is not
subject to withholding under Section 1445 of the IRC with respect to
any transaction contemplated hereby. The Company has not been a
member of any affiliated group (as defined in IRC Section 1504(a) or
consolidated, combined or unitary group for purposes of any other
Taxes. None of the material property used by the Company is subject
to a lease, other than a "true" lease for federal income tax purposes.
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(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There
is no tax sharing agreement that will require any payment by the
Company after the date of this Agreement. The Company has had a valid
election to be taxed as an S corporation in effect since its inception
and through the date of the Merger.
(e) There is no plan or intention by the Shareholder, and
to the Knowledge of the Company, there is no plan or intention on the
part of the Shareholder to sell, exchange, or otherwise dispose of a
number of shares of Parent Stock to be received by them hereunder that
would reduce the Shareholder's ownership of Parent Stock to a number
of shares having a value, as of the Effective Date, of less than fifty
percent (50%) of the value of all of the formerly outstanding Shares
as of the Effective Date. For the purposes of this representation,
the Shares exchanged for cash or other property, surrendered by
dissenters or exchanged for cash in lieu of fractional shares of
Parent Stock will be treated as outstanding Shares on the Effective
Date. The Shares and shares of Parent Stock held by Shareholder and
otherwise sold, redeemed, or disposed of prior or subsequent to the
Effective Date will be considered in making this representation.
(f) To Shareholder's Knowledge, Newco will acquire at
least ninety percent (90%) of the fair market value of the net assets
and at least seventy percent (70%) of the fair market value of the
gross assets held by the Company immediately prior to the Merger. For
the purposes of this representation, amounts paid by the Company to
dissenters, amounts paid by the Company to Shareholder who receive
cash or other property, the Company's assets used to pay its
reorganization expenses, and all redemptions and distributions (except
for regular normal dividends) made by the Company immediately
preceding the transfer, will be included as assets of the Company held
immediately prior to the Merger.
(g) To Shareholder's Knowledge, the liabilities of the
Company assumed by Newco and the liabilities to which the transferred
assets of the Company are subject were incurred by the Company in the
ordinary course of its business.
(h) Parent, Newco, the Company and the Shareholder will
pay their respective expenses, if any, incurred in connection with
the Merger.
(i) To Shareholder's Knowledge, there is no intercompany
indebtedness existing between Parent and the Company or between Newco
and the Company that was issued, acquired, or will be settled at a
discount.
(j) To Shareholder's Knowledge, the Company is not under
the jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the IRC.
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(k) To Shareholder's Knowledge, the fair market value of
the assets of the Company transferred to Newco will equal or exceed
the sum of the liabilities assumed by Newco, plus the amount of
liabilities, if any, to which the transferred assets are subject.
(l) To Shareholder's Knowledge, the Company is not an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of
the IRC.
3.12 No Material Adverse Change. Except for seasonal fluctuations
which could be significant, since the date of the Closing Balance Sheet, there
has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and to the
Shareholder's Knowledge no event has occurred or circumstance exists that will
or is reasonably likely to result in such a material adverse change.
3.13 Employee Benefits.
(a) As used in this Section 3.13, the following terms
have the meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit
Obligation owed, adopted, or followed by the Company or an ERISA Affiliate of
the Company.
"COMPANY PLAN" means all Plans of which the Company or an
ERISA Affiliate of the Company is or was a Plan Sponsor, or to which the
Company or an ERISA Affiliate of the Company otherwise contributes or has
contributed, or in which the Company or an ERISA Affiliate of the Company
otherwise participates or has participated. All references to Plans are to
Company Plans unless the context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of
the Company or any ERISA Affiliate of an Company.
"ERISA AFFILIATE" means, with respect to the Company, any
other person that, together with the Company, would be treated as a single
employer under IRC Section 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA Section
3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations,
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon
the amount of service rendered, sabbatical policies, severance payment
policies, and fringe benefits within the meaning of IRC Section 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
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"PENSION PLAN" has the meaning given in ERISA Section 3(2)(A).
"PLAN" has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Section 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet
the requirements of IRC Section 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer
Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC Section 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA Section 3(1).
(b) (i) Part 3.13(b) of the Shareholder's Disclosure
Letter contains a complete and accurate list of all Company Plans, and
identifies as such all Company Plans that are Qualified Plans.
Neither the Company nor any ERISA Affiliate of the Company has ever
established, maintained or contributed to or otherwise participated
in, or had an obligation to maintain, contribute to, or otherwise
participate in, any Company Other Benefit Obligations, Company VEBAs,
defined benefit Pension Plans, Title IV Plans, or Multi-Employer
Plans.
(ii) Part 3.13(b) of the Shareholder's Disclosure
Letter contains a complete and accurate list of (A) all ERISA
Affiliates of the Company , and (B) all Plans of which any
such ERISA Affiliate is or was a Plan Sponsor, in which any
such ERISA Affiliate participates or has participated, or to
which any such ERISA Affiliate contributes or has contributed.
(iii) Part 3.13(b) of the Shareholder's Disclosure
Letter sets forth the financial cost of all obligations owed
under the Company Plans.
(c) Shareholder has delivered to Parent, or will deliver
to Parent within ten days of the date of this Agreement:
(i) all documents that set forth the terms of the
Company Plans, and of any related trust, including (A) all
plan descriptions and summary plan descriptions of Company
Plans for which Shareholder or the Company are required to
prepare, file, and distribute plan descriptions and summary
plan descriptions, and (B) all summaries and descriptions
furnished to participants and beneficiaries regarding
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Company Plans, Company Other Benefit Obligations, and Company
VEBAs for which a plan description or summary plan description
is not required;
(ii) all personnel, payroll, and employment manuals
and policies;
(iii) all registration statements filed with respect
to the Company Plan;
(iv) all insurance policies purchased by or to
provide benefits under the Company Plans;
(v) all contracts with third party administrators,
actuaries, investment managers, consultants, and other
independent contractors that relate to the Company Plans;
(vi) all reports submitted within the four years
preceding the date of this Agreement by third party
administrators, actuaries, investment managers, consultants,
or other independent contractors with respect to the Company
Plans;
(vii) all notifications to employees of their rights
under ERISA Section 601 et seq. and IRC Section 4980B;
(viii) the Form 5500 filed in each of the most
recent three plan years with respect to the Company Plan,
including all schedules thereto and the opinions of
independent accountants;
(ix) all notices that were given by the Company or
any ERISA Affiliate or any Company Plan to the IRS, or any
participant or beneficiary, pursuant to statute, within the
four years preceding the date of this Agreement, including
notices that are expressly mentioned elsewhere in this Section
3.13;
(x) all notices that were given by the IRS, or
the Department of Labor to the Company, any ERISA Affiliate of
an Company, or any Company Plan within the four years
preceding the date of this Agreement;
(xi) with respect to Qualified Plans, the most
recent determination letter for each Plan of the Company that
is a Qualified Plan; and
(d) Except as set forth in Part 3.13(d) of the
Shareholder's Disclosure Letter:
(i) The Company has performed all of respective
obligations under all Company Plans. The Company has made
appropriate entries in its financial records and statements
for all obligations and liabilities under such Plans, that
have accrued but are not due.
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(ii) No statement, either written or oral, has
been made by any Acquired Company to any Person with regard
to any Plan that was not in accordance with the Plan and that
could have an adverse economic consequence to the Company or
to Parent.
(iii) The Company, with respect to all Company
Plans, is, and the Company Plans are, in full compliance with
ERISA, the IRC, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section
3.13.
(A) No transaction prohibited by ERISA
Section 406 and no "prohibited transaction" under
IRC Section 4975(c) have occurred with respect to
the Company Plan.
(B) Neither the Shareholder nor Company
has any liability to the IRS with respect to any
Plan, including any liability imposed by Chapter 43
of the IRC.
(C) Neither the Shareholder nor the
Company has any liability under ERISA Section 502 or
Section 4071.
(D) All filings required by ERISA and
the IRC as to each Plan have been timely filed, and
all notices and disclosures to participants required
by either ERISA or the IRC have been timely provided.
(E) All contributions and payments made
or accrued with respect to all Company Plans, are
deductible under IRC Section 162 or Section 404. No
amount, or any asset of any Company Plan, is subject
to tax as unrelated business taxable income.
(iv) The Company Plan can be terminated within
sixty days, without payment of any additional contribution or
amount and without the vesting or acceleration of any benefits
promised by such Plan.
(v) Since the Company's inception, there has been
no amendment of the Company Plans.
(vi) No event has occurred or circumstance exists
that could result in a material increase in premium costs of
Company Plans that are insured, or a material increase in
benefit costs of such Plans and Obligations that are
self-insured.
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(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal
proceeding involving, the Company Plans, is pending or, to
Shareholder's Knowledge, is Threatened.
(viii) Except as otherwise described in Part 3.13 of
the Shareholder's Disclosure Letter, the Company has no
Company Plan which is a stock bonus, pension, or
profit-sharing plan within the meaning of IRC Section 401(a).
(ix) Each Qualified Plan of the Company is
qualified in form and operation under IRC Section 401(a); each
trust for each such Plan is exempt from federal income tax
under IRC Section 501(a). No event has occurred or
circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan
or trust.
(x) The Company and each ERISA Affiliate of the
Company has met the minimum funding standard, and has made all
contributions required, under ERISA Section 302 and IRC
Section 402.
xi) No Company Plan is subject to Title IV of
ERISA.
(xii) No amendment has been made, or is reasonably
expected to be made, to any Plan that has required or could
require the provision of security under ERISA Section 307 or
IRC Section 401(a)(29).
(xiii) No accumulated funding deficiency, whether or
not waived, exists with respect to any Company Plan; no event
has occurred or circumstance exists that may result in an
accumulated funding deficiency as of the last day of the
current plan year of any such Plan.
(xiv) Except to the extent required under ERISA
Section 601 et seq. and IRC Section 4980B, the Company does
not provide health or welfare benefits for any retired or
former employee and is not obligated to provide health or
welfare benefits to any active employee following such
employee's retirement or other termination of service.
(xv) The Company has the right to modify and
terminate benefits to retirees (other than pensions) with
respect to both retired and active employees.
(xvi) Shareholder and the Company have complied
with the provisions of ERISA Section 601 et seq. and IRC
Section 4980B.
(xvii) The consummation of the Contemplated
Transactions will not result in the payment, vesting, or
acceleration of any benefit.
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3.14 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Part 3.14 of the Shareholder's
Disclosure Letter and to the Shareholder's Knowledge,
(i) the Company is, and at all times since December
31, 1995 has been in substantial compliance with each Legal
Requirement that is or was applicable to it or to the conduct
or operation of its business or the ownership or use of any of
its assets except where the failure to so comply did not have,
will not have, and is not reasonably likely to have, an
adverse effect on the business, financial condition and
results of operation of the Company;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) will, or
is reasonably likely to, constitute or result in a violation
by the Company of, or a failure on the part of the Company to
comply with, any Legal Requirement, or (B) will, or is
reasonably likely to, give rise to any obligation on the part
of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time
since December 31, 1995, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or
potential obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) Part 3.14 of the Shareholder's Disclosure Letter
contains a complete and accurate list of each Governmental
Authorization that is held by or has been issued to the Company.
Each Governmental Authorization listed or required to be listed in
Part 3.14 of the Shareholder's Disclosure Letter is valid and in full
force and effect. Except as set forth in Part 3.14 of the
Shareholder's Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995, has been, in substantial compliance with
all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part
3.14 of the Shareholder's Disclosure Letter;
(ii) no event has occurred or circumstance exists
that, to the Shareholder's Knowledge, will or is reasonably
likely to (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of
or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in
Part 3.14 of the Shareholder's Disclosure Letter, or (B)
result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination
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of, or any modification to, any Governmental Authorization
listed or required to be listed in Part 3.14 of the
Shareholder's Disclosure Letter;
(iii) the Company has not received, at any time
since December 31, 1995 any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or
required to be listed in Part 3.14 of the Shareholder's
Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings
required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the
Shareholder's Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
its business in the manner they currently conduct and operate such business
and to permit the Company to own and use their assets in the manner in which
they currently own and use such assets, except where the failure to hold such
Governmental Authorization would not have an adverse effect on the business,
financial condition and results of operation of the Company.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the Shareholder's
Disclosure Letter, there is no pending Proceeding commenced by
or against the Company:
(i) that otherwise relates to or that will, or is
reasonably likely to, adversely affect the business of, or any
of the assets owned or used by, the Company; or
(ii) that challenges, or that will, or is
reasonably likely to have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Shareholder, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that will, or
is reasonably likely to give rise to or serve as a basis for the commencement
of any such Proceeding. Shareholder has delivered or made available
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to Parent copies of all pleadings, correspondence, and other documents relating
to each Proceeding listed in Part 3.15 of the Shareholder's Disclosure Letter.
(b) Except as set forth in Part 3.15 of the Shareholder's
Disclosure Letter and to Shareholder's Knowledge:
(i) there is no Order to which the Company or any
of the assets owned or used by the Company, is subject;
(ii) the Shareholder is not subject to any Order
that relates to the business of, or any of the assets owned or
used by, the Company; and
(iii) no officer, director, agent, or employee of
the Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the
business of the Company.
(c) Except as set forth in Part 3.15 of the Shareholder's
Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995, has been, in substantial compliance with
all of the terms and requirements of each Order to which it,
or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists
that will, or to the Shareholder's Knowledge is reasonably
likely to, constitute or result in (with or without notice or
lapse of time) a violation of or failure to substantially
comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is
subject; and
(iii) the Company has not received, at any time
since December 31, 1995, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or
potential violation of, or failure to substantially comply
with, any term or requirement of any Order to which the
Company, is or has been subject.
3.16 Absence of Certain Changes and Events. Except as set forth in
Part 3.16 of the Shareholder's Disclosure Letter or otherwise contemplated in
this Agreement, since the date of the Closing Balance Sheet, the Company has
conducted its business only in the Ordinary Course of Business and there has
not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of
capital stock of the Company; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase,
redemption,
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retirement, or other acquisition by the Company of any shares of any such
capital stock; or declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock, except for distributions
since September 30, 1996 in contemplation of the payment of income taxes
relating to the income of the Company at the Shareholder's effective rate, not
to exceed $100,000, and the distribution of the property as contemplated in
Section 5.3;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any shareholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any director,
officer, or employee, except for bonuses of up to $100,000 to its key
executives and employees in addition to bonuses accrued as of
September 30, 1996;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee benefit
plan for or with any employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business,
or financial condition of the Company;
(f) entry into, termination of, or receipt of notice of
termination by the Company of (i) any license, distributorship,
dealer, sales representative, joint venture, credit, or similar
agreement, or (ii) any Contract or transaction involving a total
remaining commitment by or to the Company of at least $50,000;
(g) sale (other than sales of inventory or obsolete or
unusable equipment and vehicles in the Ordinary Course of Business),
lease, or other disposition of any asset or property of the Company or
mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company, including the sale,
lease, or other disposition of any of the Intellectual Property,
except as contemplated hereby;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
(i) material change in the accounting methods used by the
Company, except as disclosed on the Closing Balance Sheet; or
(j) agreement, whether oral or written, by the Company to
do any of the foregoing.
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3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Shareholder's Disclosure Letter
contains a complete and accurate list, and Shareholder has delivered
or made available to Parent true and complete copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by
the Company of an amount or value in excess of $10,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to
the Company of an amount or value in excess of $10,000;
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of $10,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional sales agreements having a value
per item or aggregate payments of less than $10,000 and with
terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current
or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any
other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of
the Company or any affiliate of the Company or limit the
freedom of the Company or any affiliate of the Company to
engage in any line of business or to compete with any Person;
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(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(x) each power of attorney by or to the Company
that is currently effective and outstanding;
(xi) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or
provides for an express undertaking by the Company to be
responsible for consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $10,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the
Shareholder's Disclosure Letter:
(i) the Shareholder does not have, and may not,
acquire any rights under, and the Shareholder has not become
subject to any obligation or liability under, any Applicable
Contract that relates to the business of, or any of the assets
owned or used by, the Company; and
(ii) to the Shareholder's Knowledge, no officer,
director, agent, employee, consultant, or contractor of the
Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any
conduct, activity, or practice relating to the business of the
Company, or (B) assign to the Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the
Shareholder's Disclosure Letter and to the Shareholder's knowledge,
each Applicable Contract identified or required to be identified in
Part 3.17(a) of the Shareholder's Disclosure Letter is in full force
and effect and is valid and enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the
Shareholder's Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995 has been, in substantial compliance with all
applicable terms and requirements of each
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Applicable Contract identified or required to be identified in
Part 3.17(a) of the Shareholder's Disclosure Letter under
which such Company has or had any obligation or liability or
by which such Company or any of the assets owned or used by
such Company is or was bound;
(ii) to Shareholder's Knowledge, each other Person
that has or had any obligation or liability under any
Applicable Contract under which the Company has or had any
rights is, and at all times since December 31, 1995 has been,
in substantial compliance with all applicable terms and
requirements of such Applicable Contract;
(iii) to Shareholder's Knowledge, no event has
occurred or circumstance exists that (with or without notice
or lapse of time) will, or is reasonably likely to, result in
a material violation or breach of, or give the Company or
other party thereto the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) the Company has not given to or received from
any other Person, since December 31, 1995, any notice or other
communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or
default under, any Applicable Contract.
(e) There are no pending renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts
paid or payable to the Company under current or completed Applicable
Contracts with any Person and no such Person has made written demand
for such renegotiation.
(f) The Applicable Contracts relating to the sale,
design, manufacture, or provision of products or services by the
Company have been entered into without the commission by the Company
or Shareholder of any act alone or in concert with any other Person,
or any consideration having been paid or promised, that is or would be
in violation of any Legal Requirement.
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3.18 Insurance.
(a) Except as set forth in Part 3.18 of the Shareholder's
Disclosure Letter, Shareholder has delivered or made available to
Parent:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the
Company, or any director of the Company, in his or her
capacity as a director, is or has been covered at any time
within the four years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Part 3.18(b) of the Shareholder's Disclosure Letter
describes:
(i) any self-insurance arrangement by or
affecting the Company, including any reserves established
thereunder;
(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk
by the Company; and
(iii) all obligations of the Company to third
parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy
under which such coverage is provided.
(c) Part 3.18(c) of the Shareholder's Disclosure Letter
sets forth, by year, for the current policy year and each of the four
preceding policy years:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $10,000, which
sets forth:
(A) the name of the claimant;
(B) a description of the policy by
insurer, type of insurance, and period of coverage;
and
(C) the amount and a brief description
of the claim; and
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(iii) a statement describing the loss experience
for all claims that were self-insured, including the number
and aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the
Shareholder's Disclosure Letter:
(i) All policies to which the Company is a party
or that provide coverage to Shareholder, the Company, or any
director or officer of an Company:
(A) are valid, outstanding, and
enforceable;
(B) are issued by an insurer that the
Shareholder reasonably believes is financially sound
and reputable;
(C) are sufficient for compliance with
all Legal Requirements and Applicable Contracts;
(D) will not be terminated in accordance
with its terms upon the consummation of the
Contemplated Transactions and no insurer has given
notice of its intent to terminate such policy upon
the consummation of the Contemplated Transactions;
and
(E) do not provide for any retrospective
premium adjustment or other experienced- based
liability on the part of the Company.
(ii) Neither the Shareholder nor the Company has
received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will
not be renewed or that the issuer of any policy is not willing
or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and
has otherwise performed all of its obligations, under each
policy to which the Company is a party or that provides
coverage to the Company or director thereof (in his or her
capacity as a director).
(iv) The Company has given notice to the insurer
of all claims that may be insured thereby.
3.19 Environmental Matters.
Except as set forth in Part 3.19 of the Shareholder's Disclosure
Letter:
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(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither the Shareholder nor the Company
has any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible received, any
actual or Threatened order, notice, or other communication from (i)
any Governmental Body or private citizen acting in the public
interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply
with any Environmental Law, or of any actual or Threatened obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which
Shareholder or the Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or
processed by Shareholder, the Company, or any other Person for whose
conduct the Company is or may be held responsible, or from which
Hazardous Materials of the Company have been transported, treated,
stored, handled, transferred, disposed or recycled.
(b) There are no pending or, to the Knowledge of the
Company or the Shareholder, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities
or any other properties and assets (whether real, personal, or mixed)
in which Shareholder or the Company has or had an interest.
(c) Neither the Shareholder nor the Company has any basis
to expect, nor has any of them or any other Person for whose conduct
they are or may be held responsible, received, any citation,
directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials,
or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which
Shareholder or the Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by
Shareholder, the Company, or any other Person for whose conduct the
Company is or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(d) Neither the Shareholder nor the Company, nor any
other Person for whose conduct they are or may be held responsible,
has any Environmental, Health, and Safety Liabilities with respect to
the Facilities or with respect to any other properties and assets
(whether real, personal, or mixed) in which Shareholder or the Company
(or any predecessor), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such
other property or assets.
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(e) There are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in
land, water, sumps, or any other part of the Facilities, or
incorporated into any structure therein or thereon in quantities that
would require registration with or reporting to any regulatory agency
or emergency planning authority. None of the Company, any other
Person for whose conduct the Company may be held responsible, or any
independent contractor hired by the Company has permitted or
conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Shareholder or the Company has or
had an interest except in full compliance with all applicable
Environmental Laws.
(f) There has been no Release or, to the Knowledge of
Shareholder and the Company, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where
any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the
Facilities, or from or by any other properties and assets (whether
real, personal, or mixed) in which Shareholder or the Company has or
had an interest, whether by Shareholder, the Company, or any other
Person for whom the Company may be held responsible.
(g) Shareholder has delivered or made available to Parent
true and complete copies and results of any reports, studies,
analyses, tests, or monitoring possessed or initiated by Shareholder
or the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance
by Shareholder, the Company, or any other Person for whose conduct
they are or may be held responsible, with Environmental Laws.
3.20 Employees.
(a) Part 3.20 of the Shareholder's Disclosure Letter
contains a complete and accurate list of the following information for
each employee of the Company with a salary of at least $30,000 per
year (including each such employee on leave of absence or layoff
status), or for each officer of director: employer; name; job title;
current compensation paid or payable and any change in compensation
since December 31, 1995; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under the Company's
pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any Director Plan.
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(b) To Shareholder's Knowledge, no employee or director
of the Company is a party to, or is otherwise bound by, any agreement
or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and
any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the
Company to conduct its business, including any Proprietary Rights
Agreement with Shareholder or the Company by any such employee or
director. To Shareholder's Knowledge, no director, officer, or other
key employee of the Company intends to terminate his employment with
the Company.
(c) Part 3.20 of the Shareholder's Disclosure Letter also
contains a complete and accurate list of the following information for
each retired employee or director of the Company, or their dependents,
receiving benefits or scheduled to receive benefits in the future:
name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other
benefits.
3.21 Labor Relations; Compliance. The Company has not been and is
not a party to any collective bargaining or other labor Contract since January
1, 1992. Since January 1, 1992, there has not been, there is not presently
pending or existing, and to Shareholder's Knowledge there is not Threatened,
(a) any strike, slowdown, picketing, work stoppage, or employee grievance
process, (b) any Proceeding against or affecting the Company relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. To Shareholder's Knowledge, no event has occurred or circumstance exists
that provides, or is reasonably likely to provide, the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. The Company has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. The Company is not
liable for the payment of any compensation, damages, taxes, fines, penalties,
or other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
3.22 Intellectual Property. Part 3.22 of the Shareholder's
Disclosure Letter sets forth each material item of Intellectual Property, and,
except as set forth in Part 3.22 of the Shareholder's Disclosure Letter, the
Company owns, or is licensed or otherwise has the right to use, all such
Intellectual Property which is used in the conduct of the business of the
Company, and the consummation of the Contemplated Transactions will not alter
or impair any such Intellectual Property in any material respect or the
Company's right to use same. Except as set forth in Part 3.22 of the
Shareholder's Disclosure Letter and except for such other claims which if
adversely determined would not have a material adverse effect on the Company,
no claims have been asserted
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against the Company by any Person with respect to the use of any such
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement relating thereto. Each of the
trademarks, trade names and copyrights used in the conduct of the business of
the Company is valid and enforceable (except as disclosed in Part 3.22 of the
Shareholder's Disclosure Letter) and to Shareholder's Knowledge, do not violate
the rights of any Person.
3.23 Certain Payments. Neither the Company nor any director,
officer, agent or employee of the Company, nor any other Person acting for or
on behalf of the Company, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in money, property,
or services (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any affiliate of the Company, or (iv) in violation of any Legal
Requirement, (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Company.
3.24 Disclosure.
(a) No representation or warranty of Shareholder in this
Agreement and no statement in the Shareholder's Disclosure Letter
omits to state a material fact necessary to make the statements herein
or therein, in light of the circumstances in which they were made, not
misleading.
(b) No notice given pursuant to Section 5.6 will contain
any untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
(c) To the Shareholder's Knowledge, there is no fact that
has specific application to either Shareholder, the Company or STPI
(other than general economic, industry or competitive conditions) and
that materially adversely affects or, as far as Shareholder can
reasonably foresee, materially threatens, the assets, business,
financial condition, or results of operations of the Company and STPI,
taken as a whole, that has not been set forth in this Agreement, the
Shareholder's Disclosure Letter, the STPI Agreement or the
Shareholders' Disclosure Letter (as defined in the STPI Agreement).
3.25 Relationships with Related Persons. Neither the Shareholder
nor any Related Person of Shareholder or of the Company has any interest in any
personal property whether tangible or intangible), used in the Company's
business. Except with respect to ownership interests in the Company, STPI or
Parent held by the Shareholder or a Related Person of the Shareholder or the
Company, neither the Shareholder nor any Related Person of the Shareholder or
of the Company
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owns (of record or as a beneficial owner) a material equity interest or any
other material financial or profit interest in a Person that has had material
business dealings or a material financial interest in any transaction with the
Company since December 31, 1995, other than business dealings or transactions
conducted in the Ordinary Course of Business with the Company at substantially
prevailing market prices and on substantially prevailing market terms. Except
as set forth in Part 3.25 of the Shareholder's Disclosure Letter or as
otherwise related to STPI, neither the Shareholder nor, to Shareholder's
Knowledge, any Related Person of Shareholder or of the Company is a party to
any Contract with, or has any claim or right against, the Company.
3.26 Brokers or Finders. Shareholder and his agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco, jointly and severally, represent and warrant to
Shareholder as follows:
4.1 Organization and Good Standing. Each of Parent and Newco is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas. Newco is a wholly owned Subsidiary of Parent and
Parent is the record and beneficial owner of all of the outstanding capital
stock of Newco. Newco was formed by Parent for the sole purpose of effecting
the Merger, and has not conducted any operations or business except with
respect to actions contemplated herein.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and
binding obligation of each of Parent and Newco, enforceable against
Parent and Newco in accordance with its terms. Upon the execution and
delivery by Parent and Newco of the Escrow Agreement, the
Noncompetition Agreement and the execution and delivery of the
Registration Rights Agreement by Parent (collectively, the "Parent's
Closing Documents"), the Parent's Closing Documents will constitute
the legal, valid, and binding obligations of Parent or Newco, as the
case may be, enforceable against Parent and Newco in accordance with
their respective terms. Each of Parent and Newco has the absolute and
unrestricted right, power, and authority to execute and deliver this
Agreement and the Parent's Closing Documents and to perform its
obligations under this Agreement and the Parent's Closing Documents.
Parent and Newco have duly adopted all resolutions required by law to
approve the Merger and the Plan of Merger.
(b) Except as set forth in Part 4.2 of the Parent's
Disclosure Letter, neither the execution and delivery of this
Agreement by Parent and Newco nor the consummation or performance of
any of the Contemplated Transactions by Parent and Newco will give any
<PAGE> 40
Person the right to prevent, delay, or otherwise interfere with any of
the Contemplated Transactions pursuant to:
(i) any provision of Parent's or Newco's
Organizational Documents;
(ii) any resolution adopted by the board of
directors or the shareholders of Parent or Newco;
(iii) any Legal Requirement or Order to which
Parent or Newco may be subject; or
(iv) any Contract to which Parent or Newco is a
party or by which Parent or Newco may be bound.
Except as set forth in Part 4.2 of the Parent's Disclosure Letter,
neither Parent nor Newco is or will be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 Capitalization. The authorized capital stock of Parent
consists of 50,000,000 shares of Parent Stock, of which 2,826,371 shares are
issued and outstanding, and 5,000,000 shares of preferred stock, par value $.01
per share. The Parent'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 Parent's Board of
Directors has authorized the designation of 200,000 shares of the preferred
stock as the Series B Convertible Preferred Stock, of which 124,831 shares are
issued and outstanding. All of the outstanding equity securities of Parent
have been duly authorized and validly issued and are fully paid and
nonassessable. Part 4.3 of Parent's Disclosure Letter sets forth the warrants,
options, subscriptions or other rights or preferences (including conversion or
preemptive rights) outstanding to acquire capital stock of Parent, or notes,
securities or other instruments convertible into or exchangeable for capital
stock of Parent. Except as set forth in Part 4.3 of the Parent's Disclosure
Letter, no legend or other reference to any purported Encumbrance appears upon
any certificate representing any equity securities of Parent. To Parent's
Knowledge, there are no Contracts relating to the issuance, sale, or transfer
of any equity securities or other securities of Parent except as set forth in
Part 4.3 of Parent's Disclosure Letter. None of the outstanding equity
securities or other securities of Parent was issued in violation of the
Securities Act or any other Legal Requirement. All of the Parent Stock, when
delivered pursuant to the provision of this Agreement, will be validly issued,
fully paid and non-assessable, free and clear of all Encumbrances, and will not
be issued in violation of any preemptive rights. Set forth on Part 4.3 of the
Parent's Disclosure Letter is a complete and accurate list of all shareholders
of Parent who own, beneficially or of record, 10% or more of the outstanding
capital stock of Parent.
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4.4 Financial Statements. Parent has delivered to Shareholder:
(a) audited consolidated balance sheets of Parent as at December 31 in each of
the years 1994 through 1996, and the related audited consolidated statements of
income, changes in shareholders' equity, and cash flow for each of the fiscal
years then ended, together with the report thereon of Deloitte & Touche,
independent certified public accountants, (b) an unaudited consolidated balance
sheet of Parent as at September 30, 1996 (the "Parent's Interim Balance Sheet")
and the related unaudited consolidated statements of income, changes in
shareholders' equity, and cash flow for the nine months then ended, including
in each case the notes thereto. Such financial statements and notes fairly
present the financial condition and the results of operations, changes in
shareholders' equity, and cash flow of Parent as at the respective dates of and
for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or
in the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the audited
balance sheet); the financial statements referred to in this Section 4.4 reflect
the consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements.
4.5 Certain Proceedings. Except as set forth in Part 4.5 of the
Parents Disclosure Letter, there is no pending Proceeding that has been
commenced against Parent or Newco and that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To Parent's Knowledge, no such Proceeding has
been Threatened.
4.6 Taxes. Prior to the Merger, Parent will be in control of
Newco within the meaning of Section 368(c)(1) of the IRC. Parent has no plan or
intention to cause the Surviving Corporation to issue additional shares of its
stock, following the Merger, that would result in Parent losing control of
Newco within the meaning of Section 368(c)(1) of the IRC. Parent has no plan or
intention to reacquire any of its stock issued under the Merger. Parent has no
plan or intention to liquidate Newco; to merge Newco with and into another
corporation; to sell or otherwise dispose of any of the assets of the Company
acquired in the Merger, except for dispositions made in the Ordinary Course of
Business or transfers described in Section 368(a)(2)(C) of the IRC. It is the
intention of the Parent that following the Merger the Surviving Corporation
will continue the historic business of the Company and will use a significant
portion of the Company's business assets in the course of its business.
Parent, Newco and the Company will pay their respective expenses, if any,
incurred in connection with the Merger. Neither Parent nor Newco is an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the IRC.
No stock of Newco will be issued in the Merger.
4.7 Brokers or Finders. Parent and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold Shareholder harmless from any
such payment alleged to be due by or through Parent as a result of the action
of Parent or its officers or agents.
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4.8 Litigation. Except as set forth in Part 4.8 of the Parent's
Disclosure Letter, there is no action, Proceeding, claim or investigation
pending against Parent or Newco before any Governmental body that if determined
adversely to Parent or Newco may reasonably be expected to have a material
adverse effect on the present or future operations or financial conditions of
Parent or Newco, and, to the best of Parent's and Newco's Knowledge, no such
action, Proceeding, claim or investigation has been Threatened.
4.9 Absence of Certain Changes. Except as set forth in Part 4.9
of the Parent's Disclosure Letter, since the date of Parent's Interim Balance
Sheet, except as contemplated herein, there has not been with respect to Parent
and its Subsidiaries, on a consolidated basis:
(a) any change in the financial condition, properties,
assets, liabilities, business or operations of Parent or its
Subsidiaries which change by itself or in conjunction with all other
such changes, whether or not arising in the ordinary course of
business, has had, or can reasonably be expected to have, an adverse
effect on Parent and its Subsidiaries, taken as a whole;
(b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
properties, assets or business of Parent and its Subsidiaries, taken
as a whole;
(c) any split, combination or recapitalization of the
capital stock of Parent or any declaration or payment of any dividend
or making of any other distribution or payment in respect of its
capital stock or redeeming, purchasing or otherwise acquiring or
agreeing to redeem, purchase or acquire any of its capital stock; or
(d) any material change with respect to the management,
supervisory, development or other key personnel of Parent.
4.10 Disclosure.
(a) Parent has furnished to Shareholder a copy of
Parent's Disclosure Letter. The representations and warranties of
Parent and Newco in this Agreement and Parent's Disclosure Letter do
not contain an 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.
(b) No notice given pursuant to Section 6.4 will contain
any untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
(c) To Parent's Knowledge, there is no fact that has
specific application to either Parent or any of its Subsidiaries
(other than general economic, industry or competitive
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conditions) and that materially adversely affects or, as far as Parent
can reasonably foresee, materially threatens, the assets, business,
financial condition, or results of operations of the Parent and its
Subsidiaries, taken as a whole, that has not been set forth in this
Agreement or the Parent's Disclosure Letter.
4.11 No Undisclosed Liabilities. Except as set forth in Part 4.11
of the Shareholder's Disclosure Letter and obligations and liabilities arising
under contracts to which Parents is a party or bound, the Parent has no
liabilities or obligations of the type required to be reflected as liabilities
on a balance sheet prepared in accordance with GAAP, except for liabilities or
obligations reflected or reserved against in the Parent's Interim Balance Sheet
or the Parent's audited balance sheet as at December 31, 1996 and current
liabilities incurred in the Ordinary Course of Business since the respective
dates thereof.
SECTION 5. COVENANTS OF SHAREHOLDER
5.1 Access and Investigation. Between the date of this Agreement
and the Closing Date, the Company and the Shareholder will, and will cause the
Company and its Representatives to, (a) afford Parent and its Representatives
and prospective lenders and their Representatives (collectively, "Parent's
Advisors") full and free access to the Company's personnel, properties
(including subsurface testing), contracts, books and records, and other
documents and data, (b) furnish Parent and Parent's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Parent may reasonably request, and (c) furnish Parent and Parent's Advisors
with such additional financial, operating, and other data and information as
Parent may reasonably request.
5.2 Operation of the Business of the Company. Between the date of
this Agreement and the Closing Date, unless otherwise consented to by Parent
and except as contemplated herein, the Company and Shareholder will, and
Shareholder will cause the Company to:
(a) conduct such business of the Company only in the
Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of such Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;
(c) confer with Parent concerning operational matters of
a material nature; and
(d) otherwise report periodically as reasonably requested
by Parent concerning the status of the business, operations, and
finances of the Company.
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5.3 Excluded Assets. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Company and Shareholder will not, and will cause the Company not to, without
the prior consent of Parent, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of the
changes or events listed in Section 3.16 is likely to occur. The Company has,
or prior to the Closing shall, sell, and the Shareholder or its affiliate shall
purchase (or with respect to the property described in Section 3.6 of the
Shareholder's Disclosure Letter under the headings "Excluded Real Property" and
"Excluded Personal Property", the Company shall distribute to Shareholder), all
of the Excluded Assets to the Shareholder or its affiliate; and, in connection
with such sale and distribution, Shareholder or its affiliate shall assume all
liabilities related to the Excluded Assets; provided, however, STED shall be
the party assuming the liabilities with support to MIECO.
5.4 Master Lease. On or prior to Closing, the Company shall
assign to Shareholder or its assigns, and Shareholder or its assigns shall
assume, all rights, obligations and duties, of the Company with respect to that
certain Contract for Purchase and Sale of Real Estate, dated February 15, 1995,
by and among J. Kenneth Neal, Gail A. Neal, J. K. Neal, Inc., Mission Ice
Services of Laredo, Inc. and the Company (the "Real Estate Contract") whereby
Shareholder, or his assigns, will purchase the certain real property currently
leased by the Company on or before February 28, 1998. Notwithstanding any
covenant contained in this Agreement to the contrary, the Surviving Corporation
and the Shareholder, or its assigns with respect to property acquired pursuant
to the Real Estate Contract, will enter into a master lease agreement in the
form of Exhibit 5.4 attached hereto (the "Master Lease").
5.5 Required Approvals. As promptly as practicable after the date
of this Agreement, the Company and Shareholder will, and Shareholder will cause
the Company to, make all filings required by Legal Requirements to be made by
them in order to consummate the Contemplated Transactions. Between the date of
this Agreement and the Closing Date, the Company and Shareholder will, and will
cause the Company to, (a) cooperate with Parent with respect to all filings
that Parent reasonably elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Parent in obtaining all consents identified in Schedule 4.2; provided, however,
that this Agreement will not require the Company or the Shareholder to incur
any unreasonable burden, financial or otherwise, to make such filing or obtain
such consent or Governmental Authorization.
5.6 Notification. Between the date of this Agreement and the
Closing Date, the Shareholder will promptly notify Parent in writing if the
Shareholder becomes aware of any fact or condition that causes or constitutes a
Breach of any of the Company's or Shareholder's representations and warranties
as of the date of this Agreement, or if the Shareholder becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or
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discovery of such fact or condition. Should any such fact or condition require
any change in the Shareholder's Disclosure Letter if the Shareholder's
Disclosure Letter were dated the date of the occurrence or discovery of any
such fact or condition, the Shareholder will promptly deliver to Parent a
supplement to the Shareholder's Disclosure Letter specifying such change.
During the same period, the Company and Shareholder will promptly notify Parent
of the occurrence of any Breach of any covenant of Shareholder in this Section 5
or of the occurrence of any event, of which Shareholder has Knowledge and which
will, or is reasonably likely to, make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.7 Payment of Indebtedness by Related Persons. Except as
expressly provided in this Agreement and except with respect to any amounts
owed by STPI to the Company, Shareholder will cause all indebtedness owed to
the Company by Shareholder or any Related Person of the Shareholder to be paid
in full at or prior to Closing.
5.8 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, the Company and the Shareholder will not, and
will cause the Company and each of their Representatives not to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non- public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Parent) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of the Company, or any
of the capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company. Shareholder and the
Company will promptly communicate to Parent the terms of any proposal received
or the fact that Shareholder or the Company has received inquiry with respect
to, or have participated in discussions or negotiations in respect of, any such
transaction, and the identity of any persons who initiated or participated in
such discussions or negotiations.
5.9 Best Efforts. Except as set forth in the proviso of
Section 5.5, between the date of this Agreement and the Closing Date,
Shareholder will use their Best Efforts to cause the conditions in Sections 7
and 8 to be satisfied.
5.10 Filing of Short Period Returns. The Company and the
Shareholder shall treat the day before the Closing Date as the last day of the
taxable period in which the Company is an S corporation, as defined in the IRC.
All Tax returns relating to Company's status as an S corporation for the
present taxable year of the Company, which are required and/or permitted by the
authorized taxing authorities (herein collectively referred to as the "S Short
Year Returns") shall be filed accordingly. In accordance with
Section 1362(e)(6)(D) and related regulations of the IRC, the books of the
Company shall be closed at the close of the day before the Closing Date. The
Shareholder will cause its accounting firm to prepare, at the Shareholder's
expense, the S Short Year Returns.
5.11 Cooperation on Tax Matters.
(a) The Shareholder shall cooperate fully with the Parent, as
and to the extent reasonably requested by the other party, in connection with
the preparation and filing of any Tax Return, statement, report or form
(including any report required pursuant to Section 6042 of the IRC
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<PAGE> 46
and all Treasury Regulations promulgated thereunder), any audit, and litigation
or other proceeding with respect to Taxes. Such cooperation shall include the
retentions and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding.
(b) The Shareholder agrees, upon request, to use all
reasonable efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (with respect, but not
limited, to transactions contemplated hereby).
5.12 Other Tax Matters
(a) Without the prior written consent of the Parent, neither
the Shareholder nor the Company (to the extent it may affect or relate to the
Company, the Surviving Corporation or the Parent) shall make or change any Tax
election, change any annual Tax accounting period, adopt or change any method
of Tax accounting period, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim a
Tax refund, consent to any extension or waiver of the limitations period of the
limitations period applicable to any Tax claim or assessment or take or omit to
take any other action, if any such action or omission would have the effect of
increasing the Tax liability of the Company, the Surviving Corporation or the
Parent.
(b) All Tax Returns not required to be filed on or before the
date hereof (including any applicable extensions) relating to any Pre-Closing
Tax Period will be filed when due in accordance with all applicable laws.
5.13 Employee Benefit Plan. Prior to the Closing, Shareholder
take all actions necessary to cause the Company to cease participation in its
401K plan (the "401k Plan") and to cause all of its functions as employer,
settlor, sponsor or administrator of the 401K to be transferred to another of
the companies participating in the 401k Plan, other than STPI; provided,
however, that the Shareholder may cause the Company and each of the affiliates
of the Company participating in the 401k plan to terminate the such plan
effective prior to Closing.
SECTION 6. COVENANTS OF PARENT
6.1 Approvals of Governmental Bodies. As promptly as practicable
after the date of this Agreement, Parent will, and will cause each of its
Related Persons to, make all filings required by Legal Requirements to be made
by them to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Parent will, and will cause each Related Person
to, cooperate with Shareholder and the Company with respect to all filings that
Shareholder and/or the Company is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with
Shareholder in obtaining all consents identified in Part 3.2 of
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<PAGE> 47
the Shareholder's Disclosure Letter; provided that this Agreement will not
require Parent to dispose of or make any change in any portion of its business
or to incur any other unreasonable burden to obtain a Governmental
Authorization.
6.2 Best Efforts. Except as set forth in the proviso to
Section 6.1, between the date of this Agreement and the Closing Date, Parent
will use its Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
6.3 Cooperation on Tax Matters The Parent agrees (i) to retain
and provide Shareholders with access to all books and records with respect to
Tax matters pertinent to the Company relating to any Pre-Closing Tax Period,
and to abide by all record retention agreements entered into with any Taxing
Authority, (ii) to give the Shareholder reasonable written notice prior to
destroying or discarding any such books and records and, if the Shareholder so
requests, the Parent shall allow the Shareholder to take possession of such
books and records and (iii) to cooperate fully with the Shareholder regarding
whatever steps may be reasonably necessary to qualify the Merger as a tax-free
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the IRC.
6.4 Notification. Between the date of this Agreement and the
Closing Date, the Parent will promptly notify Shareholder in writing if the
Parent becomes aware of any fact or condition that causes or constitutes a
Breach of any of Company's, Shareholder's, Parent's or Newco's representations
and warranties as of the date of this Agreement, or if Parent becomes aware of
the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute
a Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition known by Parent require any
change in the Parent's Disclosure Letter if the Parent's Disclosure Letter were
dated the date of the occurrence or discovery of any such fact or condition,
Parent will promptly deliver to Shareholder a supplement to the Parent's
Disclosure Letter specifying such change. During the same period, Parent will
promptly notify Shareholder of the occurrence of any Breach, known to the
Parent, of any covenant of Shareholder, Company, Parent or Newco in this
Agreement or of the occurrence of any event that will or is reasonably likely
to make the satisfaction of the conditions in Section 7 or 8 impossible or
unlikely.
6.5 Release of Personal Guarantees. Parent and Newco shall take
all such actions necessary or appropriate to cause Shareholder to be released
at or prior to Closing from any personal guarantees of payment or performance
relating to the Company's current and long-term indebtedness, notes payable,
current and long-term capital leases and any other obligations relating to the
Company, its assets or business (other than the Excluded Assets), subject to
Company and Shareholder's performance of all covenants and obligations required
hereunder.
6.6 Increase in Tax Liability. Without the prior written consent
of the Shareholder, neither the Parent nor the Surviving Corporation (to the
extent it may affect or relate to the Company, the Surviving Corporation or the
Parent) shall make or change any Tax election, change
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any annual Tax accounting period, adopt or change any method of Tax accounting
period, file any amended Tax Return, enter into any closing agreement, settle
any Tax claim or assessment, surrender any right to claim a Tax refund, consent
to any extension or waiver of the limitations period of the limitations period
applicable to any Tax claim or assessment, or take or omit to take any other
action, if any such action or omission would have the effect of increasing the
Tax liability of the Company or the Shareholder with respect to periods ending
on or prior to the Closing.
6.7 Employee Options. At the request of Shareholder, Parent shall
take all actions necessary and appropriate to issue options covering up to
10,000 shares of Parent Stock to certain employees of Parent or its
Subsidiaries as may be determined by the Shareholder.
6.8 Payment of Indebtedness to Related Persons. Concurrent with
or immediately following the Closing, Parent and Newco will cause all
indebtedness owed by the Company to any Related Person of the Shareholder
(other than STPI) to be paid in full.
6.9 Master Lease. At the request of Shareholder, but in no
event later than February 28, 1998, the Surviving Corporation shall, and the
Parent shall cause the Surviving Corporation to, enter into the Master Lease in
the form of Exhibit 5.4 attached hereto. Concurrent therewith, Parent shall
execute the Guaranty, in the form of Exhibit 6.9 attached hereto, with respect
to the obligations and performance of the Surviving Corporation under the
Master Lease.
6.10 Registration Rights Agreement. Prior to the Closing, Parent
shall negotiate in good faith with Shareholder an agreement (the "Registration
Rights Agreement") which gives the Shareholder "piggyback" registration rights
and "demand" registration rights on the same or better terms and conditions as
those granted by Parent to other shareholders of Parent under other
registration rights agreements to which Parent is a party, or contemplates
entering into; provided, that such registration rights of Shareholder shall be
exercisable, subject to reasonable restrictions, at any time after an initial
public offering of the Parent Stock.
6.11 STPI Merger. Parent agrees that it will not, and will not
permit Subco to, consummate the transactions contemplated by the STPI Agreement
unless the transactions contemplated herein are consummated concurrent
therewith.
6.12 401k Plan. After the Closing, Parent shall cause the
Surviving Corporation to use its best efforts in cooperating in the winding up
of the 401k Plan.
SECTION 7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE
Parent's obligation to consummate the Merger and to take the other
actions required to be taken by Parent at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Parent, in whole or in part):
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7.1 Accuracy of Representations. All of Shareholder's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing Date as if made
on the Closing Date, without giving effect to any supplements to the initial
disclosure of the Shareholder's Disclosure Letter.
7.2 Shareholder's Performance.
(a) All of the covenants and obligations that Shareholder
is required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
duly performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to
Section 2.8 must have been delivered, and each of the other covenants
and obligations in Sections 5 must have been performed and complied
with in all material respects.
7.3 Consents. Each of the Consents identified in Part 3.2 of the
Shareholder's Disclosure Letter and Part 4.2 of the Parent's Disclosure Letter
must have been obtained and must be in full force and effect, except where the
failure to obtain each consent would not have a materially adverse effect on
the business, financial condition or result of operation of the Company, or the
ability of the parties to consummate the Contemplated Transactions without the
payment of additional consideration.
7.4 Additional Documents. Each of the following documents must
have been delivered to Parent:
(a) an opinion of Cox & Smith Incorporated, dated the
Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Parent may reasonably request
for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
Shareholder's representations and warranties, (iii) evidencing the
performance by Shareholder of, or the compliance by Shareholder
with, any covenant or obligation required to be performed or complied
with by such Shareholder, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating
the consummation or performance of any of the Contemplated
Transactions.
7.5 No Proceedings. Since the date of this Agreement, there must
not have been commenced or Threatened against Parent, or against any Person
affiliated with Parent, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with,
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any of the Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of the
Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds. There
must not have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Company, or (b) is
entitled to all or any portion of the Acquisition Price.
7.7 No Prohibition. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause Parent or any Person
affiliated with Parent to suffer any material adverse consequence under any
applicable Legal Requirement or Order.
7.8 Financing. Parent shall have obtained financing satisfactory
to it adequate to consummate the Merger.
7.9 Tax Certification. Parent shall have received a certification
signed by the Shareholder to the effect that Shareholder is not a "foreign
person" as defined in Section 1445 of the IRC.
7.10 Excluded Assets. The Company shall have sold or distributed,
and Shareholder shall have purchased or received, all of the Excluded Assets
and, in connection therewith, Shareholder shall have assumed all liabilities
related to the Excluded Assets.
7.11 Assignment of the Real Estate Contract. The Company shall
have assigned to Shareholder, or his assigns, the Real Estate Contract as
contemplated in Section 5.4 hereof.
7.12 Employee Benefit Plan. The Boards of Directors of the
Company and each of its affiliates participating in the 401k Plan shall have
adopted a resolution terminating such plan.
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDER'S
OBLIGATION TO CLOSE
Shareholder's obligation to consummate the Merger and to take the
other actions required to be taken by Shareholder at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Shareholder, in whole or in part):
8.1 Accuracy of Representations. All of Parent's representations
and warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
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8.2 Parent's Performance.
(a) All of the covenants and obligations that Parent is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to
Section 2.8 must have been delivered and Parent must have delivered the
Cash Amount and the Stock Amount required to be made by Parent
pursuant to Sections 2.8(b) and 2.8(d).
(c) Parent must have consummated the acquisition of
Southwest Texas Packaged Ice, Inc. prior to or on the Effective Date
pursuant to the STPI Agreement.
8.3 Consents. Each of the Consents identified in Part 3.2 of the
Shareholder's Disclosure Letter and Part 4.2 of the Parent's Disclosure Letter
must have been obtained and must be in full force and effect.
8.4 Additional Documents. Parent must have caused the following
documents to be delivered to Shareholder:
(a) an opinion of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., dated the Closing Date in form and substance satisfactory to
Shareholder, in substantially the form of Exhibit 8.4 (a); and
(b) such other documents as Shareholder may reasonably
request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of
any representation or warranty of Parent, (iii) evidencing the
performance by Parent of, or the compliance by Parent with, any
covenant or obligation required to be performed or complied with by
Parent, (ii) evidencing the satisfaction of any condition referred to
in this Section 8, or (v) otherwise facilitating the consummation of
any of the Contemplated Transactions.
8.5 No Proceedings. Since the date of this Agreement, there must
not have been commenced or Threatened against Shareholder, Company, or against
any Person affiliated with Company, any Proceeding (a) involving any challenge
to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
8.6 Release of Personal Guarantees. The current and long-term
indebtedness, the notes payable and the current long-term capitalized leases,
with respect to which the Shareholder has personally guaranteed payment or
performance, will either be paid off concurrently with the Closing
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by the Company (or Parent on behalf of the Company), or Parent will take such
actions necessary to release Shareholder from such guarantees at or prior to
the Closing.
8.7 Employment of Shareholder. Shareholder shall be employed by
Parent as its vice president and chief operating officer on mutually agreeable
terms.
8.8 No Prohibition. Neither the consummation nor the performance
of any of the contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause Shareholder or any Person
affiliated with Shareholder to suffer any material adverse consequence under,
any applicable Legal Requirement or Order.
8.9 Assignment of the Real Estate Contract. The Company shall
have assigned to Shareholder, or his assigns, the Real Estate Contract as
contemplated in Section 5.4 hereof.
8.10 Release of Obligations related to the Transfer of MIECO. The
Company shall have been released from any and all obligations relating to any
debt assumed by Southwest Texas Equipment Distributors, Inc. in connection
with the transfer of MIECO.
8.11 STPI Merger. The transactions contemplated by the STPI
Agreement shall be consummated concurrently with the Closing.
8.12 Registration Rights. Parent and Shareholder shall have
entered into a Registration Rights Agreement in a form reasonably satisfactory
to Shareholder, consistent with Section 6.10.
8.13 Employee Benefit Plan. The Boards of Directors of the Company
and each of its affiliates participating in the 401k Plan shall have authorized
the termination of such plan.
8.14 Southwestern Ice, Inc. The transactions contemplated by
that Agreement and Plan of Merger, dated March 25, 1997 by and among Parent,
Southwestern Ice, Inc. ("SWI"), Packaged Ice Southwestern, Inc. and the
shareholders of SWI must have been consummated prior to or concurrent with the
Closing.
SECTION 9. TERMINATION
9.1 Termination Events. This Agreement may, by notice given prior
to or at the Closing, be terminated:
(a) by either Parent or Shareholder if a material Breach
of any provision of this Agreement has been committed by the other
party and such Breach has not been waived;
(b) [Section intentionally omitted.]
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(c) by mutual consent of Parent and Shareholder; or
(d) by either Parent or Shareholder if the Closing has
not occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before Ending Date, or such later date as the
parties may agree upon;
(e) "Ending Date" shall mean April 15, 1997, or, if
Parent has obtained by April 15, 1997 assurance(s) of sufficient
financing to complete the Merger, but such financing has been delayed
for any reason, then April 30, 1997.
9.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 9.2(b), 9.2(c) and Section 11 will survive.
(b) Without limiting the applicability of Section 11.1, if Parent
and Newco fail to consummate the transactions contemplated on its part to occur
on the Closing Date, in circumstances whereby all conditions of the Closing set
forth in Section 7 have been satisfied in all material respects or waived,
Shareholder and the Company shall be entitled to terminate this Agreement and
to be reimbursed by Parent and Newco for its out-of-pocket expenses incurred
directly in connection with the negotiation, preparation and performance of
this Agreement and a management fee equal to $12,500 per month relating to the
services of Shareholder for the period from January 20, 1997 through the date
of termination of this Agreement.
(c) If Shareholder and the Company fail to consummate the
transactions contemplated on their part to occur on the Closing Date, in
circumstances whereby all conditions of the Closing set forth in Section 8 have
been satisfied in all material respects or waived, Parent's and Newco's sole
remedy shall be to (i) to require Shareholder and the Company to consummate and
specifically perform the Contemplated Transactions, in accordance with the
terms of this Agreement, and to obtain from Shareholder any attorney fees
incurred in connection with procuring such specific performance or (ii)
terminate this Agreement and obtain reimbursement of its out-of-pocket expenses
incurred directly in connection with the negotiation, preparation and
performance of this Agreement.
SECTION 10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification; Knowledge. Subject to
Section 10.5 hereof, all representations, warranties, covenants, and obligations
in this Agreement, the Shareholder's Disclosure Letter, the Parent's Disclosure
Letter, the certificates delivered pursuant to Section
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2.8(a)(iii) and 2.8(b)(iv), and any other certificate or document delivered
pursuant to this Agreement will survive the Closing. Shareholder shall not be
liable under this Section 10 for Damages (as hereinafter defined) resulting from
any event relating to a Breach of any representation, warranty, covenant or
agreement made in this Agreement if either Parent or Newco had actual knowledge
of such Breach on or before the Closing Date.
10.2 Indemnification and Payment of Damages by Shareholder.
Subject to the limitations and terms set forth in Section 9.2 and this Section
10, Shareholder will indemnify and hold harmless Parent, Newco and the
Surviving Corporation, and their respective Representatives, shareholders,
controlling persons, and affiliates for, and will pay to such Persons the
amount of, any loss, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
the Company or Shareholder in this Agreement, Shareholder's Disclosure
Letter, or any other certificate or document delivered by Shareholder
pursuant to this Agreement as if such representation or warranty were
made on and as of the Closing Date, other than any such Breach that is
disclosed in the Shareholder's Disclosure Letter as a supplement to
the initial disclosure in the Shareholder's Disclosure Letter as of
the time of the execution of this Agreement, or any Breach by
Shareholder of subsections (e) through (l) of Section 3.11, with
respect to which the Parent's sole remedy shall be subsection (e) of
this Section 10.2.
(b) any Breach by Shareholder of any covenant or
obligation of such Shareholder in this Agreement;
(c) any product shipped or manufactured by, or any
services provided by, the Company prior to the Closing Date;
(d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with
Shareholder or the Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions; or
(e) any loss, liability or expense attributable to any
tax payable by Parent or the Surviving Corporation resulting from the
Merger not being treated as a tax free merger under the IRC as a
result of (i) any negligent act or omission of Shareholder or (ii) any
Breach of a representation, warranty or covenant of Shareholder
contained herein.
Notwithstanding any of the foregoing, in the event that the Contemplated
Transactions are not consummated, neither Parent nor Newco shall be entitled to
indemnification for Breaches of
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covenants and agreements contained herein to be performed at or prior to the
Closing or the Breach of any representation or warranty contained herein.
10.3 Indemnification and Payment of Damages by
Shareholder--Environmental Matters. In addition to the provisions of Section
10.2, Shareholder will indemnify and hold harmless Parent, and Newco, and
their respective Representatives, shareholders, controlling persons and
affiliates for, and will pay to Parent, Newco, the Surviving Corporation and
the other Indemnified Persons the amount of, any Damages (including costs of
cleanup, containment, or other remediation to the extent required to comply
with any Environmental Laws) arising, directly or indirectly, from or in
connection with:
(a) any Environmental, Health, and Safety Liabilities
arising out of or relating to: (i) (A) the ownership, operation, or
condition at any time on or prior to the Closing Date of the
Facilities or any other properties and assets (whether real, personal,
or mixed and whether tangible or intangible) in which Shareholder or
the Company has or had an interest, or (B) any Hazardous Materials
that were present on the Facilities or such other properties and
assets at any time on or prior to the Closing Date as a result of the
introduction of such Hazardous Materials by the Company or its
Representatives or as a result of the Company's or any
successor-in-interest's operations; or (ii) (A) any Hazardous
Materials, wherever located, that were, or were allegedly, generated,
transported, stored, treated, Released, or otherwise handled by
Shareholder or the Company or by any other Person for whose conduct
the Company is or may be held responsible at any time on or prior to
the Closing Date, or (B) any Hazardous Activities that were, or were
allegedly, conducted by Shareholder or the Company or by any other
Person for whose conduct the Company is or may be held responsible; or
(b) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was
incurred, or manifested itself), personal injury, property damage
(including trespass, nuisance, wrongful eviction, and deprivation of
the use of real property), or other damage of or to any Person,
including any employee or former employee of the Company or any other
Person for whose conduct the Company is or may be held responsible, in
any way arising from or allegedly arising from any Hazardous Activity
conducted or allegedly conducted by the Company with respect to the
Facilities or the operation of the Company prior to the Closing Date,
or from Hazardous Material that was (i) introduced, generated, stored,
treated, related or disposed of by the Company on or before the
Closing Date on or at the Facilities (or present on any other
property, if such Hazardous Material emanated from any of the
Facilities and was present on any of the Facilities on or prior to the
Closing Date) or (ii) Released or allegedly Released by the Company or
any other Person for whose conduct the Company is or may be held
responsible, at any time on or prior to the Closing Date.
Shareholder will be entitled to control any cleanup, any related
Proceeding, and any other Proceeding with respect to which indemnity may be
sought under this Section 10.3 or with respect
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to Section 3.19. The procedure described in Section 10.9 will apply to any claim
relating to a matter covered by this Section 10.3. Notwithstanding any
provision in this Agreement to the contrary, in no event will Parent, Newco, or
any of their respective Representatives, shareholders, controlling persons, and
affiliates be entitled to indemnification under this Section 10.3 or with
respect to the representations and warranties set forth in Section 3.19 to the
extent to which any liability arising from such indemnification claim are
attributable to activities or conduct of the Company (or the Surviving
Corporation), Parent, Newco, or any of their respective Representatives,
shareholders, controlling persons, agents and affiliates from and after the
Closing Date.
10.4 Indemnification and Payment of Damages by Parent. Parent and
Newco, jointly and severally, will indemnify and hold harmless Shareholder, and
will pay to Shareholder the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any Breach of any representation or
warranty made by Parent or Newco in this Agreement or in any certificate
delivered by Parent or Newco pursuant to this Agreement, (b) any Breach by
Parent or Newco of any covenant or obligation of Parent or Newco in this
Agreement, (c) any violation by Parent or Newco of any state or federal
securities law in connection with the issuance of the Parent Stock, or (d) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such Person with Parent (or any Person acting on its behalf) in connection with
any of the Contemplated Transactions, (e) any loss, liability or expense
attributable to any Tax payable by Shareholder resulting from the Merger not
being treated as a tax-free merger under the IRC as a result of (i) any
negligent act or omission of Parent, Newco or the Surviving Corporation
(excluding any act or omission of the Company on or prior to the Closing Date
or any act or omission of the Shareholder at any time) or (ii) any Breach of
representation, warranty or covenant of Parent or Newco contained herein, or
(f) any loss, liability or expense arising out of or relating to any claims by
Southco, Inc. or Frank Hall against the Company or Shareholder other than with
respect to the payment or performance by the Company prior to the Closing Date
under the Promissory Note dated November 21, 1994, payable by Southwest Texas
Packaged Ice, Inc. in the original principal amount of $105,619.56.
10.5 Time Limitations. If the Closing occurs, Shareholder will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with on or prior to the Closing Date or representations made again as
of the Closing Date, other than those in Sections 3.11, 3.13 and 3.19, unless
on or before two years from the Closing Date, Parent notifies Shareholder of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Parent. A claim with respect to Section 3.19 or Section
10.3 must be made prior to the fifth anniversary hereof, and shall thereupon
terminate. A claim with respect to Section 3.11 or Section 3.13, or a claim
for indemnification or reimbursement based upon any covenant or obligation to
be performed and complied with after the Closing Date, including without
limitation, any indemnification claims made under Section 10.2(d) or Section
10.2(e), must be made prior to the expiration of the applicable statutory
period of limitations, including any extensions to such period, and shall
thereupon terminate. If the Closing occurs, Parent will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied
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with prior to the Closing Date other than those set forth in Section 4.6,
unless on or before two years from the Closing Date, Shareholder notifies
Parent of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Shareholder; a claim with respect to Section
4.6 or a claim for indemnification or reimbursement based upon any covenant or
obligation to be performed and complied with after the Closing Date must be
made prior to the expiration of the applicable statutory period of limitations,
including any extensions to such period, and shall thereupon terminate.
10.6 Limitations on Amount -- Shareholder.
(a) Shareholder will have no liability (for
indemnification or otherwise) with respect to the matters described in
Section 10.2 and 10.3 until the total of all Damages with respect to
such matters and the matters described in Section 10.2 and 10.3 of the
Agreement and Plan of Merger, of even date herewith, among Parent,
Packaged Ice STPI, Inc., STPI and the shareholders of STPI (the "STPI
Agreement") exceeds $75,000 in the aggregate, and then only for the
amount by which such Damages exceed $75,000 (the "Basket"); provided,
however, the Basket shall not apply to any claim for indemnification
arising out of a Breach of any representations, warranties or
covenants contained in Sections 3.3, 3.6, 3.11, 5.10, 5.11 or 5.12 or
any provisions herein to the extent of their relation to any of the
Excluded Assets, including, without limitation, Shareholder's or
STED's, as the case may be, obligation to assume all liabilities
related to the Excluded Assets. The Shareholder's maximum liability
with respect to the matters described in Section 10.2 and Section 10.2
of the STPI Agreement will be limited to $2,000,000 in the aggregate
(the "Cap"); provided, however, this Cap will not apply to a claim for
indemnification arising out of a Breach of any of the Company's
representations, warranties or covenants contained in Sections 3.1(c),
3.3, 3.6, 3.11, 3.19, 5.10, 5.11 or 5.12, the indemnification
obligation of Section 10.2(e), or any provisions herein to the extent
of their relation to any of the Excluded Assets, including, without
limitation, Shareholder's or STED's, as the case may be, obligation to
assume all liabilities related to the Excluded Assets. Notwithstanding
the foregoing, the maximum liability with respect to matters described
in Sections 10.2 and 10.3, in this Agreement and the STPI Agreement
shall be equal to the sum of the Acquisition Price of this Agreement
and the Acquisition Price of the STPI Agreement. In addition, this
Section 10.6 will not apply to any claim for indemnification based upon
the fraud of the Shareholder.
(b) In case any event shall occur which would otherwise
entitle any party to assert a claim for indemnification hereunder, no
claim, loss, liability, cost or expense shall be deemed to have been
sustained by such party to the extent of any proceeds received by such
party from any insurance policies with respect thereto.
10.7 [Section omitted intentionally.]
10.8 Escrow. Upon notice to Shareholder, Parent may give notice of
a Claim in such amount under the Escrow Agreement. Neither the exercise of nor
the failure to give a notice of a
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Claim under the Escrow Agreement will constitute an election of remedies or
limit Parent in any manner in the enforcement of any other remedies that may be
available to it.
10.9 Sole Remedy. The sole and exclusive remedy of the parties
hereunder for any and all claims under this Agreement discovered after the
Closing shall be the indemnities set forth in this Section 10, as limited by
the provisions set forth elsewhere in this Section 10. Notwithstanding any
provision in this Agreement to the contrary, no party shall be able to avoid
the limitations expressly set forth in this Section 10 or Section 9.2 by
electing to pursue any other remedy.
10.10 Procedure for Indemnification -- Third Party Claims.
(a) If a Person receives notice of the commencement any
Proceeding against it which might give any party indemnification
rights under this Section 10, then promptly thereafter such Person
will, if a claim is to thus be made against such party, give notice to
such party of the commencement of such Proceeding, but the failure to
notify such party will not relieve this Person of any liability that
it may have to such party, except to the extent this party is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.10(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would result in a
conflict of interests preventing such joint representation, or (ii)
the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding
and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as
long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding,
in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable
costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation
of Legal Requirements or any material violation of the rights of any
Person and no material effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and
(ii) the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent.
If the indemnifying party does not undertake to defend such matter to
which the indemnified party is entitled to indemnification hereunder
within 10 days after receiving notice of the Proceeding's
commencement, the indemnified party may
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undertake such defense through counsel of its choice, at the cost and
expense of the indemnifying party, and the indemnified party may
settle such matter, and the indemnifying party shall reimburse the
indemnified party for the amount paid in such settlement and any other
liabilities, costs or expenses incurred by the indemnified party in
connection therewith, provided, however, that under no circumstances
shall the indemnified party settle any third party claim without the
written consent of the indemnifying party, which consent shall not be
unreasonably withheld. The indemnified party shall make available to
the indemnifying party all records, other materials and personnel
reasonably required by it for its use in contesting any third party
claims and shall cooperate fully with the indemnifying party in the
defense of all such claims.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability
that a Proceeding may materially adversely affect it or its affiliates
other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified
party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement effected without
its consent (which may not be unreasonably withheld).
10.11 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
10.12 Payment in Cash or Parent Stock. Payment of indemnification
claims under this Section 10 may be paid in either cash or Parent Stock, in the
sole discretion of Shareholder. The shares of Parent Stock shall be valued at
$10.00 per share for purposes of the payment of such indemnification claims.
10.13 Subrogation Rights. If Parent, Newco the Surviving
Corporation or any of their respective Representatives, shareholders,
controlling persons and affiliates makes a claim for indemnification with
respect to the environmental representations and warranties set forth in
Section 3.19 hereof or under Section 10.3 hereof (an "Environmental Claim"), (i)
Shareholder shall have rights of subrogation with respect to any lawful claim,
right or demand of Parent, Newco, the Company or the Surviving Corporation
against any third Person to the extent such claim, right or demand relates to
such Environmental Claim (the "Environmental Indemnification Rights"),
including any common law or statutory rights of contribution or indemnity,
contractual rights or indemnification rights from J.K. Neal or his affiliates
pursuant to that certain Contract for Purchase and Sale of Real Estate, dated
February 15, 1995, by and among J. Kenneth Neal, J. Kenneth Neal, Mission Ice
Services of Laredo, Inc. and the Company and that certain Lease Agreement dated
March 1, 1988 between J. K. Neal, Inc. and the Company and that certain Asset
Sale Agreement, dated February 8, 1988 by and between A.J. Lewis III, agent for
corporation to be formed as "Mission Party Ice, Inc." and J.K. Neal, Inc.,
formerly known as Mission Ice and Fuel Company, Inc.
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or any other agreement, (ii) Parent and Newco shall, and shall cause the
Surviving Corporation to, take all such actions necessary to assign any and all
of such Environmental Indemnification Rights to Shareholder and (iii) Parent
and Newco shall, and shall cause the Surviving Corporation to, preserve and
assert any such claims of contribution and indemnity and to provide reasonable
assistance to Shareholder in asserting such Environmental Indemnification
Rights against a Person.
SECTION 11. GENERAL PROVISIONS
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Shareholder will cause the
Company not to incur or pay any out-of-pocket expenses after December 31, 1996
in connection with this Agreement. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party. Notwithstanding any provision in this Agreement to the contrary, and in
addition to any other rights Shareholder may have hereunder, in the event that
the Contemplated Transactions are not consummated, for any reason other than
the Breach by Shareholder of any covenant, agreement, representation or
warranty, Parent shall pay to Shareholder and the Company an amount equal to
the sum of (i) all of the out-of-pocket costs, fees and expenses incurred by
Shareholder and the Company in connection with the preparation, execution and
performance of this Agreement and the Contemplated Transactions, including
without limitation all fees and expenses of agents, representatives, counsel
and accountants and (ii) $12,500 per month as a management fee relating to the
services of Shareholder for the period commencing on January 20, 1997 and
ending on the date of termination of this Agreement.
11.2 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Parent and the
Shareholder mutually agree. Unless consented to by Parent and the Shareholder
in advance or required by Legal Requirements, prior to the Closing Shareholder
shall, and shall cause the Company to, and Parent shall and shall cause Newco
to, keep this Agreement strictly confidential and may not make any disclosure
of this Agreement to any Person. Shareholder and Parent will consult with each
other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Parent will have the right to be present for any
such communication.
11.3 Confidentiality. Each of Parent, Newco and Shareholder will
maintain in confidence, and will cause their respective the directors,
officers, employees, agents, and advisors to maintain in confidence, and not
use to the detriment of another party or the Company any written, oral, or
other information obtained in confidence from another party or the Company in
connection with this Agreement or the Contemplated Transactions, unless (a)
such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (b) the use of such information is necessary or
appropriate
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in making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by or necessary or appropriate in connection with
legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return to the other party any documents, and all copies thereof, received or
obtained by it in connection with the Contemplated Transactions, without
retaining copies thereof, and will destroy all copies of analyses,
compilations, studies or other documents it has prepared containing or
reflecting any of such confidential information. Notwithstanding the return or
destruction of confidential information, each of the parties will continue to
be bound by the obligation of confidentiality and other obligations hereunder.
11.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the other
parties):
If to Parent or Newco: Packaged Ice, Inc.
Attention: President
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Facsimile No.: (713) 464-4681
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attention: Alan Schoenbaum, P.C.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
If to Shareholder: A. J. Lewis III
801 Ivy Lane
San Antonio, Texas 78209
Facsimile No.: (210) 523-1600
If to the Company: Mission Party Ice, Inc.
Attention: President
P.O. Box 10180
San Antonio, Texas 78210
Facsimile No.: (210) 532-1600
61
<PAGE> 62
with a copy to: Cox & Smith Incorporated
Attention: James B. Smith, Jr., Esq.
112 E. Pecan, Suite 1800
San Antonio, Texas 78205
Facsimile No.: (210) 226-8395
11.5 Arbitration. Except with respect to any claimed breach of the
provisions of Section 11.3 hereof, the parties agree that all disputes,
controversies or claims that may arise among them (including their agents and
employees), including without limitation any dispute, controversy or claim
arising out of or relating to this Agreement or any other agreement, or the
breach, termination or invalidity thereof, whether entered into or arising
prior, on or subsequent to the date hereof, shall be submitted to, and
determined by, binding arbitration. Such arbitration shall be conducted before
a single arbitrator pursuant to the Commercial Arbitration Rules then in effect
of the American Arbitration Association, except to the extent such rules are
inconsistent with this Section 11.5. Exclusive venue for such arbitration shall
be in San Antonio, Bexar County, Texas. The arbitrator shall apply the laws of
the State of Texas (without regard to conflict of law rules) in determining the
substance of the dispute, controversy or claim and shall decide the same in
accordance with applicable usages and terms of trade. Evidentiary questions
shall be governed by the Federal Rules of Evidence. The arbitrator's award
shall be in writing and shall set forth findings and conclusions upon which the
arbitrator based the award. The prevailing party in any such arbitration shall
be entitled to recover its reasonable attorneys' fees, costs and expenses
incurred in connection with the arbitration. Any award pursuant to such
arbitration shall be final and binding upon the parties and judgment on the
award may be entered in any federal or state court sitting or located in Bexar
County, Texas, or in any other court having jurisdiction. The provisions of
this Section 11.5 shall survive the termination of this Agreement.
Notwithstanding the foregoing, this Section 11.5 shall not prevent any party
from seeking preliminary injunctive relief from a court of competent
jurisdiction, provided, however, such action shall not constitute a waiver of
the provisions of this Section 11.5 with respect to any other dispute, as this
Section 11.5 shall continue to govern any and every other such dispute between
the parties, including, without limitation, the right of a party to any other
damages, other injunctive relief and any other remedy, at law or in equity.
11.6 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7 Waiver. Except as expressly provided herein, the rights and
remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the
62
<PAGE> 63
documents referred to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
11.8 Entire Agreement and Modification. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Parent and Shareholder dated November
22, 1996) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
11.9 Disclosure Letters.
(a) The disclosures in the Shareholder's Disclosure
Letter and the Parent's Disclosure Letter must relate only to the
representations and warranties in the Section of the Agreement to which
they expressly relate and not to any other representation or warranty
in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the
Shareholder's Disclosure Letter and the Parent's Disclosure Letter
(other than an exception expressly set forth as such in such
disclosure documents with respect to a specifically identified
representation or warranty), the statements in the body of this
Agreement will control.
11.10 Assignments, Successors, and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that Parent may assign any of its rights
under this Agreement to any Subsidiary of Parent. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.11 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
63
<PAGE> 64
11.12 Section Headings, Construction. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
11.13 Time of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
11.14 Governing Law. This Agreement will be governed by the laws of
the State of Texas without regard to conflicts of laws principles.
11.15 Enforcement; Venue; Service of Process. In the event either
party shall seek enforcement of any covenant, warranty or other term or
provision of this Agreement or seek to recover damages fore the breach thereof,
the party which prevails in such proceedings shall be entitled to recover
reasonable attorneys' fees and expenses actually incurred by it in connection
therewith. Subject to Section 11.5, and without waiving the same, the parties
hereto agree that this Agreement is performable in Bexar County, Texas and that
the sole and exclusive venue for any proceeding involving any claim arising
under or relating to this Agreement shall be in Bexar County, Texas. The
parties hereto agree that the service of process or any other papers upon them
or any of them by either of the methods specified in clauses (a) and (c) of,
and otherwise in accordance with, Section 11.4 hereto shall be deemed good,
proper, and effective service upon them.
11.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
(SIGNATURE PAGE FOLLOWS)
64
<PAGE> 65
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
PARENT: PACKAGED ICE, INC.
By:
-------------------------------------
James F. Stuart,
Chief Executive Officer
NEWCO: PACKAGED ICE MISSION, INC.
By:
-------------------------------------
James F. Stuart,
Chief Executive Officer
THE COMPANY: MISSION PARTY ICE, INC.
By:
-------------------------------------
A.J. Lewis III,
President
SHAREHOLDER: ---------------------------------------
A.J. Lewis III
<PAGE> 1
EXHIBIT 10.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PACKAGED ICE, INC.
PACKAGED ICE STPI, INC.
SOUTHWEST TEXAS PACKAGED ICE, INC.
AND THE SHAREHOLDERS OF
SOUTHWEST TEXAS PACKAGED ICE, INC.
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Acquisition Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Applicable Contract" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Balance Sheet" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Basket" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Best Efforts" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Breach" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Cap" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing Balance Sheet" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Consent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Contemplated Transactions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Contract" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Damages" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Ending Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Encumbrance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Environment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental Claim" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental, Health, and Safety Liabilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental Indemnification Rights" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Escrow Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Escrow Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Escrow Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Facilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Governmental Authorization" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Governmental Body" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Hazardous Activity" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Hazardous Materials" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Intellectual Property" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Interim Balance Sheet" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"IRC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
ii
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<TABLE>
<S> <C>
"IRS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Knowledge" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Legal Requirement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Noncompetition Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Occupational Safety and Health Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Ordinary Course of Business" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Organizational Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Parent's Closing Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Parent's Disclosure Letter" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Parent Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"PIMI Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Plan of Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Pre-Closing Tax Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Proceeding" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Registration Rights Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Related Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Release" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Representative" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Share Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Shareholder Cash Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Shareholders Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Shareholders' Closing Documents" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Shareholders' Disclosure Letter" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Stock Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Tax" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Tax Return" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Threat of Release" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Threatened" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Voting Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2. MERGER; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2. Continuing of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4. Corporate Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
<S> <C>
2.5. Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Rights and Liabilities of the Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 12
2.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.8 Closing Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.9 Appointment of Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.5 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.6 Title to Properties; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.7 Condition and Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.9 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.13 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Company Other Benefit Obligation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Company Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Company VEBA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"ERISA Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Multi-Employer Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Other Benefit Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Pension Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Plan Sponsor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
"Qualified Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
"Title IV Plans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
"VEBA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
"Welfare Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.14 Compliance with Legal Requirements; Governmental Authorizations . . . . . . . . . . . . . . . . . . 26
3.15 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.16 Absence of Certain Changes and Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.17 Contracts; No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.21 Labor Relations; Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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3.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.23 Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.25 Relationships with Related Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.26 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.5 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.7 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.10 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.11 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5. COVENANTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.1 Access and Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.2 Operation of the Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.3 Negative Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.4 Required Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.5 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.6 Payment of Indebtedness by Related Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.7 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.8 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.9 Filing of Short Period Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.10 Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.11 Other Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.13 Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6. COVENANTS OF PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.1 Approvals of Governmental Bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.2 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.3 Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.4 Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.5 Release of Personal Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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7.2 Shareholders' Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.5 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.6 No Claim Regarding Stock Ownership or Sale Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 49
7.7 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.8 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.9 Tax Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . 50
8.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.2 Parent's Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.5 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.6 Release of Personal Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.7 Employment of Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.8 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.11 Southwestern Ice, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10. INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.1 Survival; Right to Indemnification; Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.2 Indemnification and Payment of Damages by Shareholder . . . . . . . . . . . . . . . . . . . . . . . 53
10.3 Indemnification and Payment of Damages by Shareholder--Environmental Matters 54
10.4 Indemnification and Payment of Damages by Parent . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.5 Time Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.6 Limitations on Amount -- Shareholders and Minority Shareholders . . . . . . . . . . . . . . . . . . 56
10.7 Additional Limitations on Indemnification Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.8 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.9 Sole Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.10 Procedure for Indemnification -- Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . 57
10.11 Procedure for Indemnification -- Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.12 Payment in Cash or Parent Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.13 Subrogation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.5 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.8 Entire Agreement and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.9 Disclosure Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.10 Assignments, Successors, and No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.12 Section Headings, Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.13 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.15 Enforcement; Venue; Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
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EXHIBITS
<TABLE>
<CAPTION>
Exhibit Nos.
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Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 2.8(a)(ii)
Investment Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 2.8(a)(iv)
Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 2.8(c)(i)
Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 2.8(c)(ii)
Opinion of Cox & Smith Incorporated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 7.4(a)
Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 8.4(a)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of March
25, 1997, by and among Packaged Ice, Inc., a Texas corporation ("Parent"),
Packaged Ice STPI, Inc. ("Subco"), a Texas corporation and a direct
wholly-owned subsidiary of Parent, Southwest Texas Packaged Ice, Inc., a Texas
corporation (the "Company"), and Liza B. Lewis and A.J. Lewis III
(collectively, the "Shareholders"). The persons listed on the signature page
hereof under the heading Minority Shareholders (hereinafter the "Minority
Shareholders") are also entering into this Agreement for the limited purposes
specifically set forth herein.
R E C I T A L S :
WHEREAS, the respective Boards of Directors of Parent, Subco and the
Company have each approved the merger of the Company with and into Subco (the
"Merger"), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein the parties hereto covenant and agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUISITION PRICE" has the meaning set forth in Section 2.5(d).
"APPLICABLE CONTRACT" means any Contract to which the Company is a party or
bound (a) under which the Company has or may acquire any rights, (b) under
which the Company has or may become subject to any obligation or liability, or
(c) by which the Company or any of the assets owned or used by it is or may
become bound.
"BALANCE SHEET" has the meaning set forth in Section 3.4.
"BASKET" has the meaning set forth in Section 10.6.
"BEST EFFORTS" means the efforts that a reasonably prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as reasonably practicable; provided,
however, that an obligation to use Best Efforts under this Agreement does not
require the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions.
<PAGE> 10
"BREACH" means that a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in such representation or warranty or breach of, or any
failure to perform or comply with any covenant, obligation, or other provision
contained herein.
"CAP" has the meaning set forth in Section 10.6.
"CLOSING" has the meaning set forth in Section 2.7.
"CLOSING BALANCE SHEET" means the audited balance sheet of the Company as at
December 31, 1996.
"CLOSING DATE" means the date and time as of which the Closing actually takes
place.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by this
Agreement, including:
(a) the Merger;
(b) the execution, delivery, and performance of Noncompetition
Agreement, the Registration Rights Agreement, and the Escrow Agreement;
(c) the performance by the parties of their respective covenants
and obligations under this Agreement; and
(d) Subco's acquisition of the Company through the Merger.
"CONTRACT" means any agreement, contract, obligation, promise, or undertaking
(whether written or oral) that is legally binding.
"DAMAGES" has the meaning set forth in Section 10.2.
"EFFECTIVE DATE" has the meaning set forth in Section 2.3.
"ENDING DATE" has the meaning set forth in Section 9.1(e).
"ENCUMBRANCE" means any charge, claim, community property interest, condition,
equitable interest including any equitable servitude, lien, option, pledge,
security interest, right of first refusal,
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or restriction of any kind, including any restriction on use, voting, transfer,
receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwater, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL CLAIM" has the meaning set forth in Section 10.13.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL INDEMNIFICATION RIGHTS" has the meaning set forth in Section
10.13.
"ENVIRONMENTAL LAW" means any law, regulation, ordinance, order, injunction,
decree, consent decree, judgement or administrative directive relating to the
Environment, public health and safety, occupational health and safety and
transportation including without limitation all such standards of conduct or
bases of obligations relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution,
labelling, testing, processing, discharge,
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release, control or cleanup of any waste, hazardous materials, substances,
chemical substances or mixtures, pesticides, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGENT" shall mean Texas Commerce Bank National Association.
"ESCROW AGREEMENT" has the meaning set forth in Section 2.8(c).
"ESCROW AMOUNT" has the meaning set forth in Section 2.5(e).
"FACILITIES" means any real property, leaseholds, or other interests currently
or formerly owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Company.
"GAAP" means generally accepted accounting principles as employed in the United
States of America. Wherever in this Agreement reference is made to a
calculation to be made in accordance with GAAP, such reference shall be deemed
to be to the GAAP from time to time applicable as at the date on which such
calculation is made or required to be made in accordance with GAAP.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or other
legally recognized jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other legally
recognized government;
(c) governmental or legally recognized quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body legally exercising, or legally entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
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"HAZARDOUS ACTIVITY" means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release,
storage, transfer, transportation, treatment, or use (including any withdrawal
or other use of groundwater) of Hazardous Materials in, on, under, about, or
from the Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that increases the danger or poses an
unreasonable risk of harm to persons or property on or off the Facilities or
that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic under or pursuant to any Environmental Law,
including any admixture or solution thereof having hazardous characteristics,
and specifically including petroleum and any derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade names, copyrights,
technology, trade secrets, know-how, formulas and processes which are owned or
used by the Company.
"INTERIM BALANCE SHEET" has the meaning set forth in Section 3.4.
"IRC" means the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" means the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a reasonably prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonable investigation concerning the existence of such fact or
other matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as a
director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has Knowledge of such fact or other matter; provided,
however, the Company will be deemed to have Knowledge of a particular fact or
other matter if Shareholders have such Knowledge.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, existing principle of common law, regulation, statute, or treaty.
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"MERGER" has the meaning set forth in Section 2.1.
"MINORITY SHAREHOLDER CASH AMOUNT" has the meaning set forth in Section 2.5(e).
"MISSION" means Mission Party Ice, Inc., a Texas corporation.
"NONCOMPETITION AGREEMENT" has the meaning set forth in Section 2.8(a)(ii).
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement (other than
common law principles) designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards, and any
governmental program designed to provide safe and healthful working conditions.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" An action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority).
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any
amendment to any of the foregoing.
"PARENT'S CLOSING DOCUMENTS" has the meaning set forth in Section 4.2.
"PARENT'S DISCLOSURE LETTER" means the disclosure schedule delivered by Parent
to Shareholders concurrently with the execution and delivery of this Agreement
which is attached hereto and incorporated herein by reference.
"PARENT STOCK" has the meaning set forth in Section 2.5(e).
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
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"PIMI AGREEMENT" has the meaning set forth in 10.6.
"PLAN" has the meaning set forth in Section 3.13.
"PLAN OF MERGER" shall have the meaning set forth in 2.8(c)(ii).
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the close of
business on the Closing Date.
"PROCEEDING" means any action, arbitration, audit, hearing, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section 6.9.
"RELATED PERSON" means, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
Related Person also means, with respect to a specified Person other
than an individual:
(e) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(f) any Person that holds a Material Interest in such specified
Person;
(g) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(h) any Person in which such specified Person holds a Material
Interest;
(i) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and
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<PAGE> 16
(j) any Related Person of any individual described in clause (b)
or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 10% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"RELEASE" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" means the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SHARE PRICE" has the meaning set forth in Section 2.5(c).
"SHAREHOLDER CASH AMOUNT" has the meaning set forth in Section 2.5(e).
"SHAREHOLDERS AGREEMENT" has the meaning set forth in Section 2.8(a)(vi).
"SHAREHOLDERS' CLOSING DOCUMENTS" has the meaning set forth in Section 3.2.
"SHAREHOLDERS' DISCLOSURE LETTER" means the disclosure schedule, delivered by
the Company and the Shareholders to Parent concurrently with the execution and
delivery of this Agreement, and any supplements thereto delivered prior to or
concurrently with the Closing, which schedule and supplements are incorporated
herein by reference.
"SHARES" means all of the shares of the $1.00 par value common stock of the
Company owned by the Shareholders and the Minority Shareholders.
"STOCK AMOUNT" has the meaning set forth in Section 2.5(e).
"SUBSIDIARY" means, with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to
elect a majority of that corporation's or other Person's board of directors or
similar governing body, or otherwise having the power to direct the business
and policies of that corporation or other Person (other than securities or
other interests
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<PAGE> 17
having such power only upon the happening of a contingency that has not
occurred) are held, directly or indirectly by the Owner; when used without
reference to a particular Person, "Subsidiary" means a Subsidiary of the
Company.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.1.
"TAX" means any tax (including without limitation any tax on gross income, net
income, franchise, gross receipts, royalty, capital gains, value added, sales,
property, ad valorem, transfer, license, use, profits, windfall profits,
withholding on amounts paid to or by the Company, payroll, employment, excise,
severance, stamp, occupation, premium, gift, or estate), levy, assessment,
tariff, duty (including customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency, or fee.
"TAX RETURN" means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment
of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" means a substantial likelihood of a Release that would
require action in order to prevent or mitigate damage to the Environment
resulting from such Release.
"THREATENED" means a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
(to the extent of each of the Shareholders' Knowledge) if any other event has
occurred or any other circumstances exist, with respect to which either of the
Shareholders would reasonably conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
"VOTING AGREEMENT" has the meaning set forth in Section 2.8(a)(v).
SECTION 2. MERGER; CLOSING
2.1 Merger. In accordance with the provisions of the business
corporation laws of the States of Texas, at the Effective Date, the Company
shall be merged (the "Merger") into Subco and Subco shall be the surviving
corporation (the "Surviving Corporation") and as such shall continue to be
governed by the laws of the State of Texas. For federal income tax purposes, it
is intended that the Merger shall qualify as a reorganization pursuant to
Sections 368(a)(1)(A) and (a)(2)(D) of the IRC.
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2.2. Continuing of Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of Subco, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of the Company, with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and into that
of Subco, and the Surviving Corporation shall be vested fully therewith and the
separate corporate existence and identity of the Company shall thereafter cease
except to the extent continued by statute.
2.3. Effective Date. The Merger shall become effective upon the
occurrence of the issuance of the certificate of merger (the "Effective Date")
by the Secretary of State of the State of Texas upon filing on the Closing Date
of the articles of merger (with the Plan of Merger attached thereto) with the
Secretary of the State of Texas pursuant to Article 5.04 of the Texas Business
Corporation Act (the "Articles of Merger").
2.4. Corporate Government.
a) The Articles of Incorporation of Subco as in effect
on the Effective Date, shall continue in full force and effect and
shall be the Articles of Incorporation of the Surviving Corporation;
provided, however, Article I of the Articles of Incorporation of Subco
shall be amended to read in its entirety as follows:
"The name of the corporation shall be Southwest Texas Packaged
Ice, Inc.".
(b) The Bylaws of Subco, as in effect as of the Effective
Date, shall continue in full force and effect and shall be the Bylaws
of the Surviving Corporation.
(c) The members of the Board of Directors and the
officers of the Surviving Corporation shall be the persons holding
such offices with Subco as of the Effective Date.
2.5. Conversion of Shares. The manner and basis of converting the
Shares shall be as follows:
(a) Each Share which is issued and outstanding
immediately prior to the Effective Date shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
automatically converted into the right to receive the Share Price
which shall be payable, without interest thereon, upon the surrender
of the certificate formerly representing such Share, in accordance
with Section 2.5(e) below.
(b) Each Share shall, by virtue of the Merger and without
any action on the part of the holder thereof, be canceled and retired
and cease to exist.
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<PAGE> 19
(c) As used herein, the term "Share Price" shall mean an
amount equal to (x)/(y), where (x) is the Acquisition Price (as
defined below), and where (y) is the total number of outstanding
Shares.
(d) As used herein, the term "Acquisition Price" shall
mean $1,353,840.00.
(e) At the Closing, Parent will pay approximately 51.2%
of the Acquisition Price in the form of Parent's common stock, par
value $.01 per share ("Parent Stock") and approximately 48.8% of the
Acquisition Price in the form of cash as follows:
(i) to the Shareholders, $389,572.00 in cash (the
"Shareholder Cash Amount") and 69,350 newly issued shares of
Parent Stock valued at $10.00 per share (the "Stock Amount");
(ii) to the Minority Shareholders, an aggregate of
$270,768.00 in cash (the "Minority Shareholder Cash Amount");
provided, however, approximately 5% (3,468 shares) of the Stock
Amount, approximately 5% ($19,476.00) of the Shareholder Cash Amount
and approximately 5% ($13,538.00) of the Minority Shareholders Cash
Amount will be placed in escrow (the "Escrow Amount"), to be held by
the Escrow Agent in accordance with the Escrow Agreement for a period
of twelve months.
(f) Each share of common stock par value $.01 per share
of Subco which shall be outstanding immediately prior to the Effective
Date shall, at the Effective Date, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into one
share of common stock of the Surviving Corporation.
(g) The stock transfer books of the Company shall be
closed as of the close of business on the Effective Date, and no
transfer of record of any of the Shares shall take place thereafter.
(h) No fractional shares of Parent Stock and no
certificates or scrip therefor shall be issued.
(i) All of the Parent Stock, when delivered pursuant to
the provisions of this Agreement, shall be validly issued, fully paid
and nonassessable.
(j) At the Effective Date, the holders of certificates
representing Shares shall thereupon cease to have any rights with
respect to such Shares and shall surrender certificates representing
the Shares to Parent whereupon such holders shall receive a
certificate or certificates for the number of shares of Parent Stock
and/or cash to which such holder is entitled under this Section 2.5.
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<PAGE> 20
2.6 Rights and Liabilities of the Surviving Corporation. As of
the Effective Date, the Surviving Corporation shall have the following rights
and obligations, pursuant to Article 5.06 of the Texas Business Corporation
Act.
(a) All rights, title and interests to all real estate
and other property owned by the Company and Subco shall be allocated
to and vested in the Surviving Corporation without reservation or
impairment, without further act or deed, and without any transfer or
assignment having occurred, but subject to any existing liens or other
encumbrances thereon.
(b) All liabilities and obligations of the Company and
Subco shall be allocated to the Surviving Corporation, and the
Surviving Corporation shall be the primary obligor therefor and,
except as otherwise provided by law or contract, no other party to
the merger, other than the Surviving Corporation, shall be liable
thereon.
(c) A proceeding pending by or against the Company may be
continued as if the Merger did not occur, or the Surviving Corporation
to which the liability, obligation, asset or right associated with
such proceeding is allocated to and vested in may be substituted in
the proceeding.
(d) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the
duties and liabilities of a corporation organized under the laws of
the State of Texas.
2.7 Closing. Consummation of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Parent's
counsel at 1500 NationsBank Plaza, San Antonio, Texas 78205, at 10:00 a.m.
(local time) on the first business day following ten (10) days after the
conditions set forth in Section 7 and Section 8 have been met or waived, or at
such other time and place as the parties may agree. Subject to the provisions
of Section 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.7 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.8 Closing Obligations. At the Closing:
(a) Shareholders will deliver to Parent:
(i) certificates representing the Shares to be
surrendered to Subco and Parent;
(ii) Noncompetition Agreement in the form of
Exhibit 2.8(a)(ii), executed by Shareholders (the
"Noncompetition Agreement");
(iii) a certificate executed by Shareholders
representing and warranting to Parent and Subco that
Shareholders' representations and warranties in this
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Agreement are accurate in all respects as of the Closing Date
as if made on the Closing Date (giving full effect to any
supplements to the initial disclosure of the Shareholders'
Disclosure Letter which were delivered on or prior to the
Closing in accordance with Section 5.5);
(iv) investment letter executed by Shareholders in
the form attached hereto as Exhibit 2.8(a)(iv);
(v) Amended and Restated Voting Agreement dated
September 20, 1995 as amended by Amendment No. 1 to Amended
and Restated Voting Agreement dated January 17, 1997 (as
amended, the "Voting Agreement") executed by Liza B. Lewis;
and
(vi) Amended and Restated Shareholders Agreement
dated September 20, 1995 as amended by Amendment No. 1 to
Amended and Restated Shareholders Agreement dated January 17,
1997 (as amended, the "Shareholders Agreement") executed by
Liza B. Lewis.
(b) Parent will deliver to Shareholders or Minority
Shareholders, as the case may be:
(i) the Shareholder Cash Amount (less the amount
to be placed in escrow) by wire transfer in immediately
available funds to an account designated by Shareholders, as
may be selected by Shareholders;
(ii) the Minority Shareholder Cash Amount (less
the amount to be placed in escrow) by bank cashier's or
certified checks payable to the order of the Minority
Shareholders entitled to receive such funds Shareholders, or
by wire transfer in immediately available funds to the
accounts designated by the respective Minority Shareholders,
as may be selected by Shareholders;
(iii) the Stock Amount (less the amount to be
placed in escrow), issued to Shareholders;
(iv) the Noncompetition Agreement executed by
Parent;
(v) a certificate executed by Parent to the
effect that, except as otherwise stated in such certificate,
each of Parent's representations and warranties in this
Agreement is accurate in all respects as of the Closing Date
as if made on the Closing Date; and
(vi) the Registration Rights Agreement executed by
Parent.
(c) Parent and Shareholders will enter into:
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<PAGE> 22
(i) an escrow agreement substantially in the form
of Exhibit 2.8(c)(i) with such revisions and modifications as
may be required by the Escrow Agent and are reasonably
acceptable to the Shareholders and Parent (the "Escrow
Agreement") with the Escrow Agent, subject to revisions as may
reasonably be requested by the Escrow Agent; and
(ii) the Articles of Merger, together with the
Plan of Merger in the form attached hereto as Exhibit
2.8(c)(ii) (the "Plan of "Merger"), shall be executed by Subco
and the Company and filed with the Secretary of State of the
State of Texas.
(d) Parent will deliver to the Escrow Agent to the held
in escrow pursuant to the Escrow Agreement;
(i) approximately 5% of the sum of the
Shareholder Cash Amount and the Minority Shareholder Cash
Amount; and
(ii) approximately 5% of the Stock Amount issued
in the name of the Shareholders.
2.9 Appointment of Representative.
(a) The Shareholders and Minority Shareholders hereby appoint A.J.
Lewis III as their representative (as used in this Section 2.9, the
"Representative") who shall have full power and authority to take all actions
necessary or permitted to effectuate the transactions contemplated hereby, to
undertake the defense or settlement of any claims for which the Shareholders or
Minority Shareholders may be required to indemnify Parent, Subco or the
Surviving Corporation, to waive any or all of the conditions precedent set
forth in Section 8 on behalf of the Shareholders and Minority Shareholders and
to take all such other actions provided in the Escrow Agreement to be taken by
the Representative (and any other actions reasonably related or ancillary
thereto), including the power to execute and deliver the Escrow Agreement and
such other documents as may be necessary for the foregoing purposes.
(b) The Shareholders and Minority Shareholders also irrevocably
authorize the Representative to be the recipient of any notice required to be
given or made by the Parent, Subco or the Surviving Corporation to any of the
Shareholders or Minority Shareholders hereunder, and any notice received by the
Representative shall be deemed for all purposes to be received by all of the
Shareholders and Minority Shareholders.
(c) All decisions and actions by the Representative, including any
agreement between the Representative and the Parent, Subco or the Surviving
Corporation relating to any defense or settlement of any claims for which a
Shareholder or Minority Shareholder may be required to indemnify the Parent,
Subco or the Surviving Corporation hereunder, any decision, action or agreement
to be made or taken under the Escrow Agreement or any other action provided
herein to
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<PAGE> 23
be taken by Representative, shall be binding upon all of the Shareholders and
Minority Shareholders, and no Shareholder or Minority Shareholder shall have
the right as between such Shareholder or Minority Shareholder and Parent, Subco
or the Surviving Corporation to object, dissent, protest or otherwise contest
the same.
(d) The provisions of this Section 2.9 shall be binding upon the
heirs, executors, administrators, personal representatives, successors and
assigns of each of the Shareholders and each of the Minority Shareholders.
SECTION 3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SHAREHOLDERS
Except as set forth in the Shareholders' Disclosure Letter, which
shall indicate the Section to which exceptions relate, the Company and
Shareholders, jointly and severally, and the Minority Shareholders severally
(as limited by Section 10.7), and solely with respect to Section 3.3(b),
represent and warrant to Parent and Subco as follows:
3.1 Organization and Good Standing.
(a) Part 3.1 of the Shareholders' Disclosure Letter
contains a complete and accurate list for the Company of its name,
jurisdiction of incorporation, other jurisdictions in which it is
authorized to do business. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of
its jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and
to perform all its obligations under Applicable Contracts. The Company
is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by
it, or the nature of the activities conducted by it, requires such
qualification. The Company has no Subsidiaries.
(b) Shareholders have delivered to Parent copies of the
Organizational Documents of the Company, as currently in effect.
(c) The Company has no Subsidiaries.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and
binding obligation of the Company and the Shareholders, enforceable
against the Company and the Shareholders in accordance with its terms.
Upon the execution and delivery by Shareholders of the Escrow
Agreement, the Registration Rights Agreement, and the Noncompetition
Agreement (collectively, the "Shareholders' Closing Documents"), the
Shareholders' Closing
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<PAGE> 24
Documents will constitute the legal, valid, and binding obligations of
the Shareholders, enforceable against Shareholders in accordance with
their respective terms. The Company and the Shareholders have the
absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the Shareholders' Closing
Documents and to perform their respective obligations under this
Agreement and the Shareholders' Closing Documents. The Shareholders
have held a shareholder meeting (or have executed a consent) and have
duly adopted all resolutions required by law to approve the Merger.
Except as set forth in Part 3.2 of the Shareholder' Disclosure Letter,
neither the execution and delivery of this Agreement by Shareholders
and the Company nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the board of
directors or the shareholders of the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person a
valid basis to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under, any
Legal Requirement or any Order to which the Company or
Shareholders, or any of the assets owned or used by the
Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the
Company;
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Company.
Except as set forth in Part 3.2 of the Shareholders' Disclosure
Letter, neither the Shareholders nor the Company are required to give any
notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
(d) Each of the Shareholders is acquiring the Parent
Stock for his own account and not with a view to the distribution
thereof within the meaning of Section 2(11) of the
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<PAGE> 25
Securities Act. Each of the Shareholders is an "accredited investor"
as such term is defined in Rule 501(a) under the Securities Act.
3.3 Capitalization.
(a) The authorized equity securities of the Company consist of
1,000,000 shares of common stock, par value $1.00 per share, of which 1,250
shares are issued and outstanding and constitute the Shares.
(b) The Shareholders and Minority Shareholders are the record and
beneficial owners and holders of the Shares as set forth in Part 3.3 of the
Shareholders' Disclosure Letter, free and clear of all Encumbrances. Except as
set forth on Part 3.3 of the Shareholders' Disclosure Letter, no legend or
other reference to any purported Encumbrance appears upon any certificate
representing equity securities of the Company.
(c) All of the outstanding equity securities of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
There are no Contracts relating to the issuance, sale, or transfer of any
equity securities or other securities of the Company. None of the outstanding
equity securities or other securities of the Company was issued in violation of
the Securities Act or any other Legal Requirement. The Company does not own and
has no Contract to acquire, any equity securities or other securities of any
Person (other than the Company) or any direct or indirect equity or ownership
interest in any other business.
3.4 Financial Statements. Shareholders have delivered to Parent:
(a) unaudited balance sheets of the Company as at December 31, 1993 and
December 31, 1994, and the related unaudited statements of income, changes in
shareholders' equity, and cash flow for each of the fiscal years then ended,
(b) a balance sheet of the Company as at December 31, 1995 (including the
notes thereto, if any, the "Balance Sheet"), and the related statements of
income, changes in shareholders' equity, and cash flow for the fiscal year then
ended, (c) an unaudited balance sheet of the Company as at September 30, 1996
(the "Interim Balance Sheet") and the related unaudited statements of income,
changes in shareholders' equity, and cash flow for the nine months then ended,
including in each case the notes thereto, if any, and (d) the audited Closing
Balance Sheet, and the audited statements of income, changes in shareholder's
equity, and cash flow for the fiscal year then ended, including in each case
the notes thereto, if any. Such financial statements and notes fairly present
the financial condition and the results of operations, changes in shareholders'
equity, and cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, and, with respect to the
Closing Balance Sheet, in accordance with GAAP, subject, in the case of
unaudited financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse), the absence of notes and such other differences as are described in
Part 3.4 of Shareholders' Disclosure Letter; the financial statements referred
to in this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements, or in Part 3.4 of the Shareholders' Disclosure
Letter.
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3.5 Books and Records. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Parent, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the Boards of Directors, and committees of
the Boards of Directors of the Company, and no meeting of any such
shareholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. All of those
books and records are in the possession of the Company.
3.6 Title to Properties; Encumbrances. Part 3.6 of the
Shareholders' Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned or previously owned
by the Company. Shareholders have delivered or made available to Parent copies
of the deeds and other instruments (as recorded) by which the Company acquired
or disposed of such real property and interests, and copies of all title
insurance policies, opinions, abstracts, and surveys in the possession of
Shareholders or the Company and relating to such property or interests. The
Company does not own any real property. The Company owns (with good and
indefeasible title in the case of real property, subject only to the matters
permitted by the following sentence) all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) reflected as owned
in the books and records of the Company, including all of the properties and
assets reflected in the Closing Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in Part 3.6 of the
Shareholders' Disclosure Letter and personal property sold since the date of
the Closing Balance Sheet in the Ordinary Course of Business, or otherwise as
permitted herein), and all of the properties and assets purchased or otherwise
acquired by the Company since the date of the Closing Balance Sheet (except for
personal property acquired and sold since the date of the Closing Balance Sheet
in the Ordinary Course of Business and consistent with past practice or
otherwise as permitted herein), which subsequently purchased or acquired
properties and assets (other than accounts receivable, inventory and short-term
investments) are listed in Part 3.6 of the Shareholders' Disclosure Letter. All
material properties and assets reflected in the Closing Balance Sheet are free
and clear of all Encumbrances and are not, in the case of real property,
subject to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except, with respect to all such
properties and assets, (a) mortgages or security interests shown on the Closing
Balance Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the
Closing Balance Sheet (such mortgages and security interests being limited to
the property or assets so acquired), with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(c) liens for current taxes not yet due, and (d) statutory and nonstatutory
landlord liens, and (e) liens on property which do not materially affect the
operation of the business of the Company.
3.7 Condition and Sufficiency of Assets. Except as set forth in
Part 3.7 of the Shareholders' Disclosure Letter, the property and assets of the
Company are in good operating condition and repair (ordinary wear and tear
excepted) and are adequate for the uses to which they
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are being put, and none of such property and assets is in need of repairs
except for ordinary, routine repairs that are due to ordinary wear and tear, or
are not material in nature or cost. The property and assets of the Company are
sufficient for the continued conduct of the Company's business after the
Closing in substantially the same manner as conducted prior to the Closing.
3.8 Accounts Receivable.
(a) All accounts receivable of the Company that are reflected on
the Closing Balance Sheet (collectively, the "Accounts Receivable") represent
valid obligations arising from sales actually made or services actually
performed in the Ordinary Course of Business. Unless paid prior to the Closing
Date, the Accounts Receivable are current and collectible net of the respective
reserves shown on the Closing Balance Sheet. Subject to such reserves, each of
the Accounts Receivable either has been or will be collected in full, without
any set-off, within one hundred eighty (180) days after the day on which it
first becomes due and payable. There is no contest, claim, or right of
set-off, other than returns in the Ordinary Course of Business, under any
Contract with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable.
(b) Part 3.8(b) of the Shareholders' Disclosure Letter lists all
accounts receivable which the Company has written off in during the last three
fiscal years ending December 31, 1996. Parent agrees to reimburse Shareholders
for any amounts which the Surviving Corporation receives after the Closing for
such accounts, less any costs incurred after the Closing Date collecting such
payments.
3.9 Inventory. The inventory of the Company, whether or not
reflected in the Closing Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, all of which have been written off
or written down to net realizable value in the Closing Balance Sheet. All
inventories not written off have been priced at the lower of cost or net
realizable value on a first in, first out basis. The quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company.
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10
of the Shareholders' Disclosure Letter and obligations and liabilities arising
under the Applicable Contracts, the Company has no liabilities or obligations
of the type required to be reflected as liabilities on a balance sheet prepared
in accordance with GAAP except for liabilities or obligations reflected or
reserved against in the Balance Sheet, the Interim Balance Sheet or the Closing
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
3.11 Taxes.
(a) The Company has filed or caused to be filed (on a
timely basis since inception) all Tax Returns that are or were
required to be filed by or with respect to any of
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them, either separately or as a member of a group of corporations,
pursuant to applicable Legal Requirements. Shareholders have
delivered or made available to Parent copies of all such Tax Returns
relating to income or franchise taxes filed since inception. The
Company has paid, or made provision for the payment of, all Taxes that
have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Shareholders or
the Company, except such Taxes, if any, as are listed in Part 3.11 of
the Shareholders' Disclosure Letter and are being contested in good
faith and as to which adequate reserves have been provided in the
Closing Balance Sheet.
(b) The United States federal income and state franchise
Tax Returns of the Company subject to such Taxes have been audited by
the IRS or relevant state tax authorities as set forth on Part 3.11 of
the Shareholders' Disclosure Letter. Part 3.11 of the Shareholders'
Disclosure Letter contains a complete and accurate list of all audits
of all such Tax Returns, including a reasonably detailed description
of the nature and outcome of each audit. All deficiencies proposed as
a result of such audits have been paid, reserved against, settled, or,
as described in Part 3.11 of the Shareholders' Disclosure Letter, are
being contested in good faith by appropriate proceedings. Part 3.11 of
the Shareholders' Disclosure Letter describes all adjustments to the
United States federal income Tax Returns filed by the Company or any
group of corporations including the Company for all taxable years
since December 31, 1995, and the resulting deficiencies proposed by
the IRS. Except as described in Part 3.11 of the Shareholders'
Disclosure Letter, neither the Shareholders nor the Company has given
or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of the Company
or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to
Taxes on the respective books of the Company are adequate and are at
least equal to that Company's liability for Taxes. There exists no
proposed tax assessment against the Company except as disclosed in the
Closing Balance Sheet or in Part 3.11 of the Shareholders' Disclosure
Letter. No consent to the application of Section 341(f)(2) of the IRC
has been filed with respect to any property or assets held, acquired,
or to be acquired by the Company. All Taxes that the Company is or was
required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to
the proper Governmental Body or other Person. The Shareholders is not
subject to withholding under Section 1445 of the IRC with respect to
any transaction contemplated hereby. The Company has not been a
member of any affiliated group (as defined in IRC Section 1504(a) or
consolidated, combined or unitary group for purposes of any other
Taxes. None of the material property used by the Company is subject
to a lease, other than a "true" lease for federal income tax purposes.
(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There
is no tax sharing agreement that will require any payment by the
Company after the date of this Agreement. The Company has had a
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valid election to be taxed as an S corporation in effect since its
inception and through the date of the Merger.
(e) There is no plan or intention by the Shareholders or
the Minority Shareholders, and to the Knowledge of the Company, there
is no plan or intention on the part of the Shareholders or the
Minority Shareholders to sell, exchange, or otherwise dispose of a
number of shares of Parent Stock to be received by them hereunder that
would reduce the Shareholders' ownership of Parent Stock to a number
of shares having a value, as of the Effective Date, of less than fifty
percent (50%) of the value of all of the formerly outstanding Shares
as of the Effective Date. For the purposes of this representation,
the Shares exchanged for cash or other property, surrendered by
dissenters or exchanged for cash in lieu of fractional shares of
Parent Stock will be treated as outstanding Shares on the Effective
Date. The Shares and shares of Parent Stock held by Shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent to the
Effective Date will be considered in making this representation.
(f) To Shareholders' Knowledge, Subco will acquire at
least ninety percent (90%) of the fair market value of the net assets
and at least seventy percent (70%) of the fair market value of the
gross assets held by the Company immediately prior to the Merger. For
the purposes of this representation, amounts paid by the Company to
dissenters, amounts paid by the Company to Shareholders who receive
cash or other property, the Company's assets used to pay its
reorganization expenses, and all redemptions and distributions (except
for regular normal dividends) made by the Company immediately
preceding the transfer, will be included as assets of the Company held
immediately prior to the Merger.
(g) To Shareholders' Knowledge, the liabilities of the
Company assumed by Subco and the liabilities to which the transferred
assets of the Company are subject were incurred by the Company in the
ordinary course of its business.
(h) Parent, Subco, the Company and the Shareholders will
pay their respective expenses, if any, incurred in connection with the
Merger.
(i) To Shareholders' Knowledge, there is no intercompany
indebtedness existing between Parent and the Company or between Subco
and the Company that was issued, acquired, or will be settled at a
discount.
(j) To Shareholders' Knowledge, the Company is not under
the jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the IRC.
(k) To Shareholders' Knowledge, the fair market value of
the assets of the Company transferred to Subco will equal or exceed
the sum of the liabilities assumed by Subco, plus the amount of
liabilities, if any, to which the transferred assets are subject.
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(l) To Shareholders' Knowledge, the Company is not an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of
the IRC.
3.12 No Material Adverse Change. Except for seasonal fluctuations
which could be significant, since the date of the Closing Balance Sheet, there
has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and to the
Shareholders' Knowledge no event has occurred or circumstance exists that will
or is reasonably likely to result in such a material adverse change.
3.13 Employee Benefits.
(a) As used in this Section 3.13, the following terms
have the meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit
Obligation owed, adopted, or followed by the Company or an ERISA Affiliate of
the Company.
"COMPANY PLAN" means all Plans of which the Company or an
ERISA Affiliate of the Company is or was a Plan Sponsor, or to which the
Company or an ERISA Affiliate of the Company otherwise contributes or has
contributed, or in which the Company or an ERISA Affiliate of the Company
otherwise participates or has participated. All references to Plans are to
Company Plans unless the context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of
the Company or any ERISA Affiliate of an Company.
"ERISA AFFILIATE" means, with respect to the Company, any
other person that, together with the Company, would be treated as a single
employer under IRC Section 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA Section
3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations,
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon
the amount of service rendered, sabbatical policies, severance payment
policies, and fringe benefits within the meaning of IRC Section 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" has the meaning given in ERISA Section 3(2)(A).
"PLAN" has the meaning given in ERISA Section 3(3).
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"PLAN SPONSOR" has the meaning given in ERISA Section
3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet
the requirements of IRC Section 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer
Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC Section 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA Section 3(1).
(b) (i) Part 3.13(b) of the Shareholders' Disclosure
Letter contains a complete and accurate list of all Company Plans, and
identifies as such all Company Plans that are Qualified Plans.
Neither the Company nor any ERISA Affiliate of the Company has ever
established, maintained or contributed to or otherwise participated
in, or had an obligation to maintain, contribute to, or otherwise
participate in, any Company Other Benefit Obligations, Company VEBAs,
defined benefit Pension Plans, Title IV Plans, or Multi-Employer
Plans.
(ii) Part 3.13(b) of the Shareholders' Disclosure
Letter contains a complete and accurate list of (A) all ERISA
Affiliates of the Company , and (B) all Plans of which any
such ERISA Affiliate is or was a Plan Sponsor, in which any
such ERISA Affiliate participates or has participated, or to
which any such ERISA Affiliate contributes or has contributed.
(iii) Part 3.13(b) of the Shareholders' Disclosure
Letter sets forth the financial cost of all obligations owed
under the Company Plans.
(c) Shareholders have delivered to Parent, or will
deliver to Parent within ten days of the date of this Agreement:
(i) all documents that set forth the terms of the
Company Plans, and of any related trust, including (A) all
plan descriptions and summary plan descriptions of Company
Plans for which Shareholders or the Company are required to
prepare, file, and distribute plan descriptions and summary
plan descriptions, and (B) all summaries and descriptions
furnished to participants and beneficiaries regarding Company
Plans, Company Other Benefit Obligations, and Company VEBAs
for which a plan description or summary plan description is
not required;
(ii) all personnel, payroll, and employment
manuals and policies;
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(iii) all registration statements filed with
respect to the Company Plan;
(iv) all insurance policies purchased by or to
provide benefits under the Company Plans;
(v) all contracts with third party
administrators, actuaries, investment managers, consultants,
and other independent contractors that relate to the Company
Plans;
(vi) all reports submitted within the four years
preceding the date of this Agreement by third party
administrators, actuaries, investment managers, consultants,
or other independent contractors with respect to the Company
Plans;
(vii) all notifications to employees of their
rights under ERISA Section 601 et seq. and IRC Section
4980B;
(viii) the Form 5500 filed in each of the most
recent three plan years with respect to the Company Plan,
including all schedules thereto and the opinions of
independent accountants;
(ix) all notices that were given by the Company or
any ERISA Affiliate or any Company Plan to the IRS, or any
participant or beneficiary, pursuant to statute, within the
four years preceding the date of this Agreement, including
notices that are expressly mentioned elsewhere in this Section
3.13;
(x) all notices that were given by the IRS, or
the Department of Labor to the Company, any ERISA Affiliate of
an Company, or any Company Plan within the four years
preceding the date of this Agreement;
(xi) with respect to Qualified Plans, the most
recent determination letter for each Plan of the Company that
is a Qualified Plan; and
(d) Except as set forth in Part 3.13(d) of the
Shareholders' Disclosure Letter:
(i) The Company has performed all of respective
obligations under all Company Plans. The Company has made
appropriate entries in its financial records and statements
for all obligations and liabilities under such Plans, that
have accrued but are not due.
(ii) No statement, either written or oral, has
been made by any Acquired Company to any Person with regard
to any Plan that was not in accordance with the Plan and that
could have an adverse economic consequence to the Company or
to Parent.
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(iii) The Company, with respect to all Company
Plans, is, and the Company Plans are, in full compliance with
ERISA, the IRC, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section
3.13.
(A) No transaction prohibited by ERISA
Section 406 and no "prohibited transaction" under
IRC Section 4975(c) have occurred with respect to
the Company Plan.
(B) Neither the Shareholders nor Company
has any liability to the IRS with respect to any
Plan, including any liability imposed by Chapter 43
of the IRC.
(C) Neither the Shareholders nor the
Company has any liability under ERISA Section 502 or
Section 4071.
(D) All filings required by ERISA and
the IRC as to each Plan have been timely filed, and
all notices and disclosures to participants required
by either ERISA or the IRC have been timely provided.
(E) All contributions and payments made
or accrued with respect to all Company Plans, are
deductible under IRC Section 162 or Section 404. No
amount, or any asset of any Company Plan, is subject
to tax as unrelated business taxable income.
(iv) The Company Plan can be terminated within
sixty days, without payment of any additional contribution or
amount and without the vesting or acceleration of any benefits
promised by such Plan.
(v) Since the Company's inception, there has been
no amendment of the Company Plans.
(vi) No event has occurred or circumstance exists
that could result in a material increase in premium costs of
Company Plans that are insured, or a material increase in
benefit costs of such Plans and Obligations that are
self-insured.
(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal
proceeding involving, the Company Plans, is pending or, to
Shareholders' Knowledge, is Threatened.
(viii) Except as otherwise described in Part 3.13 of
the Shareholders' Disclosure Letter, the Company has no
Company Plan which is a stock bonus, pension, or
profit-sharing plan within the meaning of IRC Section 401(a).
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(ix) Each Qualified Plan of the Company is
qualified in form and operation under IRC Section 401(a);
each trust for each such Plan is exempt from federal income
tax under IRC Section 501(a). No event has occurred or
circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan
or trust.
(x) The Company and each ERISA Affiliate of the
Company have met the minimum funding standard, and has made
all contributions required, under ERISA Section 302 and IRC
Section 402.
(xi) No Company Plan is subject to Title IV of
ERISA.
(xii) No amendment has been made, or is reasonably
expected to be made, to any Plan that has required or could
require the provision of security under ERISA Section 307 or
IRC Section 401(a)(29).
(xiii) No accumulated funding deficiency, whether or
not waived, exists with respect to any Company Plan; no event
has occurred or circumstance exists that may result in an
accumulated funding deficiency as of the last day of the
current plan year of any such Plan.
(xiv) Except to the extent required under ERISA
Section 601 et seq. and IRC Section 4980B, the Company does
not provide health or welfare benefits for any retired or
former employee and is not obligated to provide health or
welfare benefits to any active employee following such
employee's retirement or other termination of service.
(xv) The Company has the right to modify and
terminate benefits to retirees (other than pensions) with
respect to both retired and active employees.
(xvi) Shareholders and the Company have complied
with the provisions of ERISA Section 601 et seq. and IRC
Section 4980B.
(xvii) The consummation of the Contemplated
Transactions will not result in the payment, vesting, or
acceleration of any benefit.
3.14 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Part 3.14 of the Shareholders'
Disclosure Letter and to the Shareholders' Knowledge,
(i) the Company is, and at all times since December
31, 1995 has been in substantial compliance with each Legal
Requirement that is or was applicable to it
26
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or to the conduct or operation of its business or the
ownership or use of any of its assets except where the failure
to so comply did not have, will not have, and is not
reasonably likely to have, an adverse effect on the business,
financial condition and results of operation of the Company;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) will, or
is reasonably likely to, constitute or result in a violation
by the Company of, or a failure on the part of the Company to
comply with, any Legal Requirement, or (B) will, or is
reasonably likely to, give rise to any obligation on the part
of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time
since December 31, 1995, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or
potential obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) Part 3.14 of the Shareholders' Disclosure Letter
contains a complete and accurate list of each Governmental
Authorization that is held by or has been issued to the Company.
Each Governmental Authorization listed or required to be listed in
Part 3.14 of the Shareholders' Disclosure Letter is valid and in full
force and effect. Except as set forth in Part 3.14 of the
Shareholders' Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995, has been, in substantial compliance with
all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part
3.14 of the Shareholders' Disclosure Letter;
(ii) no event has occurred or circumstance exists
that, to the Shareholders' Knowledge, will or is reasonably
likely to (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of
or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in
Part 3.14 of the Shareholders' Disclosure Letter, or (B)
result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or
required to be listed in Part 3.14 of the Shareholders'
Disclosure Letter;
(iii) the Company has not received, at any time
since December 31, 1995 any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any term or
requirement of any Governmental
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<PAGE> 36
Authorization, or (B) any actual, proposed, possible, or
potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental
Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or
required to be listed in Part 3.14 of the Shareholders'
Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings
required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the
Shareholders' Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
its business in the manner they currently conduct and operate such business
and to permit the Company to own and use their assets in the manner in which
they currently own and use such assets, except where the failure to hold such
Governmental Authorization would not have an adverse effect on the business,
financial condition and results of operation of the Company.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the Shareholders'
Disclosure Letter, there is no pending Proceeding commenced by or
against the Company:
(i) that otherwise relates to or that will, or is
reasonably likely to, adversely affect the business of, or any
of the assets owned or used by, the Company; or
(ii) that challenges, or that will, or is
reasonably likely to have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Shareholders, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that will, or
is reasonably likely to give rise to or serve as a basis for the commencement
of any such Proceeding. Shareholders have delivered or made available to Parent
copies of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Part 3.15 of the Shareholders' Disclosure Letter.
(b) Except as set forth in Part 3.15 of the Shareholders'
Disclosure Letter and to Shareholders' Knowledge:
(i) there is no Order to which the Company or any
of the assets owned or used by the Company, is subject;
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(ii) the Shareholders are not subject to any Order
that relates to the business of, or any of the assets owned or
used by, the Company; and
(iii) no officer, director, agent, or employee of
the Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the
business of the Company.
(c) Except as set forth in Part 3.15 of the Shareholders'
Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995, has been, in substantial compliance with
all of the terms and requirements of each Order to which it,
or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists
that will, or to the Shareholders' Knowledge is reasonably
likely to, constitute or result in (with or without notice or
lapse of time) a violation of or failure to substantially
comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is
subject; and
(iii) the Company has not received, at any time
since December 31, 1995, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or
potential violation of, or failure to substantially comply
with, any term or requirement of any Order to which the
Company, is or has been subject.
3.16 Absence of Certain Changes and Events. Except as set forth in
Part 3.16 of the Shareholders' Disclosure Letter or otherwise contemplated in
this Agreement, since the date of the Closing Balance Sheet, the Company has
conducted its business only in the Ordinary Course of Business and there has
not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of
capital stock of the Company; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase,
redemption, retirement, or other acquisition by the Company of any
shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of
capital stock;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any shareholder, director, officer,
or (except in the Ordinary Course of Business) employee;
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(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee benefit
plan for or with any employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business,
or financial condition of the Company;
(f) entry into, termination of, or receipt of notice of
termination by the Company of (i) any license, distributorship,
dealer, sales representative, joint venture, credit, or similar
agreement, or (ii) any Contract or transaction involving a total
remaining commitment by or to the Company of at least $50,000;
(g) sale (other than sales of inventory or obsolete or
unusable equipment and vehicles in the Ordinary Course of Business),
lease, or other disposition of any asset or property of the Company or
mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company, including the sale,
lease, or other disposition of any of the Intellectual Property,
except as contemplated hereby;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
(i) material change in the accounting methods used by the
Company except as disclosed on the Closing Balance Sheet; or
(j) agreement, whether oral or written, by the Company to
do any of the foregoing.
3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Shareholders' Disclosure Letter
contains a complete and accurate list, and Shareholders have delivered
or made available to Parent true and complete copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by
the Company of an amount or value in excess of $10,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to
the Company of an amount or value in excess of $10,000;
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(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of $10,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional sales agreements having a value
per item or aggregate payments of less than $10,000 and with
terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current
or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any
other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of
the Company or any affiliate of the Company or limit the
freedom of the Company or any affiliate of the Company to
engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(x) each power of attorney by or to the Company
that is currently effective and outstanding;
(xi) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or
provides for an express undertaking by the Company to be
responsible for consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $10,000;
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(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the
Shareholders' Disclosure Letter:
(i) the Shareholders do not have , and may not,
acquire any rights under, and the Shareholders have not become
subject to any obligation or liability under, any Applicable
Contract that relates to the business of, or any of the assets
owned or used by, the Company; and
(ii) to the Shareholders' Knowledge, no officer,
director, agent, employee, consultant, or contractor of the
Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any
conduct, activity, or practice relating to the business of the
Company, or (B) assign to the Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the
Shareholders' Disclosure Letter and to the Shareholders' knowledge,
each Applicable Contract identified or required to be identified in
Part 3.17(a) of the Shareholders' Disclosure Letter is in full force
and effect and is valid and enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the
Shareholders' Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995 has been, in substantial compliance with all
applicable terms and requirements of each Applicable Contract
identified or required to be identified in Part 3.17(a) of the
Shareholders' Disclosure Letter under which such Company has
or had any obligation or liability or by which such Company or
any of the assets owned or used by such Company is or was
bound;
(ii) to Shareholders' Knowledge, each other Person
that has or had any obligation or liability under any
Applicable Contract under which the Company has or had any
rights is, and at all times since December 31, 1995 has been,
in substantial compliance with all applicable terms and
requirements of such Applicable Contract;
(iii) to Shareholders' Knowledge, no event has
occurred or circumstance exists that (with or without notice
or lapse of time) will, or is reasonably likely to,
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result in a material violation or breach of, or give the
Company or other party thereto the right to declare a default
or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) the Company has not given to or received from
any other Person, since December 31, 1995, any notice or other
communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or
default under, any Applicable Contract.
(e) There are no pending renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts
paid or payable to the Company under current or completed Applicable
Contracts with any Person and no such Person has made written demand
for such renegotiation.
(f) The Applicable Contracts relating to the sale,
design, manufacture, or provision of products or services by the
Company have been entered into without the commission by the Company
or Shareholders of any act alone or in concert with any other Person,
or any consideration having been paid or promised, that is or would be
in violation of any Legal Requirement.
3.18 Insurance.
(a) Except as set forth in Part 3.18 of the Shareholders'
Disclosure Letter, Shareholders have delivered or made available to
Parent:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the
Company, or any director of the Company, in his or her
capacity as a director, is or has been covered at any time
within the four years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Part 3.18(b) of the Shareholders' Disclosure Letter
describes:
(i) any self-insurance arrangement by or
affecting the Company, including any reserves established
thereunder;
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(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk
by the Company; and
(iii) all obligations of the Company to third
parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy
under which such coverage is provided.
(c) Part 3.18(c) of the Shareholders' Disclosure Letter
sets forth, by year, for the current policy year and each of the four
preceding policy years:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $10,000, which
sets forth:
(A) the name of the claimant;
(B) a description of the policy by
insurer, type of insurance, and period of coverage;
and
(C) the amount and a brief description
of the claim; and
(iii) a statement describing the loss experience
for all claims that were self-insured, including the number
and aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the
Shareholders' Disclosure Letter:
(i) All policies to which the Company is a party
or that provide coverage to Shareholders, the Company, or any
director or officer of an Company:
(A) are valid, outstanding, and
enforceable;
(B) are issued by an insurer that the
Shareholders reasonably believe is financially sound
and reputable;
(C) are sufficient for compliance with
all Legal Requirements and Applicable Contracts;
(D) will not be terminated in accordance
with its terms upon the consummation of the
Contemplated Transactions and no insurer has given
notice of its intent to terminate such policy upon
the consummation of the Contemplated Transactions;
and
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(E) do not provide for any retrospective
premium adjustment or other experienced- based
liability on the part of the Company.
(ii) Neither the Shareholders nor the Company has
received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will
not be renewed or that the issuer of any policy is not willing
or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and
has otherwise performed all of its obligations, under each
policy to which the Company is a party or that provides
coverage to the Company or director thereof (in his or her
capacity as a director).
(iv) The Company has given notice to the insurer
of all claims that may be insured thereby.
3.19 Environmental Matters.
Except as set forth in Part 3.19 of the Shareholders' Disclosure
Letter:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither the Shareholders nor the Company
has any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible received, any
actual or Threatened order, notice, or other communication from (i)
any Governmental Body or private citizen acting in the public
interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply
with any Environmental Law, or of any actual or Threatened obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which
Shareholders or the Company has had an interest, or with respect to
any property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or
processed by Shareholders, the Company, or any other Person for whose
conduct the Company is or may be held responsible, or from which
Hazardous Materials of the Company have been transported, treated,
stored, handled, transferred, disposed or recycled.
(b) There are no pending or, to the Knowledge of the
Company or the Shareholders, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities
or any other properties and assets (whether real, personal, or mixed)
in which Shareholders or the Company has or had an interest.
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(c) Neither the Shareholders nor the Company has any
basis to expect, nor has any of them or any other Person for whose
conduct they are or may be held responsible, received, any citation,
directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials,
or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which
Shareholders or the Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by
Shareholders, the Company, or any other Person for whose conduct the
Company is or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(d) Neither the Shareholders nor the Company, nor any
other Person for whose conduct they are or may be held responsible,
has any Environmental, Health, and Safety Liabilities with respect to
the Facilities or with respect to any other properties and assets
(whether real, personal, or mixed) in which Shareholders or the
Company (or any predecessor), has or had an interest, or at any
property geologically or hydrologically adjoining the Facilities or
any such other property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in
land, water, sumps, or any other part of the Facilities, or
incorporated into any structure therein or thereon in quantities that
would require registration with or reporting to any regulatory agency
or emergency planning authority. None of the Company, any other
Person for whose conduct the Company may be held responsible, or any
independent contractor hired by the Company, has permitted or
conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Shareholders or the Company has or
had an interest except in full compliance with all applicable
Environmental Laws.
(f) There has been no Release or, to the Knowledge of
Shareholders and the Company, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where
any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the
Facilities, or from or by any other properties and assets (whether
real, personal, or mixed) in which Shareholders or the Company has or
had an interest, whether by Shareholders, the Company, or any other
Person for whom the Company may be held responsible.
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(g) Shareholders has delivered or made available to
Parent true and complete copies and results of any reports, studies,
analyses, tests, or monitoring possessed or initiated by Shareholders
or the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance
by Shareholders, the Company, or any other Person for whose conduct
they are or may be held responsible, with Environmental Laws.
3.20 Employees.
(a) Part 3.20 of the Shareholders' Disclosure Letter
contains a complete and accurate list of the following information for
each employee of the Company with a salary of at least $30,000 per
year (including each such employee on leave of absence or layoff
status), or for each officer of director: employer; name; job title;
current compensation paid or payable and any change in compensation
since December 31, 1995; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under the Company's
pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any Director Plan.
(b) To Shareholders' Knowledge, no employee or director
of the Company is a party to, or is otherwise bound by, any agreement
or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and
any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the
Company to conduct its business, including any Proprietary Rights
Agreement with Shareholders or the Company by any such employee or
director. To Shareholders' Knowledge, no director, officer, or other
key employee of the Company intends to terminate his employment with
the Company.
(c) Part 3.20 of the Shareholders' Disclosure Letter also
contains a complete and accurate list of the following information for
each retired employee or director of the Company, or their dependents,
receiving benefits or scheduled to receive benefits in the future:
name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other
benefits.
3.21 Labor Relations; Compliance. The Company has not been and is
not a party to any collective bargaining or other labor Contract since January
1, 1992. Since January 1, 1992, there has not been, there is not presently
pending or existing, and to Shareholders' Knowledge there is not Threatened,
(a) any strike, slowdown, picketing, work stoppage, or employee grievance
process, (b) any Proceeding against or affecting the Company relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint
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filed by an employee or union with the National Labor Relations Board, the
Equal Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting the Company or its premises, or (c) any application for certification
of a collective bargaining agent. To Shareholders' Knowledge, no event has
occurred or circumstance exists that provides, or is reasonably likely to
provide, the basis for any work stoppage or other labor dispute. There is no
lockout of any employees by the Company, and no such action is contemplated by
the Company. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 Intellectual Property. Part 3.22 of the Shareholders'
Disclosure Letter sets forth each material item of Intellectual Property, and,
except as set forth in Part 3.22 of the Shareholders' Disclosure Letter, the
Company owns, or is licensed or otherwise has the right to use, all such
Intellectual Property which is used in the conduct of the business of the
Company, and the consummation of the Contemplated Transactions will not alter
or impair any such Intellectual Property in any material respect or the
Company's right to use same. Except as set forth in Part 3.22 of the
Shareholders' Disclosure Letter and except for such other claims which if
adversely determined would not have a material adverse effect on the Company,
no claims have been asserted against the Company by any Person with respect to
the use of any such Intellectual Property or challenging or questioning the
validity or effectiveness of any license or agreement relating thereto. Each
of the trademarks, trade names and copyrights used in the conduct of the
business of the Company is valid and enforceable (except as disclosed in Part
3.22 of the Shareholders' Disclosure Letter) and to Shareholders' Knowledge, do
not violate the rights of any Person.
3.23 Certain Payments. Neither the Company nor any director,
officer, agent or employee of the Company, nor any other Person acting for or
on behalf of the Company, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in money, property,
or services (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any affiliate of the Company, or (iv) in violation of any Legal
Requirement, (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Company.
3.24 Disclosure.
(a) No representation or warranty of Shareholders in this
Agreement and no statement in the Shareholders' Disclosure Letter
omits to state a material fact necessary to make the statements herein
or therein, in light of the circumstances in which they were made, not
misleading.
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(b) No notice given pursuant to Section 5.5 will contain
any untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
(c) To the Shareholders' Knowledge, there is no fact that
has specific application to either Shareholders or the Company or
Mission (other than general economic, industry or competitive
conditions) and that materially adversely affects or, as far as
Shareholders can reasonably foresee, materially threatens, the assets,
business, financial condition, or results of operations of the Company
and Mission, taken as a whole, that has not been set forth in this
Agreement, the Shareholders' Disclosure Letter, the PIMI Agreement, or
the Shareholders' Disclosure Letter (as defined in the PIMI
Agreement).
3.25 Relationships with Related Persons. Neither the Shareholders
nor, to Shareholders' knowledge, any Related Person of Shareholders or of the
Company has any interest in any personal property whether tangible or
intangible), used in the Company's business. Except with respect to ownership
interests in the Company, Parent or Mission, held by the Shareholders or a
Related Person of the Shareholders or the Company, neither the Shareholders nor
any Related Person of the Shareholders or of the Company owns (of record or as
a beneficial owner) a material equity interest or any other material financial
or profit interest in a Person that has had material business dealings or a
material financial interest in any transaction with the Company since December
31, 1995, other than business dealings or transactions conducted in the
Ordinary Course of Business with the Company at substantially prevailing market
prices and on substantially prevailing market terms. Except as set forth in
Part 3.25 of the Shareholders' Disclosure Letter or except as related to
Mission, neither the Shareholders nor, to Shareholders' Knowledge, any Related
Person of Shareholders or of the Company is a party to any Contract with, or
has any claim or right against, the Company.
3.26 Brokers or Finders. Shareholders and their agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent and Subco, jointly and severally, represent and warrant to
Shareholders as follows:
4.1 Organization and Good Standing. Each of Parent and Subco is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas. Subco is a wholly owned Subsidiary of Parent and
Parent is the record and beneficial owner of all of the outstanding capital
stock of Subco. Subco was formed by Parent for the sole purpose of effecting
the Merger, and has not conducted any operations or business except with
respect to actions contemplated herein.
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4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and
binding obligation of each of Parent and Subco, enforceable against
Parent and Subco in accordance with its terms. Upon the execution and
delivery by Parent and Subco of the Escrow Agreement, the
Noncompetition Agreement and execution and delivery of the
Registration Rights Agreement by Parent (collectively, the "Parent's
Closing Documents"), the Parent's Closing Documents will constitute
the legal, valid, and binding obligations of Parent or Subco, as the
case may be, enforceable against Parent in accordance with their
respective terms. Each of Parent and Subco has the absolute and
unrestricted right, power, and authority to execute and deliver this
Agreement and the Parent's Closing Documents and to perform its
obligations under this Agreement and the Parent's Closing Documents.
Parent and Subco have duly adopted all resolutions required by law to
approve the Merger and the Plan of Merger.
(b) Except as set forth in Part 4.2 of the Parent's
Disclosure Letter, neither the execution and delivery of this
Agreement by Parent and Subco nor the consummation or performance of
any of the Contemplated Transactions by Parent and Subco will give any
Person the right to prevent, delay, or otherwise interfere with any of
the Contemplated Transactions pursuant to:
(i) any provision of Parent's or Subco's
Organizational Documents;
(ii) any resolution adopted by the board of
directors or the shareholders of Parent or Subco;
(iii) any Legal Requirement or Order to which
Parent or Subco may be subject; or
(iv) any Contract to which Parent or Subco is a
party or by which Parent or Subco may be bound.
Except as set forth in Part 4.2 of the Parent's Disclosure Letter,
neither Parent nor Subco is or will be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 Capitalization. The authorized capital stock of Parent
consists of 50,000,000 shares of Parent Stock, of which 2,826,371 shares are
issued and outstanding, and 5,000,000 shares of preferred stock, par value $.01
per share. The Parent'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 Parent's Board of
Directors has authorized the designation of 200,000 shares
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of the preferred stock as the Series B Convertible Preferred Stock, of which
124,831 shares are issued and outstanding. All of the outstanding equity
securities of Parent have been duly authorized and validly issued and are fully
paid and nonassessable. Part 4.3 of the Parent's Disclosure Letter sets forth
the warrants, options, subscriptions or other rights or preferences (including
conversion or preemptive rights) outstanding to acquire capital stock of
Parent, or notes, securities or other instruments convertible into or
exchangeable for capital stock of Parent. Except as set forth in Part 4.3 of
the Parent's Disclosure Letter, no legend or other reference to any purported
Encumbrance appears upon any certificate representing any equity securities of
Parent. To Parent's Knowledge, there are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of
Parent except as set forth in Part 4.3 of Parent's Disclosure Letter. None of
the outstanding equity securities or other securities of Parent was issued in
violation of the Securities Act or any other Legal Requirement. All of the
Parent Stock, when delivered pursuant to the provision of this Agreement, will
be validly issued, fully paid and non-assessable, free and clear of all
Encumbrances, and will not be issued in violation of any preemptive rights.
Set forth on Part 4.3 to the Parent's Disclosure Letter is a complete and
accurate list of all shareholders of Parent who own, beneficially or of record,
10% or more of the outstanding capital stock of Parent.
4.4 Financial Statements. Parent has delivered to Shareholder:
(a) audited consolidated balance sheets of Parent as at December 31 in each of
the years 1994 through 1996, and the related audited consolidated statements of
income, changes in shareholders' equity, and cash flow for each of the fiscal
years then ended, together with the report thereon of Deloitte & Touche,
independent certified public accountants, (b) an unaudited consolidated balance
sheet of Parent as at September 30, 1996 (the "Parent's Interim Balance Sheet")
and the related unaudited consolidated statements of income, changes in
shareholders' equity, and cash flow for the nine months then ended, including
in each case the notes thereto. Such financial statements and notes fairly
present the financial condition and the results of operations, changes in
shareholders' equity, and cash flow of Parent as at the respective dates of and
for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or
in the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the audited
balance sheet); the financial statements referred to in this Section 4.4
reflect the consistent application of such accounting principles throughout the
periods involved, except as disclosed in the notes to such financial
statements.
4.5 Certain Proceedings. Except as set forth in Part 4.5 of the
Parent's Disclosure Letter, there is no pending Proceeding that has been
commenced against Parent or Subco and that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To Parent's Knowledge, no such Proceeding has
been Threatened.
4.6 Taxes. Prior to the Merger, Parent will be in control of
Subco within the meaning of Section 368(c)(1) of the IRC. Parent has no plan
or intention to cause the Surviving Corporation to issue additional shares of
its stock, following the Merger, that would result in Parent losing
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control of Subco within the meaning of Section 368(c)(1) of the IRC. Parent
has no plan or intention to reacquire any of its stock issued under the Merger.
Parent has no plan or intention to liquidate Subco; to merge Subco with and
into another corporation; to sell or otherwise dispose of any of the assets of
the Company acquired in the Merger, except for dispositions made in the
Ordinary Course of Business or transfers described in Section 368(a)(2)(C) of
the IRC. It is the intention of the Parent that following the Merger the
Surviving Corporation will continue the historic business of the Company and
will use a significant portion of the Company's business assets in the course
of its business. Parent, Subco and the Company will pay their respective
expenses, if any, incurred in connection with the Merger. Neither Parent nor
Subco is an investment company as defined in Section 368(a)(2)(F)(iii) and
(iv) of the IRC. No stock of Subco will be issued in the Merger.
4.7 Brokers or Finders. Parent and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold Shareholders harmless from any
such payment alleged to be due by or through Parent as a result of the action
of Parent or its officers or agents.
4.8 Litigation. Except as set forth in Part 4.8 of the Parent's
Disclosure Letter, there is no action, Proceeding, claim or investigation
pending against Parent or Subco before any Governmental body that if determined
adversely to Parent or Subco may reasonably be expected to have a material
adverse effect on the present or future operations or financial conditions of
Parent or Subco, and, to the best of Parent's and Subco's Knowledge, no such
action, Proceeding, claim or investigation has been Threatened.
4.9 Absence of Certain Changes. Except as set forth in Part 4.9
of the Parent's Disclosure Letter, since the date of Parent's Interim Balance
Sheet, except as contemplated herein, there has not been with respect to Parent
and its Subsidiaries, on a consolidated basis:
(a) any change in the financial condition, properties,
assets, liabilities, business or operations of Parent or its
Subsidiaries which change by itself or in conjunction with all other
such changes, whether or not arising in the ordinary course of
business, has had, or can reasonably be expected to have, an adverse
effect on Parent and its Subsidiaries, taken as a whole;
(b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
properties, assets or business of Parent and its Subsidiaries, taken
as a whole;
(c) any split, combination or recapitalization of the
capital stock of Parent or any declaration or payment of any dividend
or making of any other distribution or payment in respect of its
capital stock or redeeming, purchasing or otherwise acquiring or
agreeing to redeem, purchase or acquire any of its capital stock; or
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(d) any material change with respect to the management,
supervisory, development or other key personnel of Parent.
4.10 Disclosure.
(a) Parent has furnished to Shareholders a copy of
Parent's Disclosure Letter. The representations and warranties of
Parent and Subco in this Agreement and Parent's Disclosure Letter do
not contain an 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.
(b) No notice given pursuant to Section 6.4 will contain
any untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
(c) To Parent's Knowledge, there is no fact that has
specific application to either Parent or any of its Subsidiaries
(other than general economic, industry or competitive conditions) and
that materially adversely affects or, as far as Parent can reasonably
foresee, materially threatens, the assets, business, financial
condition, or results of operations of the Parent and its
Subsidiaries, taken as a whole, that has not been set forth in this
Agreement or the Parent's Disclosure Letter.
4.11 No Undisclosed Liabilities. Except as set forth in Part 4.11
of the Shareholders' Disclosure Letter and obligations and liabilities arising
under contracts to which Parents is a party or bound, the Parent has no
liabilities or obligations of the type required to be reflected as liabilities
on a balance sheet prepared in accordance with GAAP, except for liabilities or
obligations reflected or reserved against in the Parent's Interim Balance Sheet
or the Parent's audited balance sheet as at December 31, 1996 and current
liabilities incurred in the Ordinary Course of Business since the respective
dates thereof.
SECTION 5. COVENANTS OF SHAREHOLDERS
5.1 Access and Investigation. Between the date of this Agreement
and the Closing Date, the Company and the Shareholders will, and will cause the
Company and its Representatives to, (a) afford Parent and its Representatives
and prospective lenders and their Representatives (collectively, "Parent's
Advisors") full and free access to the Company's personnel, properties
(including subsurface testing), contracts, books and records, and other
documents and data, (b) furnish Parent and Parent's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Parent may reasonably request, and (c) furnish Parent and Parent's Advisors
with such additional financial, operating, and other data and information as
Parent may reasonably request.
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5.2 Operation of the Business of the Company. Between the date of
this Agreement and the Closing Date, unless otherwise consented to by Parent
and except as contemplated herein, the Company and Shareholders will, and
Shareholders will cause the Company to:
(a) conduct such business of the Company only in the
Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of such Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;
(c) confer with Parent concerning operational matters of
a material nature; and
(d) otherwise report periodically as reasonably requested
by Parent concerning the status of the business, operations, and
finances of the Company.
5.3 Negative Covenant. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Company and Shareholders will not, and will cause the Company not to, without
the prior consent of Parent, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of the
changes or events listed in Section 3.16 is likely to occur.
5.4 Required Approvals. As promptly as practicable after the date
of this Agreement, the Company and Shareholders will, and Shareholders will
cause the Company to, make all filings required by Legal Requirements to be
made by them in order to consummate the Contemplated Transactions. Between the
date of this Agreement and the Closing Date, the Company and Shareholders will,
and will cause the Company to, (a) cooperate with Parent with respect to all
filings that Parent reasonably elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Parent in obtaining all consents identified in Part 4.2 of the
Parent's Disclosure Letter; provided, however, that this Agreement will not
require the Company or the Shareholders to incur any unreasonable burden,
financial or otherwise, to make such filing or obtain such consent or
Governmental Authorization.
5.5 Notification. Between the date of this Agreement and the
Closing Date, the Shareholders will promptly notify Parent in writing if the
Shareholders become aware of any fact or condition that causes or constitutes a
Breach of any of the Company's or Shareholders' representations and warranties
as of the date of this Agreement, or if the Shareholders become aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Shareholders' Disclosure Letter if the Shareholders' Disclosure Letter were
dated the date of the occurrence or
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discovery of any such fact or condition, the Shareholders will promptly deliver
to Parent a supplement to the Shareholders' Disclosure Letter specifying such
change. During the same period, the Company and Shareholders will promptly
notify Parent of the occurrence of any Breach of any covenant of Shareholders
in this Section 5 or of the occurrence of any event, of which Shareholders have
Knowledge and which will, or is reasonably likely to, make the satisfaction of
the conditions in Section 7 impossible or unlikely.
5.6 Payment of Indebtedness by Related Persons. Except as
expressly provided in this Agreement and except with respect to any amounts
owed by Mission to the Company, Shareholders will cause all indebtedness owed
to the Company by Shareholders or any Related Person of the Shareholders to be
paid in full at or prior to Closing.
5.7 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, the Company and the Shareholders will not,
and will cause the Company and each of their Representatives not to, directly
or indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non- public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Parent) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of the Company, or any
of the capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company. Shareholders and
the Company will promptly communicate to Parent the terms of any proposal
received or the fact that Shareholders or the Company has received inquiry with
respect to, or have participated in discussions or negotiations in respect of,
any such transaction, and the identity of any persons who initiated or
participated in such discussions or negotiations.
5.8 Best Efforts. Except as set forth in the proviso to Section
5.4, between the date of this Agreement and the Closing Date, Shareholders will
use their Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
5.9 Filing of Short Period Returns. The Company, Shareholders and
Minority Shareholders shall treat the day before the Closing Date as the last
day of the taxable period in which the Company is an S corporation, as defined
in the IRC. All Tax returns relating to Company's status as an S corporation
for the present taxable year of the Company, which are required and/or
permitted by the authorized taxing authorities (herein collectively referred to
as the "S Short Year Returns") shall be filed accordingly. In accordance with
Section 1362(e)(6)(D) and related regulations of the IRC, the books of the
Company shall be closed at the close of the day before the Closing Date. The
Shareholders will cause its accounting firm to prepare, at the Shareholders'
expense, the S Short Year Returns.
5.10 Cooperation on Tax Matters.
(a) The Shareholders shall cooperate fully with the Parent,
as and to the extent reasonably requested by the other party, in connection
with the preparation and filing of any Tax
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Return, statement, report or form (including any report required pursuant to
Section 6042 of the IRC and all Treasury Regulations promulgated thereunder),
any audit, and litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retentions and (upon the other party's request)
the provision of records and information which are reasonably relevant to any
such audit, litigation or other proceeding.
(b) The Shareholders agree, upon request, to use all
reasonable efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (with respect, but not
limited, to transactions contemplated hereby).
5.11 Other Tax Matters
(a) Without the prior written consent of the Parent, neither
the Shareholders nor the Company (to the extent it may affect or relate to the
Company, the Surviving Corporation or the Parent) shall make or change any Tax
election, change any annual Tax accounting period, adopt or change any method
of Tax accounting period, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim a
Tax refund, consent to any extension or waiver of the limitations period of the
limitations period applicable to any Tax claim or assessment or take or omit to
take any other action, if any such action or omission would have the effect of
increasing the Tax liability of the Company, the Surviving Corporation or the
Parent.
(b) All Tax Returns not required to be filed on or before the
date hereof (including any applicable extensions) relating to any Pre-Closing
Tax Period will be filed when due in accordance with all applicable laws.
5.12 Austin Property. The Surviving Corporation will continue to
sublease the property located in Austin presently occupied by the Company from
Southwest Texas Equipment Distributors, Inc. d/b/a Mission Ice Equipment
Company at a rate of $450 per month.
5.13 Employee Benefit Plan. Prior to the Closing, Shareholders
shall cause the Company to cease its participation in its 401(k) plan (the
"401(k) Plan") and to cause all of the Company's functions as employer,
settlor, sponsor or administrator of the 401(k) to be transferred to another
of the companies participating in the 401k Plan (other than Mission or the
Company). Without limiting the foregoing obligations, the Shareholders may, in
its sole discretion, elect to terminate or cause any of the companies
participating in the 401(k) Plan to terminate the 401(k) Plan prior to or after
the foregoing.
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SECTION 6. COVENANTS OF PARENT
6.1 Approvals of Governmental Bodies. As promptly as practicable
after the date of this Agreement, Parent will, and will cause each of its
Related Persons to, make all filings required by Legal Requirements to be made
by them to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Parent will, and will cause each Related Person
to, cooperate with Shareholders and the Company with respect to all filings
that Company and/or the Shareholders are required by Legal Requirements to make
in connection with the Contemplated Transactions, and (ii) cooperate with
Shareholders in obtaining all consents identified in Part 3.2 of the
Shareholders' Disclosure Letter; provided that this Agreement will not require
Parent to dispose of or make any change in any portion of its business or to
incur any other unreasonable burden to obtain a Governmental Authorization.
6.2 Best Efforts. Except as set forth in the proviso to Section
6.1, between the date of this Agreement and the Closing Date, Parent will use
its Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3 Cooperation on Tax Matters The Parent agrees (i) to retain
and provide Shareholders with access to all books and records with respect to
Tax matters pertinent to the Company relating to any Pre-Closing Tax Period,
and to abide by all record retention agreements entered into with any Taxing
Authority, (ii) to give the Shareholders reasonable written notice prior to
destroying or discarding any such books and records and, if the Shareholders so
request, the Parent shall allow the Shareholders to take possession of such
books and records and (iii) to cooperate fully with the Shareholders regarding
whatever steps may be reasonably necessary to qualify the Merger as a tax-free
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the IRC.
6.4 Notification. Between the date of this Agreement and the
Closing Date, the Parent will promptly notify Shareholders in writing if the
Parent becomes aware of any fact or condition that causes or constitutes a
Breach of any of Company's, Minority Shareholders', Parent's or Subco's
representations and warranties as of the date of this Agreement, or if Parent
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition known by Parent
require any change in the Parent's Disclosure Letter if the Parent' s
Disclosure Letter were dated the date of the occurrence or discovery of any
such fact or condition, Parent will promptly deliver to Shareholders a
supplement to the Parent's Disclosure Letter specifying such change. During
the same period, Parent will promptly notify Shareholders of the occurrence of
any Breach, known to the Parent, of any covenant of Shareholders, Company,
Parent or Subco in this Agreement or of the occurrence of any event that will
or is reasonably likely to make the satisfaction of the conditions in Section 7
or 8 impossible or unlikely.
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6.5 Release of Personal Guarantee. Parent and Subco shall take
all such actions necessary or appropriate to cause Shareholders to be released
at or prior to Closing from any personal guarantees of payment or performance
relating to the Company's current and long-term indebtedness, notes payable,
current and long-term capital leases and any other obligations relating to the
Company, its assets or business (other than the Excluded Assets), subject to
Company and Shareholders' performance of all covenants and obligations required
hereunder.
6.6 Increase in Tax Liability. Without the prior written consent
of the Shareholders, neither the Parent nor the Surviving Corporation (to the
extent it may affect or relate to the Company, the Surviving Corporation or the
Parent) shall make or change any Tax election, change any annual Tax accounting
period, adopt or change any method of Tax accounting period, file any amended
Tax Return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a Tax refund, consent to any extension
or waiver of the limitations period of the limitations period applicable to any
Tax claim or assessment or take or omit to take any other action, if any such
action or omission would have the effect of increasing the Tax liability of the
Company or the Shareholders with respect to periods ending on or prior to the
Closing.
6.7 Payment of Indebtedness to Related Persons. Concurrent with
or immediately following the Closing, Parent and Subco will cause all
indebtedness owed by the Company to any Related Person of the Shareholders
(other than Mission) to be paid in full.
6.9 Registration Rights Agreement. Prior to the Closing, Parent
shall negotiate in good faith with Shareholders an agreement (the "Registration
Rights Agreement") which gives the Shareholders "piggyback" registration rights
and "demand" registration rights on the same or better terms and conditions as
those granted by Parent to other shareholders of Parent under other
registration rights agreements to which Parent is a party, or contemplates
entering into; provided, that such registration rights of Shareholders shall be
exercisable, subject to reasonable restrictions, at any time after an initial
public offering of the Parent Stock.
6.10 401(k) Plan. After the Closing, Parent shall cause the
Surviving Corporation to use its Best Efforts in cooperating in the winding up
of the 401(k) Plan.
SECTION 7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE
Parent's obligation to consummate the Merger and to take the other
actions required to be taken by Parent at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Parent, in whole or in part):
7.1 Accuracy of Representations. All of Shareholders'
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing Date as if made
on the
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Closing Date, without giving effect to any supplements to the initial
disclosure in the Shareholders' Disclosure Letter.
7.2 Shareholders' Performance.
(a) All of the covenants and obligations that
Shareholders are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered collectively),
and each of these covenants and obligations (considered individually),
must have been duly performed and complied with in all material
respects.
(b) Each document required to be delivered pursuant to
Section 2.8 must have been delivered, and each of the other covenants
and obligations in Sections 5 must have been performed and complied
with in all material respects.
7.3 Consents. Each of the Consents identified in Part 3.2 of the
Shareholders' Disclosure Letter and Part 4.2 of the Parent's Disclosure Letter
must have been obtained and must be in full force and effect, except where the
failure to obtain each consent would not have a materially adverse effect on
the business, financial condition or result of operation of the Company, or the
ability of the parties to consummate the Contemplated Transactions without the
payment of additional consideration.
7.4 Additional Documents. Each of the following documents must
have been delivered to Parent:
(a) an opinion of Cox & Smith Incorporated, dated the
Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Parent may reasonably request
for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
Shareholders' representations and warranties, (iii) evidencing the
performance by Shareholders of, or the compliance by Shareholders
with, any covenant or obligation required to be performed or complied
with by such Shareholders, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating
the consummation or performance of any of the Contemplated
Transactions.
7.5 No Proceedings. Since the date of this Agreement, there must
not have been commenced or Threatened against Parent, or against any Person
affiliated with Parent, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds. There
must not have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the
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beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any stock of, or any other voting, equity, or ownership interest
in, any of the Company, or (b) is entitled to all or any portion of the
Acquisition Price.
7.7 No Prohibition. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause Parent or any Person
affiliated with Parent to suffer any material adverse consequence under any
applicable Legal Requirement or Order.
7.8 Financing. Parent shall have obtained financing satisfactory
to it adequate to consummate the Merger.
7.9 Tax Certification. Parent shall have received a certification
signed by the Shareholders to the effect that each of the Shareholders is not a
"foreign person" as defined in Section 1445 of the IRC.
7.10 Employee Benefit Plan. The Company shall have ceased its
participation in the 401(k) Plan and all of the Company's functions as
employer, settlor, sponsor or administrator of the 401(k) shall have been
transferred to another of the companies participating in the 401(k) Plan
(other than Mission or the Company).
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDERS'
OBLIGATION TO CLOSE
Shareholders' obligation to consummate the Merger and to take the
other actions required to be taken by Shareholders at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Shareholders, in whole or in part):
8.1 Accuracy of Representations. All of Parent's representations
and warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 Parent's Performance.
(a) All of the covenants and obligations that Parent is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
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(b) Each document required to be delivered pursuant to
Section 2.8 must have been delivered and Parent must have delivered
the Cash Amount, the Minority Shareholder Cash Amount and the Stock
Amount required to be made by Parent pursuant to Sections 2.8(b) and
2.8(d).
8.3 Consents. Each of the Consents identified in Part 3.2 of the
Shareholders' Disclosure Letter and Part 4.2 of the Parent's Disclosure Letter
must have been obtained and must be in full force and effect.
8.4 Additional Documents. Parent must have caused the following
documents to be delivered to Shareholder:
(a) an opinion of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., dated the Closing Date in form and substance satisfactory to
the Shareholders, in substantially the form of Exhibit 8.4(a); and
(b) such other documents as Shareholders may reasonably
request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of
any representation or warranty of Parent, (iii) evidencing the
performance by Parent of, or the compliance by Parent with, any
covenant or obligation required to be performed or complied with by
Parent, (ii) evidencing the satisfaction of any condition referred to
in this Section 8, or (v) otherwise facilitating the consummation of
any of the Contemplated Transactions.
8.5 No Proceedings. Since the date of this Agreement, there must
not have been commenced or Threatened against Shareholders, Minority
Shareholders, Company, or against any Person affiliated with Company, any
Proceeding (a) involving any challenge to, or seeking damages or other relief
in connection with, any of the Contemplated Transactions, or (b) that may have
the effect of preventing, delaying, making illegal, or otherwise interfering
with any of the Contemplated Transactions.
8.6 Release of Personal Guarantees. The current and long-term
indebtedness, the notes payable and the current long-term capitalized leases,
with respect to which the Shareholders have personally guaranteed payment or
performance, will either be paid off concurrently with the Closing by the
Company (or Parent on behalf of the Company), or Parent will take such actions
necessary to release Shareholders from such guarantees at or prior to the
Closing.
8.7 Employment of Shareholder. A.J. Lewis III shall be employed
by Parent as its vice president and chief operating officer on mutually
agreeable terms.
8.8 No Prohibition. Neither the consummation nor the performance
of any of the contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause
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Shareholders or any Person affiliated with Shareholders to suffer any material
adverse consequence under, any applicable Legal Requirement or Order.
8.9 Registration Rights. Parent and Shareholders shall have
entered into a Registration Rights Agreement in a form reasonably satisfactory
to Shareholders, consistent with Section 6.9.
8.10 Employee Benefit Plan. The Boards of Directors of the
Company and each of its affiliates participating in the 401k Plan shall have
adopted a resolution terminating such plan.
8.11 Southwestern Ice, Inc. The transactions contemplated by
that Agreement and Plan of Merger, dated March 25, 1997, by and among Parent,
Southwestern Ice, Inc. ("SWI"), Packaged Ice Southwestern, Inc. and the
shareholders of SWI must be consummated prior to or concurrent with the
Closing.
SECTION 9. TERMINATION
9.1 Termination Events. This Agreement may, by notice given prior
to or at the Closing, be terminated:
(a) by either Parent or Shareholders if a material Breach
of any provision of this Agreement has been committed by the other
party and such Breach has not been waived;
(b) [Section intentionally omitted.]
(c) by mutual consent of Parent and Shareholders; or
(d) by either Parent or Shareholders if the Closing has
not occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before Ending Date, or such later date as the
parties may agree upon;
(e) "Ending Date" shall mean April 15, 1997, or, if
Parent has obtained by April 15, 1997 assurance(s) of sufficient financing
to complete the Merger, but such financing has been delayed for any reason,
then April 30, 1997.
9.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 9.2(b), Section 9.2(c) and Section 11 will
survive.
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(b) Without limiting the applicability of Section 11.1, if Parent
and Subco fail to consummate the transactions contemplated on its part to occur
on the Closing Date, in circumstances whereby all conditions of the Closing set
forth in Section 7 have been satisfied in all material respects or waived,
Shareholders and the Company shall be entitled to terminate this Agreement and
to be reimbursed by Parent and Subco for its out-of-pocket expenses incurred
directly in connection with the negotiation, preparation and performance of
this Agreement.
(c) If Shareholders and the Company fail to consummate the
transactions contemplated on their part to occur on the Closing Date, in
circumstances whereby all conditions of the Closing set forth in Section 8 have
been satisfied in all material respects or waived, Parent's and Subco's sole
remedy shall be to (i) to require Shareholders and the Company to consummate
and specifically perform the Contemplated Transactions, in accordance with the
terms of this Agreement, and to obtain from Shareholders any attorney fees
incurred in connection with procuring such specific performance or (ii)
terminate this Agreement and obtain reimbursement of its out-of-pocket expenses
incurred directly in connection with the negotiation, preparation and
performance of this Agreement.
SECTION 10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification; Knowledge. Subject to
Section 10.5 hereof, all representations, warranties, covenants, and
obligations in this Agreement, the Shareholders' Disclosure Letter, the
Parent's Disclosure Letter, the certificates delivered pursuant to Section
2.8(a)(iii) and 2.8(b)(v), and any other certificate or document delivered
pursuant to this Agreement will survive the Closing. Shareholders shall not be
liable under this Section 10 for Damages (as hereinafter defined) resulting
from any event relating to a Breach of any representation, warranty, covenant
or agreement made in this Agreement if either Parent or Subco had actual
knowledge of such Breach on or before the Closing Date.
10.2 Indemnification and Payment of Damages by Shareholder.
Subject to the limitations and terms set forth in Section 9.2 and this Section
10, Shareholders jointly and severally and Minority Shareholders severally
(subject to the limitations in Section 10.7) will indemnify and hold harmless
Parent, Subco and the Surviving Corporation, and their respective
Representatives, shareholders, controlling persons, and affiliates for, and
will pay to such Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third- party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
the Company or Shareholders or Minority Shareholders in this
Agreement, Shareholders' Disclosure Letter, or any other certificate
or document delivered by Shareholders pursuant to this Agreement as if
such representation or warranty were made on and as of the Closing
Date, other than any such Breach that is disclosed in a supplement to
the initial disclosure in the Shareholders' Disclosure Letter as of
the time of the execution of this agreement, or any
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Breach by the Shareholders of subsections (e) through (l) of Section
3.11, with respect to which the Parent's sole remedy shall be
subsection (e) of this Section 10.2;
(b) any Breach by Shareholders of any covenant or
obligation of such Shareholders in this Agreement;
(c) any product shipped or manufactured by, or any
services provided by, the Company prior to the Closing Date;
(d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with
Shareholders or the Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions; or
(e) any loss, liability or expense attributable to any
federal income tax payable by Parent or the Surviving Corporation
resulting from the Merger not being treated as a tax free merger under
the IRC as a result of (i) any negligent act or omission of
Shareholders or (ii) any Breach of a representation, warranty or
covenant of Shareholders contained herein.
Notwithstanding any of the foregoing, in the event that the Contemplated
Transactions are not consummated, neither Parent nor Subco shall be entitled to
indemnification for Breaches of covenants and agreements contained herein to be
performed at or prior to the Closing or the Breach of any representation or
warranty contained herein.
10.3 Indemnification and Payment of Damages by
Shareholder--Environmental Matters. In addition to the provisions of Section
10.2, Shareholders jointly and severally and Minority Shareholders severally
will indemnify and hold harmless Parent, and Subco, and their respective
Representatives, shareholders, controlling persons and affiliates for, and will
pay to Parent, Subco, the Surviving Corporation and the other Indemnified
Persons the amount of, any Damages (including costs of cleanup, containment, or
other remediation to the extent required to comply with any Environmental Laws)
arising, directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities
arising out of or relating to: (i) (A) the ownership, operation, or
condition at any time on or prior to the Closing Date of the
Facilities or any other properties and assets (whether real, personal,
or mixed and whether tangible or intangible) in which Shareholders or
the Company has or had an interest, or (B) any Hazardous Materials
that were present on the Facilities or such other properties and
assets at any time on or prior to the Closing Date as a result of the
introduction of such Hazardous Materials by the Company or its
Representatives or as a result of the Company's or any
successor-in-interest's operations; or (ii) (A) any Hazardous
Materials, wherever located, that were, or were allegedly, generated,
transported, stored, treated, Released, or otherwise handled by
Shareholders or the Company or by any other Person for whose
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conduct the Company is or may be held responsible at any time on or
prior to the Closing Date, or (B) any Hazardous Activities that were,
or were allegedly, conducted by Shareholders or the Company or by any
other Person for whose conduct the Company is or may be held
responsible; or
(b) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was
incurred, or manifested itself), personal injury, property damage
(including trespass, nuisance, wrongful eviction, and deprivation of
the use of real property), or other damage of or to any Person,
including any employee or former employee of the Company or any other
Person for whose conduct the Company is or may be held responsible, in
any way arising from or allegedly arising from any Hazardous Activity
conducted or allegedly conducted by the Company with respect to the
Facilities or the operation of the Company prior to the Closing Date,
or from Hazardous Material that was (i) introduced, generated, stored,
treated, related or disposed of by the Company on or before the
Closing Date on or at the Facilities (or present on any other
property, if such Hazardous Material emanated from any of the
Facilities and was present on any of the Facilities on or prior to the
Closing Date) or (ii) Released or allegedly Released by the Company or
any other Person for whose conduct the Company is or may be held
responsible, at any time on or prior to the Closing Date.
Shareholders will be entitled to control any cleanup, any related
Proceeding and any other Proceeding with respect to which indemnity may be
sought under this Section 10.3 or with respect to Section 3.19. The procedure
described in Section 10.9 will apply to any claim relating to a matter covered
by this Section 10.3. Notwithstanding any provision in this Agreement to the
contrary, in no event will Parent, Subco, or any of their respective
Representatives, shareholders, controlling persons, and affiliates be entitled
to indemnification under this Section 10.3 or with respect to the
representations and warranties set forth in Section 3.19 to the extent to which
any liability arising from such indemnification claim are attributable to
activities or conduct of the Company (or the Surviving Corporation), Parent,
Subco, or any of their respective Representatives, shareholders, controlling
persons, agents and affiliates from and after the Closing Date.
10.4 Indemnification and Payment of Damages by Parent. Parent and
Subco, jointly and severally, will indemnify and hold harmless Shareholders and
Minority Shareholders, and will pay to Shareholders and Minority Shareholders
the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made by Parent
or Subco in this Agreement or in any certificate delivered by Parent or Subco
pursuant to this Agreement, (b) any Breach by Parent or Subco of any covenant
or obligation of Parent or Subco in this Agreement, (c) any violation by Parent
or Subco of any state or federal securities law in connection with the issuance
of the Parent Stock, or (d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Parent (or any
Person acting on its behalf) in connection with any of the Contemplated
Transactions, (e) any loss, liability or expense attributable to any Tax
payable by Shareholders resulting from the Merger not being treated as a
tax-free merger
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under the IRC as a result of (i) any negligent act or omission of Parent, Subco
or the Surviving Corporation (excluding any act or omission of the Company on
or prior to the Closing Date or any act or omission of the Shareholders at any
time) or (ii) any Breach of representation, warranty or covenant of Parent or
Subco contained herein, or (f) any loss, liability or expense arising out of or
relating to any claims by Southco, Inc. or Frank Hall against the Company or
Shareholders other than with respect to the payment or performance by the
Company prior to the Closing Date under the Promissory Note dated November 21,
1994, payable by Southwest Texas Packaged Ice, Inc. in the original principal
amount of $105,619.56.
10.5 Time Limitations. If the Closing occurs, Shareholders and
Minority Shareholders will have no liability (for indemnification or otherwise)
with respect to any representation or warranty, or covenant or obligation to be
performed and complied with on or prior to the Closing Date or representations
made again as of the Closing Date, other than those in Sections 3.11, 3.13 and
3.19, unless on or before two years from the Closing Date, Parent notifies
Shareholders and Minority Shareholders of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by Parent. A claim
with respect to Section 3.19 or Section 10.3 must be made prior to the fifth
anniversary hereof and shall thereupon terminate. A claim with respect to
Section 3.11 or Section 3.13, or a claim for indemnification or reimbursement
based upon any covenant or obligation to be performed and complied with after
the Closing Date, including without limitation, any indemnification claims made
under Section 10.2(d) or Section 10.2 (e), must be made prior to the expiration
of the applicable statutory period of limitations, including any extensions to
such period, and shall thereupon terminate. If the Closing occurs, Parent will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date other than those set forth in Section
4.6, unless on or before two years from the Closing Date, either of the
Shareholders or any of the Minority Shareholders notifies Parent of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by such Shareholder or Minority Shareholder; a claim with respect to
Section 4.6 or a claim for indemnification or reimbursement based upon any
covenant or obligation to be performed and complied with after the Closing Date
must be made prior to the expiration of the applicable statutory period of
limitations, including any extensions to such period, and shall thereupon
terminate.
10.6 Limitations on Amount -- Shareholders and Minority
Shareholders.
(a) Shareholders and Minority Shareholders will have no
liability (for indemnification or otherwise) with respect to the
matters described in Section 10.2 and 10.3 until the total of all
Damages with respect to such matters and the matters described in
Section 10.2 and 10.3 of the Agreement and Plan of Merger, of even
date herewith, among Parent, Packaged Ice Mission, Inc., Mission, and
Jack Lewis (the "PIMI Agreement") exceeds $75,000 in the aggregate,
and then only for the amount by which such Damages exceed $75,000 (the
"Basket"); provided, however, the Basket shall not apply to any claim
for indemnification arising out of a Breach of any representations,
warranties or covenants contained in Sections 3.3, 3.6, 3.11, 5.9,
5.10 or 5.11. The Shareholders' and Minority
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Shareholders' maximum liability with respect to the matters described
in Section 10.2 and Section 10.2 of the PIMI Agreement will be limited
to $2,000,000 in the aggregate (the "Cap"); provided, however, this
Cap will not apply to a claim for indemnification arising out of a
Breach of any of the Company's representations, warranties or
covenants contained in Sections 3.1(c), 3.3, 3.6, 3.11, 3.19, 5.9,
5.10 or 5.11, or the indemnification obligation of Section 10.2(e).
Notwithstanding the foregoing, the maximum liability with respect to
matters described in Sections 10.2 and 10.3, in this Agreement and the
PIMI Agreement shall be equal to the sum of the Acquisition Price of
this Agreement and the Acquisition Price of the PIMI Agreement. In
addition, this Section 10.6 will not apply to any claim for
indemnification based upon the fraud of the Shareholder.
(b) In case any event shall occur which would otherwise
entitle any party to assert a claim for indemnification hereunder, no
claim, loss, liability, cost or expense shall be deemed to have been
sustained by such party to the extent of any proceeds received by such
party from any insurance policies with respect thereto.
10.7 Additional Limitations on Indemnification Rights.
(a) A Minority Shareholder's indemnity obligations under
Section 10.2 or 10.3 hereof shall be limited as follows: (i) a
Minority Shareholder will have no liability (for indemnification or
otherwise) in excess of the amount of the Acquisition Price received
by such Minority Shareholder and (ii) except with respect to the
matters set forth in the following sentence, a Minority Shareholder's
indemnity obligations under Section 10.2 or 10.3 hereof shall be
limited to his or her proportionate share of such obligation, based
upon his or her respective percentage ownership of the Company as set
forth on Part 3.3 of the Shareholders' Disclosure Letter. With
respect to Section 3.3(b) which specifically concerns the
Shareholders as individuals, each Minority Shareholder makes such
representation and warranty individually and only as the
representation and warranty specifically relates to such Minority
Shareholders, and each such Minority Shareholder shall have individual
responsibility and liability with respect to such representation and
warranty.
(b) Notwithstanding any provision in this Agreement to
the contrary, Liza B. Lewis' indemnity obligations under Section 10.2
and 10.3 shall be limited to the amount of the Acquisition Price
received by Ms. Lewis under this Agreement. Nothing in the foregoing
sentence shall be deemed to limit the obligations of A. J. Lewis III
under this Section 10.
10.8 Escrow. Upon notice to Shareholders, Parent may give notice
of a Claim in such amount under the Escrow Agreement. Neither the exercise of
nor the failure to give a notice of a Claim under the Escrow Agreement will
constitute an election of remedies or limit Parent in any manner in the
enforcement of any other remedies that may be available to it.
10.9 Sole Remedy. The sole and exclusive remedy of the parties
hereunder for any and all claims under this Agreement discovered after the
Closing shall be the indemnities set forth in this
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Section 10, as limited by the provisions set forth elsewhere in this Section
10. Notwithstanding any provision in this Agreement to the contrary, no party
shall be able to avoid the limitations expressly set forth in this Section 10
or Section 9.2 by electing to pursue any other remedy.
10.10 Procedure for Indemnification -- Third Party Claims.
(a) If a Person receives notice of the commencement any
Proceeding against it which might give any party indemnification
rights under this Section 10, then promptly thereafter such Person
will, if a claim is to thus be made against such party, give notice to
such party of the commencement of such Proceeding, but the failure to
notify such party will not relieve this Person of any liability that
it may have to such party, except to the extent this party is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.10(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would result in a
conflict of interests preventing such joint representation, or (ii)
the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding
and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as
long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding,
in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable
costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation
of Legal Requirements or any material violation of the rights of any
Person and no material effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and
(ii) the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent.
If the indemnifying party does not undertake to defend such matter to
which the indemnified party is entitled to indemnification hereunder
within 10 days after receiving notice of the Proceeding's
commencement, the indemnified party may undertake such defense through
counsel of its choice, at the cost and expense of the indemnifying
party, and the indemnified party may settle such matter, and the
indemnifying party shall reimburse the indemnified party for the
amount paid in such settlement and any other liabilities, costs or
expenses incurred by the indemnified party in connection therewith,
provided, however, that under no circumstances shall the indemnified
party settle any third
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party claim without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld. The indemnified
party shall make available to the indemnifying party all records,
other materials and personnel reasonably required by it for its use in
contesting any third party claims and shall cooperate fully with the
indemnifying party in the defense of all such claims.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability
that a Proceeding may materially adversely affect it or its affiliates
other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified
party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
10.11 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
10.12 Payment in Cash or Parent Stock. Payment of indemnification
claims under this Section 10 may be paid in either cash or Parent Stock, in the
sole discretion of Shareholders. The shares of Parent Stock shall be valued at
$10.00 for purposes of the payment of such indemnification claims.
10.13 Subrogation Rights. If Parent, Subco the Surviving
Corporation or any of their respective Representatives, shareholders,
controlling persons and affiliates makes a claim for indemnification with
respect to the environmental representations and warranties set forth in
Section 3.19 hereof or under Section 10.3 hereof (an "Environmental Claim"),
(i) Shareholders shall have rights of subrogation with respect to any lawful
claim, right or demand of Parent, Subco, the Company or the Surviving
Corporation against any third Person to the extent such claim, right or demand
relates to such Environmental Claim (the "Environmental Indemnification
Rights"), including any common law or statutory rights of contribution or
indemnity, contractual rights or indemnification rights from J.K. Neal or his
affiliates pursuant to that certain Contract for Purchase and Sale of Real
Estate, dated February 15, 1995, by and among J.Kenneth Neal, J. Kenneth Neal,
Mission Ice Services of Laredo, Inc. and the Company and that certain Lease
Agreement dated March 1, 1988 between J.K. Neal, Inc. and the Company and that
certain Asset Sale Agreement, dated February 8, 1988 by and between A.J. Lewis
III, agent for corporation to be formed as "Mission Party Ice, Inc." and J.K.
Neal, Inc., formerly known as Mission Ice and Fuel Company, Inc. or any other
agreement (ii) Parent and Subco shall, and shall cause the Surviving
Corporation to, take all such actions necessary to assign any and all of such
Environmental Indemnification Rights to Shareholders, and (iii) Parent and
Subco shall, and shall cause the Surviving Corporation to, preserve and assert
any such claims of contribution and indemnity and to provide reasonable
assistance to Shareholders in asserting such Environmental Indemnification
Rights against a Person.
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SECTION 11. GENERAL PROVISIONS
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants.
Shareholders will cause the Company not to incur or pay any out-of-pocket
expenses after December 31, 1996 in connection with this Agreement. In the
event of termination of this Agreement, the obligation of each party to pay its
own expenses will be subject to any rights of such party arising from a breach
of this Agreement by another party. Notwithstanding any provision in this
Agreement to the contrary, and in addition to any other rights Shareholders
may have hereunder, in the event that the Contemplated Transactions are not
consummated, for any reason other than the Breach by Shareholders of any
covenant, agreement, representation or warranty, Parent shall pay to
Shareholders and the Company an amount equal to the sum of all of the
out-of-pocket costs, fees and expenses incurred by Shareholders and the
Company in connection with the preparation, execution and performance of this
Agreement and the Contemplated Transactions, including without limitation all
fees and expenses of agents, representatives, counsel and accountants.
11.2 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Parent and the
Shareholders mutually agree. Unless consented to by Parent and the
Shareholders in advance or required by Legal Requirements, prior to the Closing
Shareholders shall, and shall cause the Company to, and Parent shall and shall
cause Subco to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. Shareholders and Parent will
consult with each other concerning the means by which the Company's employees,
customers, and suppliers and others having dealings with the Company will be
informed of the Contemplated Transactions, and Parent will have the right to be
present for any such communication.
11.3 Confidentiality. Each of Parent, Subco and Shareholders will
maintain in confidence, and will cause their respective the directors,
officers, employees, agents, and advisors to maintain in confidence, and not
use to the detriment of another party or the Company any written, oral, or
other information obtained in confidence from another party or the Company in
connection with this Agreement or the Contemplated Transactions, unless (a)
such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Transactions, or (c) the furnishing or
use of such information is required by or necessary or appropriate in
connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return to the other party any documents, and all copies thereof, received or
obtained by it in connection with the Contemplated Transactions, without
retaining copies thereof, and will destroy all copies of analyses,
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compilations, studies or other documents it has prepared containing or
reflecting any of such confidential information. Notwithstanding the return or
destruction of confidential information, each of the parties will continue to
be bound by the obligation of confidentiality and other obligations hereunder.
11.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the other
parties):
If to Parent or Subco: Packaged Ice, Inc.
Attention: President
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Facsimile No.: (713) 464-4681
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attention: Alan Schoenbaum, P.C.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
If to Shareholders or
Minority Shareholders: A.J. Lewis III
801 Ivy Lane
San Antonio, Texas 78209
Facsimile No.: (210) 532-1600
If to the Company: Southwest Texas Packaged Ice, Inc.
Attention: President
P.O. Box 10180
San Antonio, Texas 78210
Facsimile No.: (210) 532-1600
with a copy to: Cox & Smith Incorporated
Attention: James B. Smith, Jr., Esq.
112 E. Pecan, Suite 1800
San Antonio, Texas 78205
Facsimile No.: (210) 226-8395
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11.5 Arbitration. Except with respect to any claimed breach of the
provisions of Section 11.3 hereof, the parties agree that all disputes,
controversies or claims that may arise among them (including their agents and
employees), including without limitation any dispute, controversy or claim
arising out of or relating to this Agreement or any other agreement, or the
breach, termination or invalidity thereof, whether entered into or arising
prior, on or subsequent to the date hereof, shall be submitted to, and
determined by, binding arbitration. Such arbitration shall be conducted before
a single arbitrator pursuant to the Commercial Arbitration Rules then in effect
of the American Arbitration Association, except to the extent such rules are
inconsistent with this Section 11.5. Exclusive venue for such arbitration
shall be in San Antonio, Bexar County, Texas. The arbitrator shall apply the
laws of the State of Texas (without regard to conflict of law rules) in
determining the substance of the dispute, controversy or claim and shall decide
the same in accordance with applicable usages and terms of trade. Evidentiary
questions shall be governed by the Federal Rules of Evidence. The arbitrator's
award shall be in writing and shall set forth findings and conclusions upon
which the arbitrator based the award. The prevailing party in any such
arbitration shall be entitled to recover its reasonable attorneys' fees, costs
and expenses incurred in connection with the arbitration. Any award pursuant
to such arbitration shall be final and binding upon the parties and judgment on
the award may be entered in any federal or state court sitting or located in
Bexar County, Texas, or in any other court having jurisdiction. The provisions
of this Section 11.5 shall survive the termination of this Agreement.
Notwithstanding the foregoing, this Section 11.5 shall not prevent any party
from seeking preliminary injunctive relief from a court of competent
jurisdiction, provided, however, such action shall not constitute a waiver of
the provisions of this Section 11.5 with respect to any other dispute, as this
Section 11.5 shall continue to govern any and every other such dispute between
the parties, including, without limitation, the right of a party to any other
damages, injunctive relief and any other remedy, at law or in equity.
11.6 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7 Waiver. Except as expressly provided herein, the rights and
remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the documents referred to in this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
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11.8 Entire Agreement and Modification. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Parent and Shareholders dated November
22, 1996) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
11.9 Disclosure Letters.
(a) The disclosures in the Shareholders' Disclosure
Letter and the Parent's Disclosure Letter must relate only to the
representations and warranties in the Section of the Agreement to
which they expressly relate and not to any other representation or
warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure
Letter (other than an exception expressly set forth as such in the
Disclosure Letter with respect to a specifically identified
representation or warranty), the statements in the body of this
Agreement will control.
11.10 Assignments, Successors, and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that Parent may assign any of its rights
under this Agreement to any Subsidiary of Parent. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.11 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
11.12 Section Headings, Construction. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
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11.13 Time of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
11.14 Governing Law. This Agreement will be governed by the laws of
the State of Texas without regard to conflicts of laws principles.
11.15 Enforcement; Venue; Service of Process. In the event either
party shall seek enforcement of any covenant, warranty or other term or
provision of this Agreement or seek to recover damages fore the breach thereof,
the party which prevails in such proceedings shall be entitled to recover
reasonable attorneys' fees and expenses actually incurred by it in connection
therewith. Subject to Section 11.5, and without waiving the same, the parties
hereto agree that this Agreement is performable in Bexar County, Texas and that
the sole and exclusive venue for any proceeding involving any claim arising
under or relating to this Agreement shall be in Bexar County, Texas. The
parties hereto agree that the service of process or any other papers upon them
or any of them by either of the methods specified in clauses (a) and (c) of,
and otherwise in accordance with, Section 11.4 hereto shall be deemed good,
proper, and effective service upon them.
11.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
(SIGNATURE PAGES FOLLOW)
<PAGE> 73
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
PARENT: PACKAGED ICE, INC.
By:
-----------------------------------
James F. Stuart,
Chief Executive Officer
SUBCO: PACKAGED ICE STPI, INC.
By:
-----------------------------------
James F. Stuart,
Chief Executive Officer
THE COMPANY: SOUTHWEST TEXAS PACKAGED ICE, INC.
By:
-----------------------------------
A.J. Lewis III, President
SHAREHOLDERS:
---------------------------------------
A.J. Lewis III
---------------------------------------
Liza B. Lewis
65
<PAGE> 74
(SIGNATURE PAGE FOLLOWS)
66
<PAGE> 75
MINORITY SHAREHOLDERS:
---------------------------------------
Dan Detmar
---------------------------------------
Jack Bradford, Sr.
---------------------------------------
James B. Cox
---------------------------------------
Steven Rieken
---------------------------------------
Fred Kingston
---------------------------------------
D. Trace Detmar
---------------------------------------
Ruth Pope
---------------------------------------
Betty Yost
<PAGE> 1
EXHIBIT 10.3
ESCROW AGREEMENT
This Escrow Agreement, dated as of April 17, 1997 (the "Closing
Date"), is entered into by and among Packaged Ice, Inc., a Texas corporation
("Parent"), Packaged Ice Mission, Inc., a Texas corporation ("Newco"), Packaged
Ice STPI, Inc. ("Subco"), A. J. Lewis III ("Lewis"), individually and as a
representative of Liza B. Lewis and the Minority Shareholders (listed in
Exhibit A attached hereto), and Texas Commerce Bank National Association, as
escrow agent ("Escrow Agent").
This Escrow Agreement is referred to both in the Agreement and Plan
of Merger by and among Parent, Newco, Mission Party Ice, Inc. and Lewis (the
"PIMI Merger Agreement") and the Agreement and Plan of Merger by and among
Parent, Subco, Southwest Texas Packaged Ice, Inc. ("STPI") and the shareholders
of STPI (the "STPI Merger Agreement"), both dated March 25, 1997 (together,
the "Merger Agreements"). Capitalized terms used in this Escrow Agreement
without definition shall have the respective meanings given to them in the PIMI
Merger Agreement. Lewis, Liza B. Lewis and the Minority Shareholders are
hereinafter collectively referred to as the "Shareholders."
The parties, intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) Parent is depositing with Escrow Agent 17,751 shares of the
$.01 par value common stock of Packaged Ice, Inc. ("Common Stock") and an
amount equal to $168,967.00 in immediately available funds, as increased by any
earnings thereon and distributions with respect thereto or losses on
investments (such funds and Common Stock being the "Escrow Fund"). Escrow
Agent acknowledges receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
(c) Pursuant to Section 2.9 of the STPI Merger Agreement, the
Minority Shareholders (as defined in the STPI Merger Agreement) and Liza B.
Lewis have appointed Lewis as their representative hereunder to act on their
behalf with respect to this Escrow Agreement. Parent and Escrow Agent shall be
entitled to rely on the authority of Lewis for all matters hereunder.
(d) The parties hereto acknowledge and agree that with respect to
any actions required or permitted to be taken by Newco and Subco, or either of
them, pursuant to the terms of this Escrow Agreement including, without
limitation, Claims (as hereinafter defined) made against, and payments from,
the Escrow Fund, the execution and delivery Notice, and the granting of any
consents by Newco or Subco, such actions may be taken by Parent, for itself and
for and on behalf
<PAGE> 2
of Newco and Subco, and the Escrow Agent and the Shareholders shall be entitled
to rely on the authority of Parent to take such actions for and on behalf of
Newco and Subco.
2. INVESTMENT OF FUNDS
Except as Parent and Lewis may from time to time jointly instruct
Escrow Agent in writing, the cash portion of the Escrow Fund shall be invested
from time to time, to the extent possible, in a money market mutual fund,
including any such fund for which the Escrow Agent, or any affiliate thereof,
services compensation with respect to such investment, until disbursement of
the entire Escrow Fund. Escrow Agent is authorized to liquidate in accordance
with its customary procedures any portion of the Escrow Fund (other than shares
of Common Stock) consisting of investments to provide for payments required to
be made under this Escrow Agreement.
3. CLAIMS
(a) From time to time on or before the 3rd day prior to
the Pay-out Date (as hereinafter defined), Parent may give notice (a "Notice")
to Lewis and Escrow Agent specifying in reasonable detail the nature and dollar
amount of any claim (a "Claim") for Damages it reasonably believes that it has a
right to indemnification under Section 10 of either of the Merger Agreements.
Parent may make more than one claim with respect to any underlying state of
facts; provided, however, the amount of Damages claimed with respect to such
state of facts shall not be duplicative. Parent shall promptly furnish Escrow
Agent with proof of delivery of such notice to Lewis. Within 30 days of receipt
of a Notice by Lewis, Lewis shall notify Parent and Escrow Agent whether it
disputes all or part of such Claim (a "Counter Notice and such 30-day period is
hereinafter referred to as the "Counter Notice Period"). If (in the Counter
Notice) Lewis disputes all of the Claim, such Claim shall be resolved as
provided in Section 3(d) of this Escrow Agreement. If (in the Counter Notice)
Lewis disputes only a portion of the claim, the disputed portion of the Claim
shall be resolved as provided in Section 3(d) of this Escrow Agreement, and the
undisputed portion of the Claim shall be paid to Parent by the Escrow Agent at
the end of the Counter Notice Period. If Lewis does not deliver a Counter
Notice to the Escrow Agent within the Counter Notice Period, Escrow Agent shall
pay to Parent the amount claimed in the Notice from (and only to the extent of)
the Escrow Fund at the end of the Counter Notice Period. To the extent
possible, payments from the Escrow Fund shall be made according to the following
percentages unless otherwise consented to by Parent and Shareholder: 49% in the
form of cash and 51% in the form of Common Stock. The Common Stock shall be
deemed to have a fair market value of $10.00 per share for purposes of this
Escrow Agreement. The Escrow Agent shall not inquire into or consider whether a
Claim complies with the requirements of the Merger Agreements.
(b) Except as provided in Section 3(a) or Section 4, the
Escrow Agent shall not pay the Parent any amount from the Escrow Fund except in
accordance with (i) joint written instructions of Parent and Lewis, (ii) an
arbitrator's award, or (iii) a final non-appealable order of a court of
competent jurisdiction. Any court order shall be accompanied by a legal opinion
by counsel for the
2
<PAGE> 3
presenting party satisfactory to Escrow Agent to the effect that the order is
final and non-appealable. Escrow Agent shall act on such court order and legal
opinion without further question.
(c) If Parent is entitled to receive payment out of the
Escrow Fund, Lewis shall have the right to contribute cash to the Escrow Fund
to cover such payment and to withdraw Common Stock equal in value to the cash
contributed.
(d) In the event that Lewis disputes all or part of a
Claim, Parent and Lewis shall endeavor in good faith to resolve such dispute,
and if such dispute cannot be resolved within 30 days after Parent receives a
Counter Notice from Lewis, such dispute shall be resolved by binding
arbitration as hereinafter provided. Upon final resolution of any such
dispute, Parent, and Lewis shall jointly execute and deliver the Escrow Agent a
joint notice instructing the Escrow Agent to deliver the amount of the Claim as
resolved.
4. TERMINATION OF ESCROW
a. On or before the 3rd day prior to the Pay-out-Date
(hereinafter defined) or the next Business Day (hereinafter defined) if such
day is not a Business Day, the Escrow Agent shall deliver to Parent and Lewis a
summary of the Pending Claims (hereinafter defined). At the opening of
business on the first anniversary of the date hereof or the next Business Day
if such day is not a Business Day (the "Pay-out-Date), the Escrow Agent shall
reserve such portion of the Escrow Fund as would then be needed to satisfy the
amount of the Pending Claims. Of this reserve, unless otherwise directed by
Parent or Shareholder, 49% shall be in the form of cash and 51% shall be in the
form of Common Stock. On the Pay-out Date, the Escrow Agent shall then
transfer to Lewis the remaining portion of the Escrow Fund, if any, which has
not been reserved pursuant to this Section 4. After the Pay-out Date, and when
Pending Claims are finally paid, compromised, settled, arbitrated or litigated,
the Escrow Agent shall from time to time pay and disburse to Lewis any amounts
in excess of the aggregate amount made the subject of any Pending Claims. For
purposes hereof, "Pending Claims" shall mean those Claims as to which (i) the
Escrow Agent shall have received Notice in accordance with Section 3 hereof on
or before the 3rd day prior to the Pay-out Date, (ii) Parent has not received
payment of such Claim as of such date, and (iii) Parent and Lewis shall not
have informed the Escrow Agent as of such date that such Claims are no longer
being asserted or have been otherwise waived by Parent or dismissed in any
related legal proceeding or arbitration.
b. This Escrow Agreement shall terminate upon the
occurrence of the earlier of (a) agreement on the part of Parent and Lewis and
(b) payment by the Escrow Agent of all of the Escrow Fund in accordance with
this Escrow Agreement. Notwithstanding any termination of this Escrow
Agreement, the provisions of Sections 9, 10, 11, 12, 15 and 20 shall survive
such termination and remain in full force and effect.
3
<PAGE> 4
5. RIGHTS TO ESCROW FUND
Except as otherwise expressly provided herein, the Escrow Fund
shall be for the exclusive benefit of Parent, Newco, Subco and the
Shareholders, and their respective successors and assigns, and no other person,
firm or corporation shall have any right, title, or interest therein; and any
claim of any person to the Escrow Fund, or any part thereof, shall be subject
and subordinate to the prior right thereto and lien of Parent, Newco, Subco and
the Shareholders.
6. ACCOUNT STATEMENTS
Receipt of the Escrow Fund and investment and reinvestment of the
cash portion of the Escrow Fund shall be confirmed by Escrow Agent as soon as
practicable by account statement, and any discrepancies in any such account
statement shall be noted by Parent and Lewis to Escrow Agent within 30 calendar
days after receipt thereof. Failure to inform Escrow Agent in writing of any
discrepancies in any such account statement within such 30 day period shall be
conclusively deemed confirmation of such account statement in its entirety.
For purposes of this Section 6, each account statement shall be deemed to have
been received by the party to whom directed on the earlier to occur of (i)
actual receipt thereof and (ii) three "Business Days" (hereinafter defined)
after the deposit thereof in the United States Mail, postage prepaid. The
term "Business Day" shall mean any day of the year, excluding Saturday, Sunday
and any other day on which national banks are required or authorized to close
in San Antonio, Texas.
7. TAX MATTERS
Parent and Lewis shall provide Escrow Agent with its taxpayer
identification number documented by an appropriate Form W8 or Form W9 upon
execution of this Escrow Agreement. Failure to so provide such forms may
prevent or delay disbursements from the Escrow Fund and may also result in the
assessment of a penalty and Escrow Agent's being required to withhold tax on
any interest or other income earned on the Escrow Fund. Any payments of income
shall be subject to applicable withholding regulations then in force in the
United States or any other jurisdiction, as applicable.
8. SCOPE OF UNDERTAKING.
Escrow Agent's duties and responsibilities in connection with this
Escrow Agreement shall be purely ministerial and shall be limited to those
expressly set forth in this Escrow Agreement. Escrow Agent shall have no
responsibility or obligation of any kind in connection with this Escrow
Agreement or the Escrow Fund and shall not be required to deliver the Escrow
Fund or any part thereof or take any action with respect to any matters that
might arise in connection therewith, other than to receive, hold, invest,
reinvest and deliver the Escrow Fund as herein provided. Without limiting the
generality of the foregoing, it is hereby expressly agreed and
4
<PAGE> 5
stipulated by the parties hereto the Escrow Agent shall not be required to
exercise any discretion hereunder and shall have no investment or management
responsibility and, accordingly, shall have no duty to, or liability for its
failure to, provide investment recommendations or investment advice to the
Other Parties or any of them. Escrow Agent shall not be liable for any error
in judgment, any act or omission, any mistake of law or fact, or for anything
it may do or refrain from doing in connection herewith, except for, subject to
Section 9 hereinbelow, its own willful misconduct, bad faith or gross
negligence. It is the intention of the parties hereto that Escrow Agent shall
never be required to use, advance or risk its own funds or otherwise incur
financial liability in the performance of any of its duties or the exercise of
any of its rights and powers hereunder.
9. RELIANCE; LIABILITY
Escrow Agent may rely on, and shall not be liable for acting or
refraining from acting in accordance with, any written notice, instruction or
request or other paper furnished to it hereunder or pursuant hereto and
believed by it to have been signed or presented by the proper party or parties.
Escrow Agent shall be responsible for holding, investing, reinvesting and
disbursing the Escrow Fund pursuant to this Escrow Agreement; provided,
however, that Escrow Agent shall have no liability for any loss arising from
any cause beyond its control, including, but no limited to, the following: (a)
acts of God, force majeure, including, without limitation, war (whether or not
declared or existing), revolution, insurrection, riot, civil commotion,
accident, fire, explosion, stoppage of labor, strikes and other differences
with employees; (b) the act, failure or neglect of any Other Party or any agent
or correspondent of any Other Party; (c) any delay, error, omission or default
of any mail, courier, telegraph, cable or wireless agency or separator; or (d)
the acts or edicts of any government or governmental agency or other group or
entity exercising governmental powers. Escrow Agent is not responsible or
liable in any manner whatsoever for the sufficiency, correctness, genuineness
or validity of the subject matter of this Escrow Agreement or any part hereof
or for transactions requiring or underlying the execution of this Escrow
Agreement, the form or execution hereof or for the identity or authority of any
person executing the Escrow Agreement on behalf of the Other Parties or
depositing the Escrow Fund.
10. RIGHT OF INTERPLEADER
Subject to Section 20 hereof and without waiving the same, should
any controversy arise involving the parties hereto or any of them or any other
person, firm or entity and such controversy results in claims and demands
having made by them, or any of them in connection with or for any part of the
Escrow Fund, or should a substitute escrow agent fail to be designated as
provided in Section 16 hereof, Escrow Agent shall have the right, but not the
obligation, either to (a) withhold delivery of the Escrow Fund until the
controversy is resolved or the conflicting demands are withdrawn or (b)
institute a petition for interpleader in any court of competent jurisdiction to
determine the rights of the parties hereto. The parties hereto agree that to
the extent such controversy is between the Other Parties, such controversy
shall be resolved in accordance with Section 20 and the parties hereto shall
take such actions as may be necessary to cause the court in which such petition
for interpleader has been filed to recognize and enforce the arbitrator's
award.
5
<PAGE> 6
In the event Escrow Agent is a party to any dispute, Escrow Agent shall have
the additional right to refer such controversy to binding arbitration. Should
a petition for interpleader be instituted, or should Escrow Agent be threatened
with litigation or become involved in litigation or binding arbitration in any
manner whatsoever in connection with this Escrow Agreement or the Escrow Fund,
the Other Parties hereby jointly and severally agree to reimburse Escrow Agent
for its reasonable attorney's fees and any and all other reasonable expenses,
losses, costs and damages incurred by Escrow Agent in connection with or
resulting from such threatened or actual litigation or arbitration prior to any
disbursement hereunder except to the extent arising out of the Escrow Agent's
willful misconduct, bad faith or gross negligence.
11. INDEMNIFICATION
The Other Parties hereby jointly and severally indemnify Escrow
Agent, its officers, directors, partners, employees and agents (each herein
called an "Indemnified Party") against, and hold each Indemnified Party
harmless from, any and all expenses, including, without limitation, attorney's
fees and court costs, losses, costs, damages and claims, including, but not
limited to, costs of investigation, litigation and arbitration, tax liability
and loss on investments suffered or incurred by any Indemnified Party in
connection with or arising from or out of this Escrow Agreement, except such
acts or omissions as may result from the willful misconduct, bad faith or gross
negligence of such Indemnified Party. IT IS THE EXPRESS INTENT OF EACH OF THE
OTHER PARTIES TO INDEMNIFY EACH OF THE INDEMNIFIED PARTIES FOR, AND HOLD THEM
HARMLESS AGAINST, THEIR OWN NEGLIGENT ACTS OR OMISSION.
12. COMPENSATION AND REIMBURSEMENT OF EXPENSES
The Other Parties hereby agree, jointly and severally, (i) to pay
Escrow Agent for its services hereunder in accordance with the fee schedule
attached hereto as Exhibit B and (ii) to pay all reasonable expenses incurred
by Escrow Agent in connection with the performance of its duties and
enforcement of its rights hereunder and otherwise in connection with the
preparation, operation, administration and enforcement of this Escrow
Agreement, including, without limitation, reasonable attorney's fees, brokerage
costs and related expenses incurred by Escrow Agent. No increase in the rate
of any fee charged by the Escrow Agent shall be valid hereunder unless
previously approved in writing by Parent and Lewis. The fee of $1,500 for the
initial one year period shall be paid one-half (1/2) by Shareholders and
one-half (1/2) by Parent to the Escrow Agent upon execution of this Escrow
Agreement. As between Parent and Shareholders, any such compensation and
reimbursement to which Escrow Agent is entitled shall be borne 50% by Parent
and 50% by Shareholders.
13. NOTICES
Any notice or other communication required or permitted to be given
under this Escrow Agreement by any party hereto to any other party hereto shall
be considered as properly given if
6
<PAGE> 7
in writing and (a) delivered against receipt therefor, (b) mailed by registered
or certified mail, return receipt requested and postage prepaid of (c) sent by
facsimile, in each case to the address or facsimile number, as the case may be,
set forth below:
If to Parent,
Newco or Subco: Packaged Ice, Inc.
Attention: President
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Facsimile No.: (713) 464-4681
with a copy to: Akin, Gump, Strauss, Hauer & Feld,
L.L.P.
Attention: Alan Schoenbaum, P.C.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
If to Shareholders: A.J. Lewis III
801 Ivy Lane
San Antonio, Texas 78209
If to the Company: Mission Party Ice, Inc.
Attention: President
P.O. Box 10180
San Antonio, Texas 78210
Facsimile No.: (210) 532-1600
with a copy to: Cox & Smith Incorporated
Attention: James B. Smith, Jr., Esq.
112 E. Pecan, Suite 1800
San Antonio, Texas 78205
Facsimile No.: (210) 226-8395
Escrow Agent: Texas Commerce Bank, N.A.
711 Navarro, 1st Floor
San Antonio, TX 78205
Corporate Trust/Escrow Section
Attention: Angie Bendele
Facsimile No.: (210)271-8099
Except to the extent otherwise provided in Section 6 hereinabove delivery of
any communication given in accordance herewith shall be effective only upon
actual receipt thereof by the party or
7
<PAGE> 8
parties to whom such communication is directed. Any party to this Escrow
Agreement may change the address to which communications hereunder are to be
directed by giving written notice to the other party or parties hereto in the
manner provided in this section. Notwithstanding the foregoing, any notice
hereunder delivered to Lewis with respect to a Claim shall only be given in
accordance with clauses (a) and (b) above, and notice to Lewis by facsimile
with respect to a Claim shall not be deemed given for purposes of this Escrow
Agreement.
14. CONSULTATION WITH LEGAL COUNSEL
Escrow Agent may consult with its counsel or other counsel
satisfactory to it concerning any question relating to its duties or
responsibilities hereunder or otherwise in connection herewith and shall not be
liable for any action taken, suffered or omitted by it in good faith upon the
advice of such counsel.
15. CHOICE OF LAW; CUMULATIVE RIGHTS
This Escrow Agreement shall be construed under, and governed by,
the laws of the State of Texas, excluding, however, (a) its choice of law rules
and (b) the portions of the Texas Trust Code Sec. 111.001, et. seq. of the
Texas Property code concerning fiduciary duties and liabilities of trustees.
All of Escrow Agent's rights hereunder are cumulative of any other rights it
may have at law, in equity or otherwise. Subject to Section 20 hereof and
without waiving the same, the parties hereto agree that the forum for
resolution of any dispute arising under this Escrow Agreement shall be Bexar
County, Texas, and each of the Other Parties hereby consents, and submits
itself, to the jurisdiction on any state or federal court sitting in Bexar
County, Texas.
16. RESIGNATION
The Escrow Agent may removed at any time with the written consent
of Parent and Lewis. Escrow Agent may resign hereunder upon thirty (30) days'
prior notice to the Parent and Lewis. If the Escrow Agent shall resign or be
removed, Parent and Lewis shall appoint, as soon as possible, a successor
escrow agent. Upon the effective date of such resignation or removal, Escrow
Agent shall deliver the Escrow Fund to any substitute escrow agent designated
by Parent and Lewis in writing. Any successor escrow agent shall be deemed to
have accepted the responsibilities hereunder upon execution of this Escrow
Agreement and delivery of such executed document to Parent and Lewis. If
Parent and Lewis fail to designate a substitute escrow agent within thirty (30)
days after the giving of such notice, Escrow Agent may institute a petition for
interpleader. Escrow Agent's sole responsibility after such 30-day notice
period expires shall be to hold the Escrow Fund (without any obligation to
reinvest the same) and to deliver the same to a designated substitute escrow
agent, if any, or in accordance with the directions of a final order or
judgment of a court of competent jurisdiction, at which time of delivery Escrow
Agent's obligations hereunder shall cease and terminate.
8
<PAGE> 9
17. ASSIGNMENT
This Escrow Agreement shall not be assigned by either of the Other
Parties without the prior written consent of Escrow Agent (such assigns of the
Other Parties to which Escrow Agent consents, if any, and Escrow Agent's
assigns being hereinafter referred to collectively as "Permitted Assigns").
18. SEVERABILITY
If one or more of the provisions hereof shall for any reason be
held to be invalid, illegal or unenforceable in any respect under applicable
law, such invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and this Escrow Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein,
and the remaining provisions hereof shall be given full force and effect.
19. GENERAL
The section headings contained in this Escrow Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Escrow Agreement. This Escrow Agreement and any
affidavit, certificate, instrument, agreement or other document required to be
provided hereunder may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
but one and the same instrument. Unless the context shall otherwise required,
the singular shall include the plural and vice-versa, and each pronoun in any
gender shall include all other genders. The terms and provisions of this
Escrow Agreement constitute the entire agreement among the parties hereto in
respect of the subject matter hereof, and neither the Other Parties nor Escrow
Agent has relied on any representations or agreements of the other, except as
specifically set forth in this Escrow Agreement or, with respect to the Other
Parties, the Merger Agreements. This Escrow Agreement or any provision hereof
may be amended, modified, waived or terminated only by written instrument duly
signed by the parties hereto. This Escrow Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their respective heirs,
devisees, executor, administrators, personal representatives, successors,
trustees, receivers and Permitted Assigns. This Escrow Agreement is for the
sole and exclusive benefit of the Other Parties and the Escrow Agent, and
nothing in this Escrow Agreement, express or implied, is intended to confer or
shall be construed as conferring upon any other person any rights, remedies or
any other type or types of benefits.
20. ARBITRATION
All disputes hereunder between or among any of the Shareholders,
Parent, Subco and/or Newco shall be settled in accordance with Section 11.5 of
the Merger Agreements.
9
<PAGE> 10
21. WAIVER
The rights and remedies of the parties to this Escrow Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Escrow Agreement or the
documents referred to in this Escrow Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Escrow Agreement or the documents referred to in
this Escrow Agreement can be discharged by one party, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other party; (b) no waiver that may be given by a party will be applicable
except in the specific instance for which it is given; and (c) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further
action without notice or demand as provided in this Escrow Agreement or the
documents referred to in this Escrow Agreement.
(SIGNATURE PAGE FOLLOW)
10
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow Agreement as of the date first written above.
PACKAGED ICE, INC.
By:
-----------------------------------
James F. Stuart, CEO
ESCROW AGENT:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:
-----------------------------------
Title:
---------------------------------
LEWIS:
---------------------------------------
A.J. Lewis III, individually
---------------------------------------
A.J. Lewis III, as the representative
of Liza B. Lewis and the Minority
Shareholders
11
<PAGE> 12
EXHIBIT A
MINORITY SHAREHOLDERS:
Dan Detmar
Jack Bradford, Sr.
James B. Cox
Steven Rieken
Fred Kingston
D. Trace Detmar
Ruth Pope
Betty Yost
<PAGE> 13
ESCROW AGREEMENT
BETWEEN PACKAGED ICE, INC.,
PACKAGED ICE MISSION, INC.,
PACKAGED ICE STPI, INC.,
A.J. LEWIS III, INDIVIDUALLY AND AS REPRESENTATIVE,
AND ESCROW AGENT
ANNEX 1
PACKAGED ICE, INC.
STOCK CERTIFICATES HELD IN ESCROW
<TABLE>
<CAPTION>
CERT. NO. NO. OF SHARES DATE ISSUED TO:
- --------- ------------- ---- ----------
<S> <C> <C> <C>
149 3,468 04/17/97 Liza B. Lewis and
A.J. Lewis III
152 14,283 04/17/97 A.J. Lewis III
------
Total: 17,751
</TABLE>
GRAND TOTAL: 17,751 SHARES
<PAGE> 1
EXHIBIT 10.4
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement") is made as of
April 17, 1997, by and between Packaged Ice, Inc., a Texas corporation
("Parent"), Packaged Ice Mission, Inc., a wholly-owned subsidiary of Parent and
a Texas corporation ("Newco"), Packaged Ice STPI, a wholly-owned subsidiary of
Parent and a Texas corporation ("Subco"), and A.J. Lewis III an individual
residing in Bexar County, Texas ("Shareholder").
RECITALS
WHEREAS, Shareholder and the respective Boards of Directors of
Parent, Newco, and Mission Party Ice, Inc., a Texas corporation ("Mission")
each intends to effect a merger of Mission with and into Newco, pursuant to the
terms and conditions of the Agreement and Plan of Merger made as of April 17,
1997 (the "PIMI Agreement"); and
WHEREAS, Shareholder and the respective Boards of Directors of
Parent, Subco, and Southwest Texas Packaged Ice, Inc., a Texas corporation
("STPI") each intends to effect a merger of STPI with and into Subco, pursuant
to the terms and conditions of the Agreement and Plan of Merger made as of
April 17, 1997 (the "STPI Agreement"); and
WHEREAS, Section 2.8(a)(ii) of the PIMI Agreement and Section
2.8(a)(ii) of the STPI Agreement require that a noncompetition agreement be
executed and delivered by Shareholder as a condition to the consummation of the
Merger;
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
Capitalized terms not expressly defined in this Agreement shall
have the meanings ascribed to them in the PIMI Agreement.
"COMPANIES" shall mean Mission, STPI and the Surviving Corporations,
collectively.
"SURVIVING CORPORATIONS" shall mean both the Surviving Corporation as defined
in the PIMI Agreement and the Surviving Corporation as defined in the STPI
Agreement.
2. ACKNOWLEDGMENTS BY SHAREHOLDER
Shareholder understands, acknowledges and agrees that (a)
Shareholder has occupied a position of trust and confidence with Mission and
STPI prior to the date hereof and has become
<PAGE> 2
familiar with the following, any and all of which constitute confidential
information of the Surviving Corporations (collectively the "Confidential
Information"): (i) any and all trade secrets concerning the business and
affairs of the Companies, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing and distribution methods and
processes, acquisition opportunities, customer lists, current and anticipated
customer requirements, price lists, market studies, business plans, computer
software and programs (including object code and source code), computer
software and database technologies, systems, structures and architectures (and
related processes, formulae, compositions, improvements, devices, know-how,
inventions, discoveries, concepts, ideas, designs, methods and information of
the Companies and any other information, however documented, of the Companies
that is a trade secret, (ii) any and all information concerning the business
and affairs of the Companies (which includes historical financial statements,
financial projections and budgets, historical and projected sales, capital
spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials), however documented, and (iii)
any and all notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Companies containing or based, in whole or in
part, on any information included in the foregoing; (b) the businesses of the
Companies and Parent are national or regional in scope; (c) their products and
services are marketed throughout the United States; (d) the Companies and
Parent compete with other businesses that are or could be located in any part
of the United States, and Parent is causing a merger with Mission and STPI in
connection with its consolidation strategy which Parent has explained in detail
to Shareholder; (e) Parent has required that Shareholder make the covenants set
forth in Sections 3 and 4 of this Agreement as a condition to Parent's
acquisition of Mission and STPI; (f) the provisions of Sections 3 and 4 of this
Agreement are reasonable and do not impose a greater restraint on Shareholder
than is necessary to protect the goodwill or other business interest of Parent
and the Surviving Corporations; (g) Parent has a legitimate interest in
protecting the confidentiality of its business secrets (including the
Confidential Information); (h) the provisions set forth in Sections 3 and 4 are
not oppressive to Shareholder nor injurious to the public; and (i) Parent would
be irreparably damaged if Shareholder were to breach the covenants set forth in
Sections 3 and 4 of this Agreement. None of the information relating solely
to the former division of Mission d/b/a Mission Ice Equipment Company, which
was sold to South Texas Equipment Distributors, Inc., shall be deemed
Confidential Information.
3. CONFIDENTIAL INFORMATION
Shareholder acknowledges and agrees that all Confidential
Information known or obtained by Shareholder, whether before or after the date
hereof, is now the property of the Surviving Corporations. Therefore,
Shareholder agrees that he will not, at any time, disclose to any unauthorized
Persons or use for his own account or for the benefit of any third party any
Confidential Information, whether Shareholder has such information in his
memory or embodied in writing or other physical form, without the written
consent of the Surviving Corporations, unless and to the extent that the
Confidential Information (i) is or becomes generally known to and available for
use by the public, other than as a result of the fault of Shareholder or any
other Person bound by a duty of confidentiality to Parent or the Companies,
(ii) becomes available to Shareholder on a non-
2
<PAGE> 3
confidential basis from a source other than Parent or the Surviving
Corporations, provided that such source is not bound by a confidentiality
agreement or other contractual, legal or fiduciary obligation of
confidentiality to Parent or the Surviving Corporations, or (iii) Shareholder
or any of his representatives is compelled to disclose by judicial or
administrative process or, in the opinion of Shareholder's counsel, by other
mandatory requirements of law. Shareholder agrees to deliver to Parent at any
time Parent may request, all documents, memoranda, notes, plans, records,
reports, and other documentation, models, components, devices, or computer
software, whether embodied in a disk or in other form (and all copies of all of
the foregoing), relating to the businesses, operations, or affairs of the
Companies and any other Confidential Information that Shareholder may then
possess or have under Shareholder's control. Shareholder's obligations with
respect to this paragraph 3 shall terminate two years after the date of
termination of his employment with the both of the Surviving Corporations.
4. NONCOMPETITION
As an inducement for Parent to enter into the PIMI Agreement and
the STPI Agreement and as additional consideration to Parent in exchange for
the consideration paid to Shareholder under the PIMI Agreement and the STPI
Agreement, Shareholder agrees that:
(a) For a period of five (5) years after the Closing
within the states in which the Parent or any of its Subsidiaries transacts, or
reasonably expects to transact, business, without the express consent of the
Parent or the Surviving Corporations:
(i) Except with respect to his employment by Parent
and ownership of Parent Stock, Shareholder will not, directly or
indirectly, engage or invest in, own, manage, operate, finance,
control, or participate in the ownership, management, operation,
financing, or control of, be employed by, associated with, or in
any manner connected with, lend Shareholder's name or any similar
name to, lend Shareholder's credit to, or render services or advice
to, any business whose products or activities compete in whole or
in part with the products or activities of the Parent as of the
date of the termination of his employment with the Parent;
provided, however, that Shareholder may purchase or otherwise
acquire up to (but not more than) one percent of any class of
securities of any enterprise (but without otherwise participating
in the activities of such enterprise) if such securities are listed
on any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of
1934. Notwithstanding the foregoing, Shareholder shall not be
restricted with respect to the retail and wholesale business of
selling, renting and leasing commercial refrigeration equipment,
including ice machines and ice merchandisers (but specifically
excluding systems which make, bag and merchandise packaged ice).
Shareholder agrees that this covenant is reasonable with respect to
its duration, geographical area, and scope.
(ii) Shareholder will not, directly or indirectly,
either for himself or any other Person, except in his capacity as
officer of the Parent or either of the Surviving Corporations, (A)
solicit or attempt to solicit any employee of Parent in attempt to
encourage the employee to leave the employ of Parent, (B) in any
way interfere with the
3
<PAGE> 4
relationship between Parent and any employee of Parent or either of
the Surviving Corporations, (C) knowingly employ, or otherwise
engage as an employee, independent contractor, or otherwise, any
employee of Parent or either of the Surviving Corporations, or (D)
induce or attempt to induce any customer, supplier, licensee, or
business relation of Parent to cease doing business with Parent, or
in any way interfere with the relationship between any customer,
supplier, licensee, or business relation of Parent; provided,
however, this prohibition shall not apply to general advertisements
in newspapers or other widely distributed publications, media, or
mail, whether electronic or otherwise.
(iii) Shareholder will not, directly or indirectly,
either for himself or any other Person, solicit the business of any
Person known to Shareholder to be a customer or prospective
customer (identified as such by Parent while Shareholder is in the
employ of the Parent or either of the Surviving Corporations) of
Parent or any subsidiary of the Parent, whether or not Shareholder
had personal contact with such Person, with respect to products or
activities which compete in whole or in part with the products or
activities of Parent or any subsidiary thereof;
(b) In the event of a breach by Shareholder of any covenant set
forth in Subsection 4(a) of this Agreement, the term of such covenant will be
extended by the period of the duration of such breach;
5. REMEDIES
If Shareholder breaches the covenants set forth in Sections 3 or 4
of this Agreement, Parent will be entitled to the following remedies:
(a) Damages from Shareholder; and
(b) In addition to its right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of
Sections 3 and 4 of this Agreement, it being agreed that money damages alone
would be inadequate to compensate the Parent and the Surviving Corporations and
would be an inadequate remedy for such breach
The rights and remedies of the parties to this Agreement are cumulative and not
alternative.
6. SUCCESSORS AND ASSIGNS
This Agreement will be binding upon Parent, Newco, Subco, the
Surviving Corporations and Shareholder and will inure to the benefit of Parent
and the Surviving Corporations and their affiliates, successors and assigns and
Shareholder and Shareholder's assigns, heirs and legal representatives.
Neither this Agreement nor any rights or obligations hereunder shall be
assignable by any of the parties hereto, including without limitation,
assignments by operation of law.
4
<PAGE> 5
7. WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement will operate
as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement.
8. GOVERNING LAW
This Agreement will be governed by the laws of the State of Texas
without regard to conflicts of laws principles.
9. JURISDICTION; SERVICE OF PROCESS
The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in this Agreement upon the courts of any state
or other jurisdiction in which any alleged breach of such covenant occurs. If
the courts of any one or more of such states or other jurisdictions hold that
such covenants are not wholly enforceable by reason of the breadth of such
scope or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect Parent or the Surviving
Corporations' right to the relief provided above in the courts of any other
states or jurisdictions within the geographical scope of such covenants, as to
breaches of such covenants in such other respective states or jurisdictions.
The above covenants as they relate to each state or jurisdiction are severable
into diverse and independent covenants.
10. SEVERABILITY
Whenever possible each provision and term of this Agreement will be
interpreted in a manner to be effective and valid but if any provision or term
of this Agreement is held to be prohibited by law or invalid, then such
provision or term will be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provision or term or the remaining provisions or terms of
this Agreement. If any of the covenants set forth in this Agreement are held
by a court of competent jurisdiction to contain limitations as to time,
geographical area or scope of activity to be restrained that are not reasonable
and impose a greater restraint than is necessary to protect the goodwill or
other business interest of Parent, the court shall reform the covenants to the
extent necessary to cause the limitations contained in the covenants as to
time, geographical area and scope of activity to be restrained to be reasonable
5
<PAGE> 6
and to impose a restraint that is not greater than necessary to protect the
goodwill or other business interest of Parent and enforce the covenants as
reformed.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
12. SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement unless otherwise specified. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
13. NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):
Shareholder: A.J. Lewis III
801 Ivy Lane
San Antonio, Texas 78209
With a copy to: James B. Smith, Esq.
Cox & Smith Incorporated
112 E. Pecan, Suite 1800
San Antonio, Texas 78205
Facsimile No.: (210)226-8395
Parent and Newco: James F. Stuart, President
Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
6
<PAGE> 7
With a copy to: Alan Schoenbaum, P.C.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street
1500 NationsBank Plaza
San Antonio, Texas 78205
Facsimile No.: (210)224-2035
14. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter of this Agreement. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
[SIGNATURE PAGE FOLLOWS]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
SHAREHOLDER:
---------------------------------------
A. J. LEWIS III
PARENT:
PACKAGED ICE, INC.
By:
-----------------------------------
JAMES F. STUART, CEO
NEWCO/SURVIVING CORPORATION:
PACKAGED ICE MISSION, INC.
By:
-----------------------------------
JAMES F. STUART, CEO
SUBCO/SURVIVING CORPORATION
PACKAGED ICE STPI, INC.
By:
-----------------------------------
JAMES F. STUART, CEO
8
<PAGE> 1
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
DATED AS OF APRIL 17, 1997
AMONG
PACKAGED ICE, INC.,
LIZA B. LEWIS AND A.J. LEWIS III
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(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 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(j) Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(k) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(l) Securities Held by the Company or Its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of April 17, 1997, among PACKAGED ICE, INC., a Texas
corporation (the "Company"), LIZA B. LEWIS and A.J. LEWIS III. (the
"Investors").
This Agreement is entered into in connection with (i) the Agreement
and Plan of Merger by and among A.J. Lewis III, Mission Party Ice, a Texas
corporation, Packaged Ice Mission, Inc., a Texas corporation and the Company
and (ii) the Agreement and Plan of Merger by and among Southwest Texas
Packaged Ice, Inc., a Texas corporation ("STPI"), Packaged Ice STPI, a Texas
corporation, the Company and the shareholders of STPI (together, the "Merger
Agreements"), both agreements being dated March 25, 1997.
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 individual Investor, for so long as he or she
owns any of the Registrable Securities, and each of his and her
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.
"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.
<PAGE> 4
"Inspectors" has the meaning ascribed to such term in Section 3(n)
hereof.
"Investor" 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.
"Merger Agreement" has the meaning ascribed to that term in the
preamble of this Agreement.
"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 the Common Stock issued to the
Investors pursuant to the Merger Agreements and any other securities
issued or issuable with respect to any shares of such Common Stock by
way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. 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 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
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<PAGE> 5
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 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.
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<PAGE> 6
"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 two 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
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 an
additional 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%
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<PAGE> 7
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, 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.
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<PAGE> 8
(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) 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. 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 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
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<PAGE> 9
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 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.
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.
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<PAGE> 10
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:
(i) 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 two Demand Registrations the Company is required to effect
pursuant to Section 2.1 hereof.
(ii) 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 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.
(iii) 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
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<PAGE> 11
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.
(iv) 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 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.
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<PAGE> 12
(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
provisions 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.
(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.
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<PAGE> 13
(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 underwriting 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, and of 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); 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
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.
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<PAGE> 14
(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.
(1) 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 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
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<PAGE> 15
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 (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
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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 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, liability, claim, damage 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 mended 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 "Indemnified Party") shall
promptly notify the Person against which such indemnity may be sought
-15-
<PAGE> 18
(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 (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 liability on Claims that are the subject matter of such proceeding and
(2) does not include any
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<PAGE> 19
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.
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<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 departure
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 and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder at the most current address of such
Holder as set forth in stock register of the Company, which address initially
is, with respect to the Investors, the address set forth in the Merger
Agreements and (ii) if to the Company, initially at the Company's address set
forth in the Merger Agreements and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section (d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
(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.
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<PAGE> 21
(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 NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, 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 NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(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. The Merger Agreements and this
Agreement, collectively are intended by the parties as a final expression of
their agreement, 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 and the Merger Agreements
supersede 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.
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<PAGE> 22
REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PACKAGED ICE, INC.
By:
-----------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
A.J. LEWIS III
---------------------------------------
LIZA B. LEWIS III
---------------------------------------
<PAGE> 1
EXHIBIT 10.6
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PACKAGED ICE, INC.,
PACKAGED ICE SOUTHWESTERN, INC.
SOUTHWESTERN ICE, INC.
AND
THE SHAREHOLDERS OF SOUTHWESTERN ICE, INC.
MARCH 25, 1997
<PAGE> 2
TABLE OF CONTENTS
Agreement and Plan of Merger
Recitals
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Applicable Contract . . . . . . . . . . . . . . . . . . . . . . . . 1
"Articles of Merger" . . . . . . . . . . . . . . . . . . . . . . . . 1
"Acquisition Price" . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Best Efforts" . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Breach" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Cap" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Cash Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Consent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Contemplated Transactions" . . . . . . . . . . . . . . . . . . . . . 2
"Contract" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Current Differential" . . . . . . . . . . . . . . . . . . . . . . . 2
"Damages" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Encumbrance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental, Health, and Safety Liabilities" . . . . . . . . . . . 3
"Environmental Law" . . . . . . . . . . . . . . . . . . . . . . . . . 3
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Escrow Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Escrow Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Escrow Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Excluded Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Facilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Governmental Authorization" . . . . . . . . . . . . . . . . . . . . 5
"Governmental Body" . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Hazardous Activity" . . . . . . . . . . . . . . . . . . . . . . . . 5
"Hazardous Materials" . . . . . . . . . . . . . . . . . . . . . . . . 5
"Intellectual Property" . . . . . . . . . . . . . . . . . . . . . . . 5
"IRC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"IRS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Knowledge" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Legal Requirement" . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Noncompetition Agreement" . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
"Occupational Safety and Health Law" . . . . . . . . . . . . . . . . 6
"Oral Notice or Communication" . . . . . . . . . . . . . . . . . . . 6
"Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Ordinary Course of Business" . . . . . . . . . . . . . . . . . . . . 6
"Organizational Documents" . . . . . . . . . . . . . . . . . . . . . 7
"Parent's Closing Documents" . . . . . . . . . . . . . . . . . . . . 7
"Parent's Disclosure Letter" . . . . . . . . . . . . . . . . . . . . 7
"Parent Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Pre-Closing Tax Period" . . . . . . . . . . . . . . . . . . . . . . 7
"Proceeding" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Registration Rights Agreement" . . . . . . . . . . . . . . . . . . . 7
"Related Person" . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Release" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Representative" . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Share Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Shareholders' Closing Documents" . . . . . . . . . . . . . . . . . . 8
"Shareholders' Disclosure Letter" . . . . . . . . . . . . . . . . . . 9
"Shareholders' Release" . . . . . . . . . . . . . . . . . . . . . . . 9
"Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Stock Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . . . 9
"Tax" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Tax Return" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Threat of Release" . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Threatened" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2. MERGER; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2. Continuing of Corporate Existence . . . . . . . . . . . . . . 10
2.3. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4. Corporate Government . . . . . . . . . . . . . . . . . . . . . 10
2.5. Conversion of Shares . . . . . . . . . . . . . . . . . . . . . 10
2.6 Rights and Liabilities of the Surviving Corporation . . . . . 12
2.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.8 Closing Obligations . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDERS . . 14
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . 14
3.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . 15
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
3.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . 16
3.5 Books and Records . . . . . . . . . . . . . . . . . . . . . . 17
3.6 Title to Properties; Encumbrances . . . . . . . . . . . . . . 17
3.7 Condition and Sufficiency of Assets . . . . . . . . . . . . . 18
3.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 18
3.9 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 19
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12 No Material Adverse Change . . . . . . . . . . . . . . . . . . 21
3.13 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . 21
"Company Other Benefit Obligation" . . . . . . . . . . . . . . . . . 21
"Company Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
"Company VEBA" . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"ERISA Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Multi-Employer Plan" . . . . . . . . . . . . . . . . . . . . . . . . 22
"Other Benefit Obligations" . . . . . . . . . . . . . . . . . . . . . 22
"PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Pension Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Plan Sponsor" . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Qualified Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Title IV Plans" . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"VEBA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Welfare Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.14 Compliance with Legal Requirements; Governmental
Authorizations . . . . . . . . . . . . . . . . . . . . . . . . 26
3.15 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . 28
3.16 Absence of Certain Changes and Events . . . . . . . . . . . . 29
3.17 Contracts; No Defaults . . . . . . . . . . . . . . . . . . . . 30
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . 35
3.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.21 Labor Relations; Compliance . . . . . . . . . . . . . . . . . 37
3.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . 38
3.23 Certain Payments . . . . . . . . . . . . . . . . . . . . . . . 38
3.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.25 Relationships with Related Persons . . . . . . . . . . . . . . 39
3.26 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO . . . . . . . . 39
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . 39
4.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . 39
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 40
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . 41
4.5 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
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<TABLE>
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4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.7 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . 42
4.8 Litigation; Order . . . . . . . . . . . . . . . . . . . . . . 42
4.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 42
4.10 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5. COVENANTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 43
5.1 Access and Investigation . . . . . . . . . . . . . . . . . . . 43
5.2 Operation of the Business of the Company . . . . . . . . . . . 43
5.3 Negative Covenant . . . . . . . . . . . . . . . . . . . . . . 43
5.4 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . 43
5.5 Required Approvals . . . . . . . . . . . . . . . . . . . . . . 43
5.6 Notification . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.7 Payment of Indebtedness by Related Persons . . . . . . . . . . 44
5.8 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . 44
5.9 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10 Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . 44
5.11 Other Tax Matters . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6. COVENANTS OF PARENT . . . . . . . . . . . . . . . . . . . . . . . 45
6.1 Approvals of Governmental Bodies . . . . . . . . . . . . . . . 46
6.2 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.3 Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . 46
6.4 Notification . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.5 Release of Personal Guarantee . . . . . . . . . . . . . . . . 46
SECTION 7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE . . . . . . . 47
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . 48
7.2 Shareholders' Performance . . . . . . . . . . . . . . . . . . 48
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . 48
7.5 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 48
7.6 No Claim Regarding Stock Ownership or Sale Proceeds . . . . . 49
7.7 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . 49
7.8 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.9 Tax Certification . . . . . . . . . . . . . . . . . . . . . . 49
7.10 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATION TO CLOSE . . . . 49
8.1 Accuracy of Representations . . . . . . . . . . . . . . . . . 49
8.2 Parent's Performance . . . . . . . . . . . . . . . . . . . . . 49
8.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
<PAGE> 6
<TABLE>
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8.5 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 50
8.6 Release of Personal Guarantees . . . . . . . . . . . . . . . . 50
8.7 Offer of Employment. . . . . . . . . . . . . . . . . . . . . . 51
8.8 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . 51
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 51
SECTION 10. INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . 52
10.1 Survival; Right to Indemnification; Knowledge . . . . . . . . 52
10.2 Indemnification and Payment of Damages by Shareholders . . . . 52
10.3 Indemnification and Payment of Damages by Parent . . . . . . . 53
10.4 Time Limitations . . . . . . . . . . . . . . . . . . . . . . . 53
10.5 Limitations on Amount -- Shareholders . . . . . . . . . . . . 54
10.6 Contribution by Parent. With respect to any damages assessed
against Shareholders stemming directly from any Environmental
Claim, Shareholders' will be entitled to contribution from
Parent, Newco and the Surviving Corporation to the extent such
damages are attributable to events occurring after the Closing. 55
10.7 Sole Remedy . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.8 Procedure for Indemnification -- Third Party Claims . . . . . 55
10.09 Procedure for Indemnification -- Other Claims . . . . . . . . 56
10.10 Payment in Cash or Parent Stock . . . . . . . . . . . . . . . 56
11.1 Representative . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 59
12.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . 59
12.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 59
12.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.5 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 61
12.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.8 Entire Agreement and Modification . . . . . . . . . . . . . . 62
12.9 Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . 62
12.10 Assignments, Successors, and No Third-Party Rights . . . . . . 62
12.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.12 Section Headings, Construction . . . . . . . . . . . . . . . . 62
12.13 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . 63
12.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 63
12.15 Enforcement; Venue; Service of Process . . . . . . . . . . . . 63
12.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of March 25,
1997, by and among Packaged Ice, Inc., a Texas corporation ("Parent"), Packaged
Ice Southwestern, Inc., a Texas corporation ("Newco") and a direct wholly-owned
subsidiary of Parent, Southwestern Ice, Inc., an Arizona corporation (the
"Company"), and Robert G. Miller, Dale M. Johnson and Alan Bernstein
(collectively, the "Shareholders"). The persons listed on the signature page
for Minority Shareholders (hereinafter the "Minority Shareholders") are
entering into this Agreement solely for the certain purposes expressly set
forth herein.
R E C I T A L S :
WHEREAS, the respective Boards of Directors of Parent, Newco and the
Company each desires to effect a merger of the Company with and into Newco
(the "Merger"), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, In consideration of the mutual covenants and agreements
contained herein the parties hereto covenant and agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUISITION PRICE" has the meaning set forth in Section 2.5(d).
"APPLICABLE CONTRACT" means any Contract to which the Company is a party or
bound (a) under which the Company has or may acquire any rights, (b) under
which the Company has or may become subject to any obligation or liability, or
(c) by which the Company or any of the assets owned or used by it is or may
become bound.
"ARTICLES OF MERGER" has the meaning set forth in Section 2.3.
"BASKET" has the meaning set forth in Section 10.6.
"BEST EFFORTS" means the efforts that a reasonably prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as reasonably practicable; provided,
however, that an obligation to use Best Efforts under this Agreement does not
require the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions.
<PAGE> 8
"BREACH" means that a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in such representation or warranty as qualified by the
Disclosure Letter or breach of, or any failure to perform or comply with any
covenant, obligation, or other provision contained herein.
"CAP" has the meaning set forth in Section 10.6.
"CASH AMOUNT" has the meaning set forth in Section 2.5(e).
"CLOSING" has the meaning set forth in Section 2.7.
"CLOSING DATE" means the date and time as of which the Closing actually takes
place.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by this
Agreement, including:
(a) the Merger;
(b) the execution, delivery, and performance of the Noncompetition
Agreement, the Registration Rights Agreement, the Shareholders' Release, and
the Escrow Agreement;
(c) the performance by the parties of their respective covenants and
obligations under this Agreement; and
(d) Newco's acquisition of the Company through the Merger.
"CONTRACT" means any agreement, contract, obligation, promise, or undertaking
(whether written or oral, and whether express or implied) that is legally
binding provided that any oral contract shall be limited to those oral
contracts entered into by an executive officer of the Company on behalf of the
Company.
"DAMAGES" has the meaning set forth in Section 10.2.
"EFFECTIVE DATE" has the meaning set forth in Section 2.3.
"ENCUMBRANCE" means any charge, claim, condition, equitable interest including
any equitable servitude, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
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<PAGE> 9
"ENVIRONMENT" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwater, drinking water supply, stream sediments, ambient air,
plant and animal life, and any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" means any law, regulation, ordinance, order, injunction,
decree, consent decree, judgment or administrative directive relating to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to lawful levels the release of pollutants
or hazardous substances or materials into the Environment;
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<PAGE> 10
(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to lawful levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting self-
appointed representatives of the public interest to recover for injuries done
to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGREEMENT" has the meaning set forth in Section 2.8(d)(i) .
"ESCROW AGENT" means Texas Commerce Bank.
"ESCROW AMOUNT" has the meaning set forth in Section 2.5(e).
"EXCLUDED ASSETS" means (i) the Corpus Christi, Texas real property, the
building thereon, the lease thereof and all personal property in such
building; (ii) the real and personal property in Wilcox, Arizona, and (iii)
the real and personal property in Crystal City, Texas, except for whichever of
the following Parent chooses to removed from the Crystal City property: the
compressor, ice machines, receivers, accumulator, condenser, rake bin,
electrical components, vault refrigeration, valves and fittings.
"FACILITIES" means any real property, leaseholds, or other interests currently
or formerly owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Company.
"GAAP" means generally accepted accounting principles as employed in the United
States of America. Wherever in this Agreement reference is made to a
calculation to be made in accordance with GAAP, such reference shall be deemed
to be to the GAAP from time to time applicable as at the date on which such
calculation is made or required to be made in accordance with GAAP.
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<PAGE> 11
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or other
legally recognized jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other legally
recognized government;
(c) governmental or legally recognized quasi-governmental authority
of any nature (including any governmental agency, branch, department, official,
or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body legally exercising, or legally entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release,
storage, transfer, transportation, treatment, or use (including any withdrawal
or other use of groundwater) of Hazardous Materials in, on, under, about, or
from the Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that poses an unreasonable risk of harm to
persons or property on or off the Facilities or that may affect the value of
the Facilities or the Company.
"HAZARDOUS MATERIALS" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof
having hazardous characteristics, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-
containing materials.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade names, copyrights,
technology, trade secrets, know-how, formulas and processes which are owned or
used by the Company.
"IRC" means the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" means the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
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<PAGE> 12
"KNOWLEDGE" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a reasonably prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonable investigation concerning the existence of such fact or other
matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as a
director, executive officer, partner, executor, or trustee of such Person (or
in any similar capacity) has Knowledge of such fact or other matter; provided,
however, the Company will be deemed to have Knowledge of a particular fact or
other matter if Shareholders have such Knowledge.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, existing principle of common law, regulation, statute, or treaty.
"MASTER LEASE AGREEMENT" has the meaning set forth in Section 12.8.
"MERGER" has the meaning set forth in Section 2.1.
"NONCOMPETITION AGREEMENT" has the meaning set forth in Section 2.8(a)(iii).
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement (other than
common law principles) designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards, and any
governmental program designed to provide safe and healthful working conditions.
"OPTION AGREEMENT" shall mean set forth in Section 12.8.
"ORAL NOTICE OR COMMUNICATION" means any notice or communication delivered or
transmitted orally to an executive officer of the Company.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" An action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
6
<PAGE> 13
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority).
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any
amendment to any of the foregoing.
"PARENT'S CLOSING DOCUMENTS" has the meaning set forth in Section 4.2.
"PARENT'S DISCLOSURE LETTER" means the disclosure letter delivered by Parent to
Shareholders concurrently with the execution and delivery of this Agreement
which are incorporated herein by reference.
"PARENT STOCK" has the meaning set forth in Section 2.5(e).
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" has the meaning set forth in Section 3.13.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof) ending on or
before the close of business on the Closing Date.
"PROCEEDING" means any action, arbitration, audit, hearing, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
2.8(a)(iv).
"RELATED PERSON" means, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
7
<PAGE> 14
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
Related Person also means, with respect to a specified Person other than
an individual:
(e) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(f) any Person that holds a Material Interest in such specified
Person;
(g) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(h) any Person in which such specified Person holds a Material
Interest;
(i) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(j) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of voting securities or other voting interests representing at
least 10% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 10% of the outstanding equity
securities or equity interests in a Person.
"RELEASE" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" means the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
8
<PAGE> 15
"SERVICES AGREEMENT" has the meaning set forth in Section 12.8.
"SHARE PRICE" has the meaning set forth in Section 2.5(c).
"SHAREHOLDERS' CLOSING DOCUMENTS" has the meaning set forth in Section 3.2.
"SHAREHOLDERS' DISCLOSURE LETTER" means the disclosure schedule delivered by
the Company and the Shareholders to Parent concurrently with the execution and
delivery of this Agreement which is attached hereto and incorporated herein by
reference and any and all supplements to the Disclosure Letter.
"SHAREHOLDERS' RELEASE" has the meaning set forth in Section 2.8(a)(ii).
"SHARES" means all of the shares of the no par value common stock of the
Company owned by the Shareholders.
"STOCK AMOUNT" has the meaning set forth in Section 2.5(d).
"SUBSIDIARY" means, with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to
elect a majority of that corporation's or other Person's board of directors or
similar governing body, or otherwise having the power to direct the business
and policies of that corporation or other Person (other than securities or
other interests having such power only upon the happening of a contingency that
has not occurred) are held, directly or indirectly by the Owner; when used
without reference to a particular Person, "Subsidiary" means a Subsidiary of
the Company.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.1.
"TAX" means any tax (including without limitation any tax on gross income, net
income, franchise, gross receipts, royalty, capital gains, value added, sales,
property, ad valorem, transfer, license, use, profits, windfall profits,
withholding on amounts paid to or by the Company, payroll, employment, excise,
severance, stamp, occupation, premium, gift, or estate), levy, assessment,
tariff, duty (including customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed, assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency, or fee.
"TAX RETURN" means any material return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
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"THREAT OF RELEASE" means a substantial likelihood of a Release that would
require action in order to prevent or mitigate damage to the Environment
resulting from such Release.
"THREATENED" means a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
(to the extent of Shareholders' Knowledge) if any other event has occurred or
any other circumstances exist, with respect to which the Shareholders would
reasonably conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
SECTION 2. MERGER; CLOSING
2.1 Merger. In accordance with the provisions of the business
corporation laws of the States of Texas, at the Effective Date, the Company
shall be merged (the "Merger") into Newco and Newco shall be the surviving
corporation (the "Surviving Corporation,") and as such shall continue to be
governed by the laws of the State of Texas. For federal income tax purposes, it
is intended that the Merger shall qualify as a plan of reorganization pursuant
to Sections 368(a)(1)(A) and 368(a)(2)(D) of the IRC.
2.2. Continuing of Corporate Existence. Except as may otherwise be
set forth herein the corporate existence and identity of Newco, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of the Company, with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and into that
of Newco, and the Surviving Corporation shall be vested fully therewith and the
separate corporate existence and identity of the Company shall thereafter cease
except to the extent continued by statute.
2.3. Effective Date. The Merger shall become effective upon the
occurrence of the issuance of the certificate of merger (the "Effective Date")
by the Secretary of State of the State of Texas pursuant to Article 5.04 of the
Texas Business Corporation Act. The signatures of the Minority Shareholders
are not required for the Agreement to become effective with respect to the
Shareholders.
2.4. Corporate Government.
(a) The Articles of Incorporation of Newco as in effect on the
Effective Date, shall continue in full force and effect and shall be the
Articles of Incorporation of the Surviving Corporation.
(b) The Bylaws of Newco, as in effect as of the Effective
Date, shall continue in full force and effect and shall be the Bylaws of
the Surviving Corporation.
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(c) The members of the Board of Directors and the officers of
the Surviving Corporation shall be the persons holding such offices as
of the Effective Date.
2.5. Conversion of Shares. The manner and basis of converting the
Shares shall be as follows:
(a) Each Share which is issued and outstanding immediately
prior to the Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the
right to receive the Share Price which shall be payable, without
interest thereon, upon the surrender of the certificate formerly
representing such Share, in accordance with sub-paragraph (f).
(b) Each Share shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and retired and
cease to exist.
(c) As used herein, the term "Share Price" shall mean an
amount equal to the Acquisition Price (as defined below) divided by the
total number of outstanding Shares.
(d) As used herein, the term "Acquisition Price" shall mean
$9,500,000, of which an $3,500,000 (the "Cash Amount") will be paid to
the Shareholders and Minority Shareholders, while an additional
$6,000,000 will be paid to the Shareholders in the form of newly issued
shares of Parent's $.01 par value common stock ("Parent Stock") valued
at $10 per share (the "Stock Amount").
(e) At the Closing, Parent will pay the Stock Amount to the
Shareholders, $2,960,811 of the Cash Amount (the "Shareholders' Cash
Amount") to the Shareholders, and the $539,189 (the "Minority
Shareholders' Cash Amount") of the Cash Amount to the Minority
Shareholders. Parent will deliver 10% of the Acquisition Price, in the
form of 60,000 shares of Parent Stock and $350,000 in cash (the "Escrow
Amount") to the Escrow Agent to be held pursuant to the Escrow
Agreement. The Escrow Amount will reflect contributions from the
Shareholders of $350,000 in cash from the Shareholders (the
"Shareholders' Cash Contribution") and 60,000 shares of Parent Stock
(the "Shareholders' Stock Contribution").
(f) Each share of common stock, par value $.01 per share, of
Newco ("Newco Stock") which shall be outstanding immediately prior to
the Effective Date shall, at the Effective Date, by virtue of the Merger
and without any action on the part of the holder thereof, be converted
into one share of common stock of the Surviving Corporation.
(g) The stock transfer books of the Company shall be closed as
of the close of business on the Effective Date, and no transfer of
record of any, of the Shares shall take place thereafter.
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(h) No fractional shares of Parent Stock and no certificates
or scrip therefor shall be issued.
(i) All of the Parent Stock, when delivered pursuant to the
provisions of this Agreement, shall be validly issued, fully paid and
nonassessable.
(j) At the Closing, the holders of certificates representing
Shares shall thereupon cease to have any rights with respect to such
Shares and shall surrender certificates representing the Shares to
Parent whereupon such holders shall receive a certificate or
certificates for the number of shares of Parent Stock to which such
holder is entitled hereunder.
2.6 Rights and Liabilities of the Surviving Corporation. As of the
Effective Date, the Surviving Corporation shall have the following rights and
obligations:
(a) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the duties
and liabilities of a corporation organized under the laws of the State
of Texas.
(b) The Surviving Corporation shall possess all of the rights,
privileges, immunities and franchises, of either a public or private
nature, of Newco, and the Company. All rights, title and interests to
all real estate and other property owned by Newco and the Company shall
be allocated to and vested in the Surviving Corporation without
reversion or impairment, without further act or deed, and without any
transfer or assignment having occurred, (but subject to any existing
liens or other encumbrances) thereon.
(c) At the Effective Date, the Surviving Corporation shall
thenceforth be responsible and liable for all liabilities and
obligations of the Company and Newco, and any Proceeding pending by or
against the Company or Newco may be prosecuted as if the Merger had not
occurred, or the Surviving Corporation may be substituted in its place.
Neither the rights of creditors nor any liens upon the property of Newco
or the Company shall be impaired by the Merger.
2.7 Closing. Consummation of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Parent's counsel at
1500 NationsBank Plaza, San Antonio, Texas 78205, at 10:00 a.m. (local time) on
the first business day following ten (10) days after the conditions set forth
in Section 7 and Section 8 have been met or waived, or at such other time and
place as the parties may agree. Subject to the provisions of Section 9,
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.7 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement. The Closing shall be deemed to have
taken place on the Effective Date.
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2.8 Closing Obligations. At the Closing:
(a) Shareholders will deliver to Parent:
(i) certificates representing the Shares, to be
surrendered to Newco and Parent;
(ii) releases in the form of Exhibit 2.8(a)(ii) executed
by Shareholders and the Minority Shareholders ("Shareholders'
Release");
(iii) Noncompetition Agreements in the form of Exhibit
2.8(a)(iii), executed by Shareholders and the Minority
Shareholders (the "Noncompetition Agreement"); and
(iv) the Registration Rights Agreement (defined in Section
6.9) executed by the Shareholders;
(v) a certificate executed by Shareholders representing
and warranting to Parent and Newco that Shareholders'
representations and warranties in this Agreement are accurate in
all respects as of the Closing Date as if made on the Closing
Date;
(vi) investment letters executed by Shareholders and the
Minority Shareholders in the form attached hereto as Exhibit
2.8(a)(vi);
(vii) Amended and Restated Voting Agreement dated
September 20, 1995 as amended by Amendment No. 1 to Amended and
Restated Voting Agreement dated January 17, 1997, executed by
Shareholders;
(viii) Amended and Restated Shareholders Agreement dated
September 20, 1995 as amended by Amendment No. 1 to Amended and
Restated Shareholders Agreement dated January 17, 1997, executed
by Shareholders;
(b) Parent will deliver:
(i) to the Shareholders the Shareholders' Cash Amount
less the Shareholders' Cash Contribution as follows:
(A) $1,246,806 by bank cashier's or certified
check payable to the order of Robert G. Miller,
(B) $690,730 by bank cashier's or certified
check payable to the order of Alan S. Bernstein,
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(C) $673,275 by bank cashier's or certified
check payable to the order of Dale M. Johnson; and
(ii) to the Minority Shareholders the Minority
Shareholders' Cash Amount as follows:
(A) $539,189 by bank cashier's or certified
check payable to the order of the Minority Shareholders
per written instructions given by them to Parent on or
before the Closing date; and
(iii) to the Shareholders the Shareholders' Stock Amount
less the Shareholders' Stock Contribution as follows:
(A) 257,880 shares of Parent Stock to Robert G.
Miller,
(B) 142,865 shares of Parent Stock to Alan S.
Bernstein, and
(C) 139,255 shares of Parent Stock to Dale M.
Johnson.
(c) Parent will deliver to Shareholders:
(i) the Registration Rights Agreement executed by
Parent;
(ii) the Noncompetition Agreements executed by Parent;
(iii) a certificate executed by Parent representing and
warranting to Shareholders that Parent and Newco's
representations and warranties in this Agreement are accurate in
all respects as of the Closing Date as if made on the Closing
Date;
(iv) the voting agreement whereby certain shareholders
of Parent agree on a voting arrangement for the designee of
Robert G Miller, Dale M. Johnson and Alan Bernstein (the "SWI
Voting Agreement").
(d) Parent and Shareholders will enter into:
(i) the escrow agreement substantially in the form of
Exhibit 2.8(d)(i) (the "Escrow Agreement") with Texas Commerce
Bank;
(ii) the Articles of Merger, which will be filed by
Newco; and
(iii) the lease agreement for the Crystal City Texas
property in the form attached hereto as Exhibit 2.8(d)(iii).
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(e) Parent will deliver the Escrow Amount to the Escrow Agent
to be held pursuant to the Escrow Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, SHAREHOLDERS AND MINORITY SHAREHOLDERS
Except as set forth in Shareholders' Disclosure Letter, which shall
indicate the Section to which such exception relates, the Company and
Shareholders jointly and severally represent and warrant to Parent and Newco in
Sections 3.1 through Sections 3.26, and the Company and Minority Shareholders
severally warrant and represent in Section 3.27 as follows:
Section 3.1 Organization and Good Standing.
(a) Part 3.1 of the Shareholders' Disclosure Letter contains a
complete and accurate list for the Company of its name, its jurisdiction
of incorporation, other jurisdictions in which it is authorized to do
business. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its
business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. The Company is duly qualified to
do business as a foreign corporation and is in good standing under the
laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification. The Company
has no Affiliates or Subsidiaries.
(b) Shareholders have delivered to Parent copies of the
Organizational Documents of the Company, as currently in effect.
(c) The Company has no Subsidiaries.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Company and the Shareholders, enforceable against the
Company and the Shareholders in accordance with its terms.
(b) Upon the execution and delivery by Shareholders of the
Escrow Agreement, the Registration Rights Agreement, the Shareholders'
Release, and the Noncompetition Agreement (collectively, the
"Shareholders' Closing Documents"), the Shareholders' Closing Documents
will constitute the legal, valid, and binding obligations of
Shareholders, enforceable against Shareholders in accordance with their
respective terms. The Company and the Shareholders have the absolute and
unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the Shareholders' Closing Documents and to
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perform their respective obligations under this Agreement and the
Shareholders' Closing Documents.
(c) Prior to the Closing, the Shareholders have held a
shareholders meeting (or have executed a consent) and have duly adopted
all resolutions required by law to approve the Merger.
(d) Except as set forth in Part 3.2 of the Shareholder'
Disclosure Letter, neither the execution and delivery of this Agreement
by Shareholders and the Company nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with
or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the Company,
or (B) any resolution adopted by the board of directors or the
shareholders of the Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person a valid basis
to challenge any of the Contemplated Transactions or to exercise
any remedy or obtain any relief under, any Legal Requirement or
any Order to which the Company or Shareholders, or any of the
assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate,
or modify, any Governmental Authorization that is held by the
Company or that otherwise relates to the business of, or any of
the assets owned or used by, the Company;
(iv) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Company.
Except as set forth in Part 3.2 of the Shareholders' Disclosure Letter,
neither Shareholders nor Company is required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
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3.3 Capitalization.
(a) The authorized equity securities of the Company consist of
1,000,000 shares of common stock, no par value, of which 1,110 shares are
issued and outstanding and constitute the Shares.
(b) Shareholders are the record and beneficial owner and holder of
the Shares, free and clear of all Encumbrances, except as set forth on Part 3.3
of the Shareholders' Disclosure Letter.
(c) No legend or other reference to any purported Encumbrance appears
upon any certificate representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
between the Company and any other Person relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company. None of
the outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any other Legal Requirement. The Company
does not own and has no Contract to acquire, any equity securities or other
securities of any Person (other than the Company) or any direct or indirect
equity or ownership interest in any other business.
3.4 Financial Statements. Shareholders have delivered to Parent:
(a) the audited balance sheet of the Company as at December 31, 1994, and the
related statements of income, changes in shareholders' equity, and cash flow
for the fiscal year then ended, (b) the audited balance sheet of the Company as
at December 31, 1995 (including the notes thereto, if any), and the related
statements of income, changes in shareholders' equity, and cash flow for the
fiscal year then ended, (c) an audited balance sheet of the Company as at
December 31, 1996 (the "1996 Balance Sheet"), and the related statements of
income, changes in shareholders' equity, and cash flow for the fiscal year then
ended, and (d) an unaudited balance sheet of the Company as at January 31,
1997 (the "Interim Balance Sheet") and the related unaudited statements of
income, changes in shareholders' equity, and cash flow for the one month then
ended, including in each case the notes thereto, if any. Such financial
statements and notes (collectively, the "Financial Statements") fairly present
the financial condition and the results of operations, changes in shareholders'
equity, and cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP
(except as set forth in Part 3.4 of the Shareholders' Disclosure Letter),
subject, in the case of unaudited financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse), the absence of notes and such other
differences as are described in Part 3.4 of Shareholders' Disclosure Letter.
The Financial Statements reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements.
3.5 Books and Records. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Parent, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the Boards of Directors, and committees of
the Boards of Directors of
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the Company, and, to the Knowledge of Shareholders, no meeting of any such
shareholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. All of those
books and records are in the possession of the Company.
3.6 Title to Properties; Encumbrances. Part 3.6 of the Shareholders'
Disclosure Letter contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by the Company. Shareholders have
delivered or made available to Parent copies of the deeds and other instruments
(as recorded) by which the Company acquired or disposed of such real property
and interests, and copies of all title insurance policies, opinions, abstracts,
and surveys in the possession of Shareholders or the Company and relating to
such property or interests. Except with respect to the Excluded Assets, the
Company owns (with good and marketable title in the case of real property,
subject only to the matters permitted by the following sentence) all the
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) reflected as owned in the books and records of the Company,
including all of the properties and assets reflected in the Interim Balance
Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Shareholders' Disclosure Letter and
personal property sold since the date of the Interim Balance Sheet in the
Ordinary Course of Business or otherwise as permitted herein), and all of the
properties and assets purchased or otherwise acquired by the Company since the
date of the Interim Balance Sheet (except for personal property acquired and
sold since the date of the Interim Balance Sheet in the Ordinary Course of
Business and consistent with past practice or otherwise as permitted herein),
which subsequently purchased or acquired properties and assets (other than
accounts receivable, inventory and short-term investments) are listed in Part
3.6 of the Shareholders' Disclosure Letter. Except with respect to the Excluded
Assets, all material properties and assets reflected in the Interim Balance
Sheet are free and clear of all Encumbrances and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) mortgages or security interests shown on
the Interim Balance Sheet as securing specified liabilities or obligations,
with respect to which no default (or event that, with notice or lapse of time
or both, would constitute a default) exists, (b) mortgages or security
interests incurred in connection with the purchase of property or assets after
the date of the Interim Balance Sheet (such mortgages and security interests
being limited to the property or assets so acquired), with respect to which no
default (or event that, with notice or lapse of time or both, would constitute
a default) exists, (c) liens for current taxes not yet due, and (d) statutory
and nonstatutory landlord liens, and (e) liens on property which do not
materially affect the operation of the business of the Company.
3.7 Condition and Sufficiency of Assets. Except as set forth in Part
3.7 of the Shareholders' Disclosure Letter, the property and assets of the
Company are in good operating condition and repair (ordinary wear and tear
excepted) and are adequate for the uses to which they are being put, and none
of such property and assets is in need of repairs except for ordinary, routine
repairs that are due to ordinary wear and tear, or are not material in nature
or cost. The property and assets of the Company are sufficient for the
continued conduct of the Company's business after the Closing in substantially
the same manner as conducted prior to the Closing.
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3.8 Accounts Receivable. All accounts receivable of the Company that
are reflected on the Interim Balance Sheet or the 1996 Balance Sheet
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the 1996 Balance Sheet or
the Interim Balance Sheet or on the accounting records of the Company as of the
Closing Date (which reserves are adequate and calculated consistent with past
practice and, in the case of the reserve as of the Closing Date, will not
represent a greater percentage of the Accounts Receivable as of the Closing
Date than the reserve reflected in the Interim Balance Sheet represented of the
Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been or
will be collected in full, without any set-off, within one hundred eighty (180)
days after the day on which it first becomes due and payable. There is no
contest, claim, or right of set-off, other than returns in the Ordinary Course
of Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Part 3.8(a) of
the Shareholders' Disclosure Letter contains a complete and accurate list of
all Accounts Receivable as of the date of the Interim Balance Sheet, which list
sets forth the aging of such Accounts Receivable.
3.9 Inventory. The inventory of the Company, whether or not
reflected in the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, all of which have been written off
or written down to net realizable value in the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or net
realizable value on a first in, first out basis. The quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company.
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10 of
the Shareholders' Disclosure Letter and obligations and liabilities arising
under the Applicable Contracts, the Company has no liabilities or obligations
of the type required to be reflected as liabilities on a balance sheet prepared
in accordance with GAAP except for liabilities or obligations reflected or
reserved against in the Interim Balance Sheet, the 1996 Balance Sheet and
current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.11 Taxes.
(a) The Company has filed or caused to be filed (on a timely
basis since inception) all Tax Returns that are or were required to be
filed by or with respect to any of them, either separately or as a
member of a group of corporations, pursuant to applicable Legal
Requirements. Shareholders have delivered or made available to Parent
copies of all such Tax Returns relating to income or franchise taxes
filed since inception. The Company
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has paid, or made provision for the payment of, all Taxes that have or
may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Shareholders or the Company,
except such Taxes, if any, as are listed in Part 3.11 of the
Shareholders' Disclosure Letter and are being contested in good faith
and as to which adequate reserves have been provided in the Interim
Balance Sheet.
(b) The United States federal income and state franchise Tax
Returns of the Company subject to such Taxes have been audited by the
IRS or relevant state tax authorities or are closed by the applicable
statute of limitations for all taxable years through December 31, 1991.
Part 3.11 of the Shareholders' Disclosure Letter contains a complete and
accurate list of all audits of all such Tax Returns, including a
reasonably detailed description of the nature and outcome of each audit.
All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Part 3.11 of the
Shareholders' Disclosure Letter, are being contested in good faith by
appropriate proceedings. Part 3.11 of the Shareholders' Disclosure
Letter describes all adjustments to the United States federal income Tax
Returns filed by the Company or any group of corporations including the
Company for all taxable years since December 31, 1991, and the resulting
deficiencies proposed by the IRS. Except as described in Part 3.11 of
the Shareholders' Disclosure Letter, neither the Shareholders nor the
Company has given or been requested to give waivers or extensions (or is
or would be subject to a waiver or extension given by any other Person)
of any statute of limitations relating to the payment of Taxes of the
Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate and are at least
equal to that Company's liability for Taxes. To the Shareholders'
Knowledge, there exists no proposed tax assessment against the Company
except as disclosed in the Interim Balance Sheet or in Part 3.11 of the
Shareholders' Disclosure Letter. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to any property
or assets held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other
Person. The Shareholders are not subject to withholding under Section
1445 of the IRC with respect to any transaction contemplated hereby.
The Company has not been a member of any affiliated group (as defined in
IRC Section 1504(a) or consolidated, combined or unitary group for
purposes of any other Taxes. None of the material property used by the
Company is subject to a lease, other than a "true" lease for federal
income tax purposes.
(d) All Tax Returns filed by the Company are true, correct,
and complete. There is no tax sharing agreement that will require any
payment by the Company after the date of this Agreement. The Company
has had a valid election to be taxed as an "S Corporation" since its
inception and through the date of the Merger.
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(e) There is no plan or intention by any of the Shareholders
or the Minority Shareholders, and to the Knowledge of the Company, there
is no plan or intention on the part of any of the Shareholders or the
Minority Shareholders to sell, exchange, or otherwise dispose of a
number of shares of Parent Stock to be received by them hereunder that
would reduce the Shareholders' ownership of Parent Stock to a number of
shares having a value, as of the Effective Date, of less than fifty
percent (50%) of the value of all of the formerly outstanding Shares as
of the Effective Date. For the purposes of this representation, the
Shares exchanged for cash or other property, surrendered by dissenters
or exchanged for cash in lieu of fractional shares of Parent Stock will
be treated as outstanding Shares on the Effective Date. Moreover, the
Shares and shares of Parent Stock held by Shareholders and otherwise
sold, redeemed, or disposed of prior or subsequent to the Effective Date
will be considered in making this representation.
(f) Newco will acquire at least ninety percent (90%) of the
fair market value of the net assets and at least seventy percent (70%)
of the fair market value of the gross assets held by the Company
immediately prior to the Merger. For the purposes of this
representation, amounts paid by the Company to dissenters, amounts paid
by the Company to Shareholders who receive cash or other property, the
Company's assets used to pay its reorganization expenses, and all
redemptions and distributions (except for regular normal dividends) made
by the Company immediately preceding the transfer, will be included as
assets of the Company held immediately prior to the Merger.
(g) The liabilities of the Company assumed by Newco and the
liabilities to which the transferred assets of the Company are subject
were incurred by the Company in the ordinary course of its business.
(h) There is no intercompany indebtedness existing between
Parent and the Company or between Newco and the Company that was issued,
acquired, or will be settled at a discount.
(i) The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of
the IRC.
(j) The fair market value of the assets of the Company
transferred to Newco will equal or exceed the sum of the liabilities
assumed by Newco pursuant to this Agreement, plus the amount of
liabilities, if any, to which the transferred assets are subject.
(k) The Company is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the IRC.
3.12 No Material Adverse Change. Since the date of the 1996 Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or
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condition of the Company, and to the Shareholders' Knowledge no event has
occurred or circumstance exists that will or is reasonably likely to result in
such a material adverse change.
3.13 Employee Benefits.
(a) As used in this Section 3.13, the following terms have the
meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit
Obligation owed, adopted, or followed by the Company or an ERISA Affiliate of
the Company.
"COMPANY PLAN" means all Plans of which the Company or an ERISA
Affiliate of the Company is or was a Plan Sponsor, or to which the Company or
an ERISA Affiliate of the Company otherwise contributes or has contributed, or
in which the Company or an ERISA Affiliate of the Company otherwise
participates or has participated. All references to Plans are to Company Plans
unless the context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of
the Company or any ERISA Affiliate of an Company.
"ERISA AFFILIATE" means, with respect to the Company, any other
person that, together with the Company, would be treated as a single employer
under IRC Section 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA Section
3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements,
or customary practices, whether or not legally enforceable, to provide
benefits, other than salary, as compensation for services rendered, to present
or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon
the amount of service rendered, sabbatical policies, severance payment
policies, and fringe benefits within the meaning of IRC Section 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" has the meaning given in ERISA Section 3(2)(A).
"PLAN" has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Section 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet
the requirements of IRC Section 401(a).
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"TITLE IV PLANS" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer
Plans.
"VEBA" means a voluntary employees' beneficiary association under
IRC Section 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA Section 3(1).
(b) (i) Part 3.13(i) of the Shareholders' Disclosure Letter
contains a complete and accurate list of all Company Plans, and
identifies as such all Company Plans that are Qualified Plan. Neither
the Company nor any ERISA Affiliate of the Company has ever established,
maintained or contributed to or otherwise participated in, or had an
obligation to maintain, contribute to, or otherwise participate in, any
Company Other Benefit Obligations, Company VEBAs, defined benefit
Pension Plans, Title IV Plans, or Multi-Employer Plans.
(ii) Part 3.13(ii) of the Shareholders' Disclosure
Letter contains a complete and accurate list of (A) all ERISA
Affiliates of the Company , and (B) all Plans of which any such
ERISA Affiliate is or was a Plan Sponsor, in which any such ERISA
Affiliate participates or has participated, or to which any such
ERISA Affiliate contributes or has contributed.
(iii) Part 3.13(iii) of the Shareholders' Disclosure
Letter sets forth a calculation of the liability of the Company
for post-retirement benefits other than pensions, made in
accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether the
Company is required by this Statement to disclose such
information.
(iv) Part 3.13(v) of the Shareholders' Disclosure Letter
sets forth the financial cost of all obligations owed under the
Company Plans that is not subject to the disclosure and reporting
requirements of ERISA.
(c) Shareholders have delivered to Parent, or will deliver to
Parent within ten days of the date of this Agreement:
(i) all documents that set forth the terms of the
Company Plans, and of any related trust, including (A) all plan
descriptions and summary plan descriptions of Company Plans for
which Shareholders or the Company are required to prepare, file,
and distribute plan descriptions and summary plan descriptions,
and (B) all summaries and descriptions furnished to participants
and beneficiaries regarding Company Plans, Company Other Benefit
Obligations, and Company VEBAs for which a plan description or
summary plan description is not required;
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(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all registration statements filed with respect to
the Company Plan;
(iv) all insurance policies purchased by or to provide
benefits under the Company Plans;
(v) all contracts with third party administrators,
actuaries, investment managers, consultants, and other
independent contractors that relate to the Company Plans;
(vi) all reports submitted within the four years
preceding the date of this Agreement by third party
administrators, actuaries, investment managers, consultants, or
other independent contractors with respect to the Company Plans;
(vii) all notifications to employees of their rights
under ERISA Section 601 et seq. and IRC Section 4980B;
(viii) the Form 5500 filed in each of the most recent
three plan years with respect to the Company Plan, including all
schedules thereto and the opinions of independent accountants;
(ix) all notices that were given by the Company or any
ERISA Affiliate or any Company Plan to the IRS, or any
participant or beneficiary, pursuant to statute, within the four
years preceding the date of this Agreement, including notices
that are expressly mentioned elsewhere in this Section 3.13;
(x) all notices that were given by the IRS, or the
Department of Labor to the Company, any ERISA Affiliate of an
Company, or any Company Plan within the four years preceding the
date of this Agreement;
(xi) with respect to Qualified Plans, the most recent
determination letter for each Plan of the Company that is a
Qualified Plan; and
(d) Except as set forth in Part 3.13(vi) of the Shareholders'
Disclosure Letter:
(i) The Company has performed all of its respective
material obligations under all Company Plans. The Company has
made appropriate entries in its financial records and statements
for all obligations and liabilities under such Plans, that have
accrued but are not due.
(ii) No statement, either written or oral, has been made
by any Acquired Company to any Person with regard to any Plan
that was not in accordance with the
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Plan and that could have an adverse material economic consequence
to the Company or to Parent.
(iii) The Company, with respect to all Company Plans,
are, and the Company Plans are, in substantial compliance with
ERISA, the IRC, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section 3.13.
(A) No transaction prohibited by ERISA Section
406 and no "prohibited transaction" under IRC Section
4975(c) have occurred with respect to the Company Plan.
(B) Neither the Shareholders nor Company has any
liability to the IRS with respect to any Plan, including
any liability imposed by Chapter 43 of the IRC.
(C) Neither the Shareholders nor the Company has
any liability under ERISA Section 502 or Section 4071.
(D) All filings required by ERISA and the IRC as
to each Plan have been timely filed, and all notices and
disclosures to participants required by either ERISA or
the IRC have been timely provided.
(E) All contributions and payments made or
accrued with respect to all Company Plans, are deductible
under IRC Section 162 or Section 404. No amount, or any
asset of any Company Plan, is subject to tax as unrelated
business taxable income.
(iv) The Company Plan can be terminated within thirty
days, without payment of any additional contribution or amount
and without the vesting or acceleration of any benefits promised
by such Plan.
(v) Except as set forth in Part 3.13(b) of the
Shareholders' Disclosure Statement, since the Company's
inception, there has been no establishment or amendment of the
Company Plans.
(vi) Since December 31, 1995, no event has occurred or
circumstance exists that could result in a material increase in
premium costs of Company Plans that are insured, or a material
increase in benefit costs of such Plans and Obligations that are
self-insured.
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(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal
proceeding involving, the Company Plans, is pending or, to
Shareholders' Knowledge, is Threatened.
(viii) Except as otherwise described in Part 3.13 of the
Shareholders' Disclosure Letter, the Company has no Company Plan
which is a stock bonus, pension, or profit-sharing plan within
the meaning of IRC Section 401(a).
(ix) Each Qualified Plan of the Company is qualified in
form and operation under IRC Section 401(a); each trust for each
such Plan is exempt from federal income tax under IRC Section
501(a). No event has occurred or circumstance exists that will or
could give rise to disqualification or loss of tax-exempt status
of any such Plan or trust.
(x) The Company and each ERISA Affiliate of the Company
has met the minimum funding standard, and has made all
contributions required, under ERISA Section 302 and IRC Section
402.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) No amendment has been made, or is reasonably
expected to be made, to any Plan that has required or could
require the provision of security under ERISA Section 307 or IRC
Section 401(a)(29).
(xiii) No accumulated funding deficiency, whether or not
waived, exists with respect to any Company Plan; no event has
occurred or circumstance exists that may result in an accumulated
funding deficiency as of the last day of the current plan year of
any such Plan.
(xiv) Except to the extent required under ERISA Section
601 et seq. and IRC Section 4980B, the Company does not provide
health or welfare benefits for any retired or former employee and
is not obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other
termination of service.
(xv) The Company has the right to modify and terminate
benefits to retirees (other than pensions) with respect to both
retired and active employees.
(xvi) Shareholders and the Company have complied with the
provisions of ERISA Section 601 et seq. and IRC Section 4980B.
(xvii) The consummation of the Contemplated Transactions
will not result in the payment, vesting, or acceleration of any
benefit.
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3.14 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.14 of the Shareholders'
Disclosure Letter and to the Shareholders' Knowledge,
(i) the Company is, and at all times since December 31,
1995 has been in substantial compliance with each Legal
Requirement that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its
assets except where the failure to so comply did not have, will
not have, and is not reasonably likely to have, a material
adverse effect on the business, financial condition and results
of operation of the Company;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) will, or is
reasonably likely to, constitute or result in a material
violation by the Company of, or a material failure on the part of
the Company to comply with, any Legal Requirement, or (B) will,
or is reasonably likely to, give rise to any material obligation
on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time since
December 31, 1995, any written notice or other communication or
any Oral Notice or Communication from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or
potential material violation of, or material failure to comply
with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential material obligation on the part of the
Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
(b) Part 3.14 of the Shareholders' Disclosure Letter contains
a complete and accurate list of each Governmental Authorization that is
held by or has been issued to the Company. Each Governmental
Authorization listed or required to be listed in Part 3.14 of the
Shareholders' Disclosure Letter is valid and in full force and effect.
Except as set forth in Part 3.14 of the Shareholders' Disclosure Letter:
(i) the Company is, and at all times since December 31,
1995, has been, in substantial compliance with all of the terms
and requirements of each Governmental Authorization identified or
required to be identified in Part 3.14 of the Shareholders'
Disclosure Letter;
(ii) no event has occurred or circumstance exists that,
to the Shareholders' Knowledge, will or is reasonably likely to
(with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a material violation of or a
material failure to comply with any term or requirement of any
Governmental Authorization
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listed or required to be listed in Part 3.14 of the Shareholders'
Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination
of, or any modification to, any Governmental Authorization listed
or required to be listed in Part 3.14 of the Shareholders'
Disclosure Letter;
(iii) the Company has not received, at any time since
December 31, 1995 any written notice or other communication or
any Oral Notice or Communication from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or
potential material violation of or material failure to comply
with any term or requirement of any Governmental Authorization,
or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed or required
to be listed in Part 3.14 of the Shareholders' Disclosure Letter
have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental
Bodies.
The Governmental Authorizations listed in Part 3.14 of the Shareholders'
Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
its business in the manner they currently conduct and operate such business
and to permit the Company to own and use their assets in the manner in which
they currently own and use such assets, except where the failure to hold such
Governmental Authorization would not have a materially adverse effect on the
business, financial condition and results of operation of the Company.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the Shareholders'
Disclosure Letter, there is no pending Proceeding commenced by or
against the Company:
(i) that otherwise relates to or that will, or is
reasonably likely to, adversely affect the business of, or any of
the assets owned or used by, the Company; or
(ii) that challenges, or that will, or is reasonably
likely to have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated
Transactions.
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To the Knowledge of Shareholders and the Company, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
will, or is reasonably likely to give rise to or serve as a basis for the
commencement of any such Proceeding. Shareholders have delivered or made
available to Parent copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.15 of the Shareholders'
Disclosure Letter.
(b) Except as set forth in Part 3.15 of the Shareholders'
Disclosure Letter and to Shareholders' Knowledge:
(i) there is no Order to which the Company or any of
the assets owned or used by the Company, is subject;
(ii) the Shareholders are not subject to any Order that
relates to the business of, or any of the assets owned or used
by, the Company; and
(iii) no officer, director, agent, or employee of
the Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Part 3.15 of the Shareholders'
Disclosure Letter:
(i) the Company is, and at all times since December 31,
1995, has been, in substantial compliance with all of the terms
and requirements of each Order to which it, or any of the assets
owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that
will or, to the Shareholders' Knowledge is reasonably likely to
constitute or result in (with or without notice or lapse of time)
a violation of or failure to substantially comply with any term
or requirement of any Order to which the Company, or any of the
assets owned or used by the Company, is subject; and
(iii) the Company has not received, at any time since
December 31, 1995, any notice or other communication or any Oral
Notice or Communication from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential
violation of, or failure to substantially comply with, any term
or requirement of any Order to which the Company, is or has been
subject.
3.16 Absence of Certain Changes and Events. Except as set forth in
Part 3.16 of the Shareholders' Disclosure Letter or otherwise contemplated in
this Agreement, since the date of the 1996 Balance Sheet, the Company has
conducted its business only in the Ordinary Course of Business and there has
not been any:
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(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock, except
for any distribution by the Company in repayment of amounts owed by the
Company to the Shareholders, the distribution of Excluded Assets
described in Part 3.16 of the Shareholders' Disclosure Letter, any
proceeds from the sale thereof, and distributions since December 31,
1996 in contemplation of the payment of Shareholders' income taxes
relating to the income of the Company for calendar year ended December
31, 1996 at the Shareholders' respective effective rates (deemed to be
40%); provided any overages in such distributions for actual taxes owed
are returned to the Company once known to be overages;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any shareholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any director,
officer, or employee.
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of the Company;
(e) damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, or financial
condition of the Company;
(f) entry into, termination of, or receipt of notice of
termination by the Company of (i) any license, distributorship, dealer,
sales representative, joint venture, credit, or similar agreement, or
(ii) any Contract or transaction involving a total remaining commitment
by or to the Company of at least $50,000;
(g) sale (other than sales of inventory or obsolete or
unusable equipment and vehicles in the Ordinary Course of Business),
lease, or other disposition of any asset or property of the Company or
mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company, including the sale, lease, or
other disposition of any of the Intellectual Property, except as
contemplated hereby;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
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(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Shareholders' Disclosure Letter
contains a complete and accurate list, and Shareholders have delivered
or made available to Parent true and complete copies, of:
(i) each Applicable Contract that involves performance
of services or delivery of goods or materials by the Company of
an amount or value in excess of $10,000;
(ii) each Applicable Contract that involves performance
of services or delivery of goods or materials to the Company of
an amount or value in excess of $10,000;
(iii) each Applicable Contract that was not entered into
in the Ordinary Course of Business and that involves expenditures
or receipts of the Company in excess of $10,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or personal
property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $10,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any
other Person;
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(viii) each Applicable Contract containing covenants that
in any way purport to restrict the business activity of the
Company or any affiliate of the Company or limit the freedom of
the Company or any affiliate of the Company to engage in any line
of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to
or by any Person based on sales, purchases, or profits, other
than direct payments for goods;
(x) each power of attorney by or to the Company that is
currently effective and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an
express undertaking by the Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures
in excess of $10,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification in
respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Shareholders'
Disclosure Letter:
(i) None of the Shareholders has or may acquire any
rights under, and none of the Shareholders has become subject to
any obligation or liability under, any Applicable Contract that
relates to the business of, or any of the assets owned or used
by, the Company; and
(ii) To the Shareholders' Knowledge, no officer,
director, agent, employee, consultant, or contractor of the
Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant,
or contractor to (A) engage in or continue any conduct, activity,
or practice relating to the business of the Company, or (B)
assign to the Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Shareholders'
Disclosure Letter and to the Shareholders' knowledge, each Applicable
Contract identified or required to be identified in Part 3.17(a) of the
Shareholders' Disclosure Letter is in full force and effect and is valid
and enforceable in accordance with its terms.
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(d) Except as set forth in Part 3.17(d) of the Shareholders'
Disclosure Letter:
(i) the Company is, and at all times since December 31,
1995, been in substantial compliance with all applicable terms
and requirements of each Applicable Contract identified or
required to be identified in Part 3.17(a) of the Shareholders'
Disclosure Letter under which such Company has or had any
obligation or liability or by which such Company or any of the
assets owned or used by such Company is or was bound;
(ii) to Shareholders' Knowledge, each other Person that
has or had any obligation or liability under any Applicable
Contract under which the Company has or had any rights is, and at
all times since December 31, 1995 has been, in substantial
compliance with all applicable terms and requirements of such
Applicable Contract;
(iii) to Shareholders' Knowledge, no event has occurred
or circumstance exists that (with or without notice or lapse of
time) will, or is reasonably likely to result in a material
violation or material breach of, or give the Company or other
party thereto the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; and
(iv) the Company has not given to or received from any
other Person, since December 31, 1995, any Oral Notice or
Communication regarding any actual, alleged, possible, or
potential violation or breach of, or default under, any
Applicable Contract.
(e) There are no pending renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts
paid or payable to the Company under current or completed Applicable
Contracts with any Person and no such Person has made written demand for
such renegotiation.
(f) The Applicable Contracts relating to the sale, design,
manufacture, or provision of products or services by the Company have
been entered into without the commission of any act alone or in concert
with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal Requirement.
3.18 Insurance.
(a) Except as set forth in Part 3.18 of the Shareholders'
Disclosure Letter, Shareholders have delivered or made available to
Parent:
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(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the
Company, or any director of the Company, in his or her capacity
as a director, is or has been covered at any time within the four
years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Part 3.18(b) of the Shareholders' Disclosure Letter
describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the
Company; and
(iii) all obligations of the Company to third parties
with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under
which such coverage is provided.
(c) Part 3.18(c) of the Shareholders' Disclosure Letter sets
forth, by year, for the current policy year and each of the four
preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $10,000, which sets
forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type
of insurance, and period of coverage; and
(C) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate
cost of such claims.
(d) Except as set forth on Part 3.18(d) of the Shareholders'
Disclosure Letter:
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(i) All policies to which the Company is a party or
that provide coverage to Shareholders, the Company, or any
director or officer of an Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that the
Shareholders reasonably believe is financially sound and
reputable;
(C) are sufficient for compliance with all Legal
Requirements and Applicable Contracts;
(D) will not be terminated in accordance with
its terms upon the consummation of the Contemplated
Transactions and no insurer has given notice of its intent
to terminate such policy upon the consummation of the
Contemplated Transactions; and
(E) do not provide for any retrospective premium
adjustment or other experienced-based liability on the
part of the Company.
(ii) Neither any of the Shareholders nor the Company has
received (A) any refusal of coverage or any notice that a defense
will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that
the issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its obligations, under each policy to
which the Company is a party or that provides coverage to the
Company or director thereof (in his or her capacity as a
director).
(iv) The Company has given notice to the insurer of all
claims that may be insured thereby.
3.19 Environmental Matters.
Except as set forth in Part 3.19 of the Shareholders' Disclosure Letter:
(a) The Company is, and at all times has been, in substantial
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither any of the Shareholders nor the
Company has any basis to expect, nor has any of them or, to the
Shareholders' Knowledge, any other Person for whose conduct they are
responsible received, any actual or Threatened order, notice, or other
communication from (i) any
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Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any
actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which
Shareholders or the Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by
Shareholders, the Company, or any other Person for whose conduct they
are responsible, or from which Hazardous Materials of the Company have
been transported, treated, stored, handled, transferred, disposed or
recycled.
(b) There are no pending or, to the Knowledge of the Company
or the Shareholders, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any Environmental
Law, with respect to or affecting any of the Facilities or any other
properties and assets (whether real, personal, or mixed) in which
Shareholders or the Company has or had an interest.
(c) Neither any of the Shareholders nor the Company has any
basis to expect, nor has any of them or, to the Shareholders' Knowledge,
any other Person for whose conduct they are responsible, received, any
citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials,
or any alleged, actual, or potential violation or failure to comply with
any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which
Shareholders or the Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by
Shareholders, the Company, or any other Person for whose conduct the
Company is responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(d) Neither any of the Shareholders nor the Company, nor, to
the Shareholders' Knowledge, any other Person for whose conduct they
are responsible, has any Environmental, Health, and Safety Liabilities
with respect to the Facilities, or with respect to any other properties
and assets (whether real, personal, or mixed) in which Shareholders or
the Company (or any predecessor) has or had an interest, or at any
property geologically or hydrologically adjoining the Facilities or any
such other property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in
land, water,
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sumps, or any other part of the Facilities, or incorporated into any
structure therein or thereon in quantities that would require
registration with or reporting to any regulatory agency or emergency
planning authority. Neither the Company nor any other Person for whose
conduct the Company is responsible has permitted or conducted, or is
aware of, any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether real, personal, or
mixed) in which Shareholders or the Company has or had an interest
except in substantial compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the Knowledge of
Shareholders and the Company, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or
from or by any other properties and assets (whether real, personal, or
mixed) in which the Company has or had an interest, whether by
Shareholders, the Company, or any other Person for whom the Company is
responsible.
(g) Shareholders have delivered or made available to Parent
true and complete copies and results of any reports, studies, analyses,
tests, or monitoring possessed or initiated by Shareholders or the
Company pertaining to Hazardous Materials or Hazardous Activities in,
on, or under the Facilities, or concerning compliance by Shareholders,
the Company, or, to the Shareholders' Knowledge, any other Person for
whose conduct they are responsible, with Environmental Laws.
3.20 Employees.
(a) Part 3.20 of the Shareholders' Disclosure Letter contains
a complete and accurate list of the following information for each
employee or director of the Company with a salary of at least $30,000
per year (including each such employee on leave of absence or layoff
status), or for each officer of director: employer; name; job title;
current compensation paid or payable and any change in compensation
since December 31, 1996, vacation accrued, and service credited for
purposes of vesting and eligibility to participate under the Company's
pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any Director Plan.
(b) To Shareholders' Knowledge, no employee or director of the
Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any
other Person ("Proprietary Rights Agreement") that in any way adversely
affects or will affect (i) the performance of his duties as an employee
or director of the Company, or (ii) the ability of the Company to
conduct its business, including any
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Proprietary Rights Agreement with Shareholders or the Company by any
such employee or director. To Shareholders' Knowledge, no director,
officer, or other key employee of the Company intends to terminate his
employment with the Company.
(c) Part 3.20 of the Shareholders' Disclosure Letter also
contains a complete and accurate list of the following information for
each retired employee or director of the Company, or their dependents,
receiving benefits or scheduled to receive benefits in the future: name,
pension benefit, pension option election, retiree medical insurance
coverage, retiree life insurance coverage, and other benefits.
3.21 Labor Relations; Compliance. The Company has not been and is not
a party to any collective bargaining or other labor Contract since January 1,
1992. Since January 1, 1992, there has not been, there is not presently pending
or existing, and to Shareholders' Knowledge there is not Threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any Proceeding against or affecting the Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. To Shareholders' Knowledge, no event has occurred or circumstance exists
that provides, or is reasonably likely to provide, the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. The Company has
complied in all material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant closing. The
Company is not liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
3.22 Intellectual Property. Part 3.22 of the Shareholders' Disclosure
Letter sets forth each material item of Intellectual Property, and, except as
set forth in Part 3.22 of the Shareholders' Disclosure Letter, the Company
owns, or is licensed or otherwise has the right to use, all such Intellectual
Property which is used in the conduct of the business of the Company, and the
consummation of the Contemplated Transactions will not alter or impair any such
Intellectual Property in any material respect or the Company's right to use
same. Except as set forth in Part 3.22 of the Shareholders' Disclosure Letter
and except for such other claims which if adversely determined would not have a
material adverse effect on the Company, no claims have been asserted against
the Company by any Person with respect to the use of any such Intellectual
Property or challenging or questioning the validity or effectiveness of any
license or agreement relating thereto. Each of the trademarks, trade names and
copyrights used in the conduct of the business of the Company is valid and
enforceable (except as disclosed in Part 3.22 of the Shareholders' Disclosure
Letter) and to Shareholders' Knowledge, do not violate the rights of any
Person.
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3.23 Certain Payments. Neither the Company nor, to the Shareholders'
Knowledge, any director, officer, agent or employee of the Company, nor any
other Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any affiliate
of the Company, or (iv) in violation of any Legal Requirement, (b) established
or maintained any fund or asset that has not been recorded in the books and
records of the Company.
3.24 Disclosure.
(a) No representation or warranty of Shareholders in this
Agreement and no statement in the Shareholders' Disclosure Letter omits
to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not
misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances
in which they were made, not misleading.
3.25 Relationships with Related Persons. Neither any of the
Shareholders nor any Related Person of any of the Shareholders or of the
Company has any interest in any personal property whether tangible or
intangible), used in the Company's business. Except with respect to ownership
interests in the Company held by any of the Shareholders or a Related Person of
any of the Shareholders or the Company, neither any of the Shareholders nor any
Related Person of any such Shareholders or of the Company owns (of record or as
a beneficial owner) a material equity interest or any other material financial
or profit interest in a Person that has had material business dealings or a
material financial interest in any transaction with the Company since December
31, 1995, other than business dealings or transactions conducted in the
Ordinary Course of Business with the Company at substantially prevailing market
prices and on substantially prevailing market terms. Except as set forth in
Part 3.25 of the Shareholders' Disclosure Letter, neither any of the
Shareholders nor, to Shareholders' Knowledge, any Related Person of any
Shareholders or of the Company is a party to any Contract with, or has any
claim or right against, the Company.
3.26 Brokers or Finders. Shareholders and their agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
3.27 Minority Shareholders Representations and Warranties. Each of
the Minority Shareholders represents and warrants that he or she has the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement, and that he or she is the record and beneficial owner
and holder of all Shares identified to him or her on the signature page for
Minority
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Shareholders, free and clear of all Encumbrances, except as set forth on Part
3.27 of the Shareholders' Disclosure Letter.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco, jointly and severally, represents and warrants to
Shareholders as follows:
4.1 Organization and Good Standing. Each of Parent and Newco is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas. Newco is a wholly owned Subsidiary of Parent and
Parent is the record and beneficial owner of all of the outstanding capital
stock of Newco. Newco was formed by Parent for the sole purpose of effecting
the Merger, and has not conducted any operations or business except with
respect to actions contemplated herein.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of each of Parent and Newco, enforceable against Parent and
Newco in accordance with its terms. Upon the execution and delivery by
Parent of the Escrow Agreement, and the Registration Rights Agreement
(collectively, the "Parent's Closing Documents"), the Parent's Closing
Documents will constitute the legal, valid, and binding obligations of
Parent, enforceable against Parent in accordance with their respective
terms. Each of Parent and Newco has the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement and the
Parent's Closing Documents and to perform its obligations under this
Agreement and the Parent's Closing Documents.
(b) Except as set forth in Part 4.2 of the Parent's Disclosure
Letter, neither the execution and delivery of this Agreement by Parent
and Newco nor the consummation or performance of any of the Contemplated
Transactions by Parent and Newco will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated
Transactions pursuant to:
(i) any provision of Parent's or Newco's Organizational
Documents;
(ii) any resolution adopted by the board of directors or
the shareholders of Parent or Newco;
(iii) any Legal Requirement or Order to which Parent or
Newco may be subject; or
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(iv) any Contract to which Parent or Newco is a party or
by which Parent or Newco may be bound.
Except as set forth in Part 4.2 of the Parent's Disclosure Letter,
neither Parent nor Newco is or will be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 Capitalization. The authorized capital stock of Parent consists
of 50,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), of which 2,826,371 shares are issued and outstanding, and 5,000,000
shares of preferred stock, par value $.01 per share. The Parent'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 Parent's Board of Directors has authorized the
designation of 200,000 shares of the preferred stock as the Series B
Convertible Preferred Stock, of which 124,831 shares are issued and
outstanding. No other shares of preferred stock are presently outstanding. All
of the outstanding equity securities of Parent have been duly authorized and
validly issued and are fully paid and nonassessable. Parent's Disclosure
Letter sets forth the warrants, options, subscriptions or other rights or
preferences (including conversion or preemptive rights) outstanding to acquire
capital stock of Parent, or notes, securities or other instruments convertible
into or exchangeable for capital stock of Parent. Except as set forth on the
Parent's Disclosure Letter, no legend or other reference to any purported
Encumbrance appears upon any certificate representing any equity securities of
Parent. To Parent's Knowledge, there are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of
Parent except as set forth in Part 4.3 of Parent's Disclosure Letter. None of
the outstanding equity securities or other securities of Parent was issued in
violation of the Securities Act or any other Legal Requirement. All of the
Parent Stock, when delivered pursuant to the provision of this Agreement, will
be validly issued, fully paid and non-assessable, free and clear of all
Encumbrances, and will not be issued in violation of any preemptive rights.
Set forth on part 4.3 to the Parent's Disclosure Letter is a complete and
accurate list of all shareholders of Parent who own, beneficially or of record,
10% or more of the outstanding capital stock of Parent.
4.4 Financial Statements. Parent has delivered to Shareholders: (a)
audited consolidated balance sheets of Parent as at December 31 in each of the
years 1994 through 1996, and the related audited consolidated statements of
income, changes in shareholders' equity, and cash flow for each of the fiscal
years then ended, together with the report thereon of Deloitte & Touche,
independent certified public accountants. Such financial statements and notes
fairly present the financial condition and the results of operations, changes
in shareholders' equity, and cash flow of Parent as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or
in the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the
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audited balance sheet); the financial statements referred to in this Section
4.4 reflect the consistent application of such accounting principles throughout
the periods involved, except as disclosed in the notes to such financial
statements.
4.5 Certain Proceedings. Except as set forth in Part 4.5 of the
Parent's Disclosure Letter, there is no pending Proceeding that has been
commenced against Parent or Newco and that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To Parent's Knowledge, no such Proceeding has
been Threatened.
4.6 Taxes. Prior to the Merger, Parent will be in control of Newco
within the meaning of Section 368(c)(1) of the IRC. Parent has no plan or
intention to cause the Surviving Corporation to issue additional shares of its
stock, following the Merger, that would result in Parent losing control of
Newco within the meaning of Section 368(c)(1) of the IRC. Parent has no plan
or intention to reacquire any of its stock issued under the Merger. Parent has
no plan or intention to liquidate Newco; to merge Newco with and into another
corporation; to sell or otherwise dispose of any of the assets of the Company
acquired in the Merger, except for dispositions made in the Ordinary Course of
Business or transfers described in Section 368(a)(2)(C) of the IRC. It is the
intention of the Parent that following the Merger the Surviving Corporation
will continue the historic business of the Company and will use a significant
portion of the Company's business assets in the course of its business.
Parent, Newco and the Company will pay their respective expenses, if any,
incurred in connection with the Merger. Neither Parent nor Newco is an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the IRC.
No stock of Newco will be issued in the Merger. There is no intercompany
indebtedness existing between Parent and the Company or between Newco and the
Company that was issued, acquired, or will be settled at a discount.
4.7 Brokers or Finders. Parent and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold Shareholders harmless from any
such payment alleged to be due by or through Parent as a result of the action
of Parent or its officers or agents.
4.8 Litigation; Order. Except as set forth in Part 4.8 of the
Parent's Disclosure Letter, there is no action, Proceeding, claim or
investigation pending against Parent or Newco before any Governmental body that
if determined adversely to Parent or Newco may reasonably be expected to have a
material adverse effect on the present or future operations or financial
conditions of Parent or Newco, and, to the best of Parent's and Newco's
Knowledge, no such action, Proceeding, claim or investigation has been
Threatened. There is no Order to which Parent or any of the assets owned or
used by the Company is subject and no officer, director, agent or employee of
Parent is subject to any Order that prohibits such officer, director, agent or
employee from engaging in or continuing any conduct, activity or practice
relating to the business of Parent.
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4.9 Absence of Certain Changes. Except as set forth in Part 4.9 of
the Parent's Disclosure Letter, since December 31, 1996, except as contemplated
herein, there has not been with respect to Parent and its Subsidiaries, on a
consolidated basis:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations of Parent or its Subsidiaries which
change by itself or in conjunction with all other such changes, whether
or not arising in the ordinary course of business, has had, or can
reasonably be expected to have, an adverse effect on Parent and its
Subsidiaries, taken as a whole;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or
business of parent and its Subsidiaries, taken as a whole;
(c) any split, combination or recapitalization of the capital
stock of Parent or any declaration or payment of any dividend or making
of any other distribution or payment in respect of its capital stock or
redeeming, purchasing or otherwise acquiring or agreeing to redeem,
purchase or acquire any of its capital stock;
(d) any material change with respect to the management,
supervisory, development or other key personnel of Parent.
4.10 Disclosure.
Parent has furnished to Shareholders a copy of Parent's Disclosure
Letter. No representation or warranty of Parent and Newco in this Agreement
and Parent's Disclosure Letter contains an 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.
4.11 No Undisclosed Liabilities. Except as set forth in Part 4.11 of
the Parent's Disclosure Letter and except for obligations and liabilities
arising under the Applicable Contracts, neither the Parent nor Newco has any
liabilities or obligations of the type required to be reflected as liabilities
on a balance sheet prepared in accordance with GAAP except for liabilities or
obligations reflected or reserved against the Parent's balance sheet as of
December 31, 1996 and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
4.12 No Material Adverse Change. Except as set forth in Part 4.12 of
the Parent's Disclosure Letter, since December 31, 1996 there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of Parent or Newco, and to the Parent's Knowledge no event
has occurred or circumstance exists that will or is reasonably likely to result
in such a material adverse change.
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SECTION 5. COVENANTS OF SHAREHOLDERS
5.1 Access and Investigation. Between the date of this Agreement and
the Closing Date, the Company and the Shareholders will, and will cause the
Company and its Representatives to, (a) afford Parent and its Representatives
and prospective lenders and their Representatives (collectively, "Parent's
Advisors") full and free access to the Company's personnel, properties
(including subsurface testing), contracts, books and records, and other
documents and data, (b) furnish Parent and Parent's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Parent may reasonably request, and (c) furnish Parent and Parent's Advisors
with such additional financial, operating, and other data and information as
Parent may reasonably request.
5.2 Operation of the Business of the Company. Between the date of
this Agreement and the Closing Date, unless otherwise consented to by Parent
and except as contemplated herein, the Company and Shareholders will, and
Shareholders will cause the Company to:
(a) conduct such business of the Company only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of such Company, keep available the services of
the current officers, employees, and agents of the Company, and maintain
the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships
with the Company;
5.3 Negative Covenant. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Company and Shareholders will not, and will cause the Company not to, without
the prior consent of Parent, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of the
changes or events listed in Section 3.16 is likely to occur.
5.4 Excluded Assets. On or prior to the Closing Date, the Company
shall sell or distribute to Shareholders, and Shareholders shall purchase or
accept all of the Excluded Assets. In connection with this sale, Shareholders
shall assume all liabilities related to the Excluded Assets.
5.5 Required Approvals. As promptly as practicable after the date of
this Agreement, the Company and Shareholders will, and Shareholders will cause
the Company to, make all filings required by Legal Requirements to be made by
them in order to consummate the Contemplated Transactions. Between the date of
this Agreement and the Closing Date, the Company and Shareholders will, and
will cause the Company to, (a) cooperate with Parent with respect to all
filings that Parent reasonably elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Parent in obtaining all consents identified in Part 3.2 of the
Shareholders' Disclosure Letter; provided, however, that this
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Agreement will not require the Company or the Shareholders to incur any
unreasonable burden, financial or otherwise, to make such filing or obtain such
consent or Governmental Authorization.
5.6 Notification. Between the date of this Agreement and the Closing
Date, the Shareholders will promptly notify Parent in writing if any of the
Shareholders become aware of any fact or condition that causes or constitutes a
Breach of any of the Company's or Shareholders' representations and warranties
as of the date of this Agreement, or if the Shareholders become aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Shareholders' Disclosure Letter if the Shareholders' Disclosure Letter were
dated the date of the occurrence or discovery of any such fact or condition,
the Shareholders will promptly deliver to Parent a supplement to the
Shareholders' Disclosure Letter specifying such change. During the same period,
the Company and Shareholders will promptly notify Parent of the occurrence of
any Breach of any covenant of Shareholders in this Section 5 or of the
occurrence of any event, of which any of the Shareholders has Knowledge and
which will, or is reasonably likely to, make the satisfaction of the conditions
in Section 7 impossible or unlikely.
5.7 Payment of Indebtedness by Related Persons. Except as expressly
provided in this Agreement, Shareholders will cause all indebtedness owed to
the Company by any Shareholder or any Related Person of any Shareholder to be
paid in full prior to Closing.
5.8 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, the Company and the Shareholders will not,
and will cause the Company and each of their Representatives not to, directly
or indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Parent) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of the Company, or any
of the capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company. Shareholders and
the Company will promptly communicate to Parent the terms of any proposal
received or the fact that Shareholders or the Company has received inquiry with
respect to, or have participated in discussions or negotiations in respect of,
any such transaction, and the identity of any persons who initiated or
participated in such discussions or negotiations.
5.9 Best Efforts. Between the date of this Agreement and the Closing
Date, Shareholders will use their Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
5.10 Cooperation on Tax Matters.
(a) After the Closing Date, the Shareholders shall cooperate with
the Parent, as and to the extent reasonably requested by the other party, in
connection with the preparation and filing
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of any Tax Return, statement, report or form (including any report required
pursuant to Section 6042 of the IRC and all Treasury Regulations promulgated
thereunder), any audit, and litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retentions and (upon the other
party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding.
(b) The Shareholders agree, upon request, to use all reasonable
efforts to obtain any certificate or other document from any governmental
authority or any other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed on Parent or Surviving Corporation
(with respect, but not limited, to transactions contemplated hereby).
5.11 Other Tax Matters
(a) Without the prior written consent of the Parent, neither the
Shareholders nor the Company (to the extent it may affect or relate to the
Company, the Surviving Corporation or the Parent) shall make or change any Tax
election, change any annual Tax accounting period, adopt or change any method
of Tax accounting period, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim a
Tax refund, consent to any extension or waiver of the limitations period of the
limitations period applicable to any Tax claim or assessment or take or omit to
take any other action, if any such action or omission would have the effect of
increasing the Tax liability of the Company or the Parent.
(b) All Tax Returns not required to be filed on or before the
date hereof (including any applicable extensions) relating to any Pre-Closing
Tax Period will be filed when due in accordance with all applicable laws.
(c) All transfer, documentary, sales, use, stamp, registration,
value added and other such Taxes and fees incurred in connection with this
Agreement (including any applicable extensions) will be filed when due in
accordance with all applicable laws.
5.12 Filing of Short Period Returns. The Company and Shareholders
shall treat the day before the Closing Date as the last day of the taxable
period in which the Company is an S corporation, as defined in the IRC. All
Tax returns relating to Company's status as an S corporation for the present
taxable year of the Company, which are required and/or permitted by the
authorized taxing authorities (herein collectively referred to as the "S Short
Year Returns") shall be filed accordingly. In accordance with Section
1362(e)(6)(D) and related regulations of the IRC, the books of the Company
shall be closed at the close of the day before the Closing Date. The
Shareholders will cause its accounting firm to prepare, at the Shareholders'
expense, the S Short Year Returns.
5.13 Crystal City Property. Shareholders will transfer title to
any or all of the following items located in the Crystal City property, as
determined by Parent: the compressor, ice machines, receivers, accumulator,
condenser, rake bin, electrical components, vault refrigeration, valves and
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fittings. Neither Parent nor the Newco shall have any obligation under this
agreement, or under any lease agreement, to remove any of the items listed in
the preceding sentence.
SECTION 6. COVENANTS OF PARENT
6.1 Approvals of Governmental Bodies. As promptly as practicable
after the date of this Agreement, Parent will, and will cause each of its
Related Persons to, make all filings required by Legal Requirements to be made
by them to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Parent will, and will cause each Related Person
to, cooperate with Shareholders and the Company with respect to all filings
that the Company and/or the Shareholders are required by Legal Requirements to
make in connection with the Contemplated Transactions, and (ii) cooperate with
Shareholders in obtaining all consents identified in Part 3.2 of the
Shareholders' Disclosure Letter; provided that this Agreement will not require
Parent to dispose of or make any change in any portion of its business or to
incur any other unreasonable burden to obtain a Governmental Authorization.
6.2 Best Efforts. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Parent will use its
Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3 Cooperation on Tax Matters The Parent agrees (i) to retain and
provide Shareholders with access to all books and records with respect to Tax
matters pertinent to the Company relating to any Pre-Closing Tax Period, and to
abide by all record retention agreements entered into with any Taxing
Authority, (ii) to give the Shareholders reasonable written notice prior to
destroying or discarding any such books and records and, if the Shareholders so
request, the Parent shall allow the Shareholders to take possession of such
books and records and (iii) to cooperate fully with the Shareholders regarding
whatever steps may be reasonably necessary to qualify the Merger as a tax-free
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the IRC.
6.4 Notification. Between the date of this agreement and the Closing
Date, the Parent will promptly notify Shareholders in writing if the Parent
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Company's, Shareholders', Parent's or Newco's representations and
warranties as of the date of this Agreement, or if Parent becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition known by Parent require any
change in the Parent's Disclosure Letter if the Parent' s Disclosure Letter
were dated the date of the occurrence or discovery of any such fact or
condition, Parent will promptly deliver to Shareholders a supplement to the
Parent's Disclosure Letter specifying such change. During the same period,
Parent will promptly notify Shareholders of the occurrence of any Breach, known
to the Parent, of any covenant of Shareholders, Company, Parent or Newco in
this Agreement or of the occurrence of any event that
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will or is reasonably likely to make the satisfaction of the conditions in
Section 7 or 8 impossible or unlikely.
6.5 Release of Personal Guarantee. Parent and Newco shall take all
such actions necessary or appropriate to cause Shareholders to be released at
or prior to Closing from any personal guarantees of payment or performance
relating to the Company's current and long-term indebtedness, notes payable,
current and long-term capital leases and any other obligations relating to the
Company, its assets or business (other than the Excluded Assets), subject to
Company and Shareholders' performance of all covenants and obligations required
hereunder. Concurrent with the Closing, Parent shall cause Newco to repay all
amounts owed to Robert G. Miller by the Company.
6.6 Excluded Assets. Parent and Newco shall take all such actions
necessary or appropriate to release the Excluded Assets from all liens and
encumbrances relating to the Company's current and long-term indebtedness,
notes payable, current and long-term capital leases and any other obligations
relating to the Company, subject to Company and Shareholders' performance of
all covenants and obligations required hereunder.
6.7 Maintaining Adequate Insurance. For the period that is five
years after the Closing Date, Parent shall maintain comprehensive general
liability insurance coverage and which names each of the Shareholders as
additional insureds under its comprehensive general liability insurance policy.
The limits of such coverage will be least $5,000,000 per occurrence. Parent
shall furnish the Shareholders with proof of this insurance on an annual basis.
For the period that is five years after the Closing Date, so long as Parent
maintains product liability coverage, Parent shall provide the same insurance
coverage to each of the Shareholders, naming each of the Shareholders as
additional insureds to its product liability insurance policy. Parent and Newco
shall maintain adequate liability insurance, including product liability
insurance, after the Closing, and the Shareholders shall be covered under such
insurance policies.
6.8 COBRA Compliance. On and after the Closing Date, Parent shall
have the sole responsibility and obligation for complying with the health care
continuation coverage requirements of Internal Revenue Code ("Code") Section
4980B and Section 601 et seq. of ERISA ("COBRA") that are applicable to the
Company's employees and the spouses and dependents of such employees and Parent
shall be solely responsible for providing COBRA continuation coverage to any
person entitled to such coverage in connection with any health plan sponsored
by Company or by Parent. Parent shall indemnify, defend and hold harmless
Company and its employees, officers, directors, successors, assigns,
subsidiaries, shareholders, agents, attorneys, representatives and affiliates
from and against any and all losses, liabilities, demands, claims, expenses,
judgments, costs, attorneys' fees, taxes and penalties arising under Code
Section 1980B or ERISA Section 601 et seq. with respect to any individual who
was an employee (or a spouse or dependent of such employee) of Company prior to
the Closing and who had or has a "qualifying event" (within the meaning of Code
Section 4980(B)(f)(3)) before, on or after the Closing.
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6.9 Registration Rights Agreement. Prior to the Closing, Parent
shall negotiate in good faith with Shareholders an agreement (the "Registration
Rights Agreement") which gives the Shareholders"piggyback" registration rights
and "demand" registration rights on the same or better terms and conditions as
those granted by Parent to other shareholders of Parent under other
registration rights agreements to which Parent is a party, or contemplates
entering into; provided, that such registration rights of Shareholders shall be
exercisable, subject to reasonable restrictions, at any time after an initial
public offering of the Parent Stock.
SECTION 7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE
Parent's obligation to consummate the Merger and to take the other
actions required to be taken by Parent at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Parent, in whole or in part):
7.1 Accuracy of Representations. All of Shareholders'
representations and warranties in this Agreement must have been accurate in
all material respects as of the date of this Agreement, and must be accurate in
all material respects as of the Closing Date as if made on the Closing Date.
7.2 Shareholders' Performance.
(a) All of the covenants and obligations that Shareholders are
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.8 must have been delivered, and each of the other covenants and
obligations in Sections 5 must have been performed and complied with in
all material respects.
7.3 Consents. Each of the Consents identified in Part 3.2 of the
Shareholders' Disclosure Letter must have been obtained and must be in full
force and effect, except where the failure to obtain each consent would not
have a materially adverse effect on the business, financial condition or result
of operation of the Company, or the ability of the parties to consummate the
Contemplated Transactions without the payment of additional consideration.
7.4 Additional Documents. Each of the following documents must have
been delivered to Parent:
(a) an opinion of Luce, Forward, Hamilton & Scripps, L.L.P.
dated the Closing Date reasonably acceptable to Parent;
(b) [Section intentionally omitted]
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(c) such other documents as Parent may reasonably request for
the purpose of (i) enabling its counsel to provide the opinion referred
to in Section 8.4(a), (ii) evidencing the accuracy of any of
Shareholders' representations and warranties, (iii) evidencing the
performance by Shareholders of, or the compliance by Shareholders
with, any covenant or obligation required to be performed or complied
with by such Shareholders, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating
the consummation or performance of any of the Contemplated Transactions.
7.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Parent, or against any Person
affiliated with Parent, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds. There must
not have been made or Threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Company, or (b) is
entitled to all or any portion of the Acquisition Price.
7.7 No Prohibition. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause Parent or any Person
affiliated with Parent to suffer any material adverse consequence under any
applicable Legal Requirement or Order.
7.8 Financing. Parent shall have obtained financing satisfactory to
it adequate to consummate the Merger.
7.9 Tax Certification. Parent shall have received a certification
signed by the Shareholders to the effect that none of the Shareholders is a
"foreign person" as defined in Section 1445 of the IRC.
7.10 Excluded Assets. The Company shall have sold or distributed, and
Shareholders or Shareholders' affiliates shall have purchased or received, all
of the Excluded Assets and, in connection therewith, Shareholders or
Shareholders' affiliates shall have assumed all liabilities related to the
Excluded Assets.
7.11 Effective Date and Closing. All documents required to be filed
under Texas and Arizona law to effect the Merger shall have been filed.
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7.12 Robert G. Miller Lease. The Company shall have obtained an
extension of that certain Lease Agreement, in which Robert G. Miller is the
lessor, relating to property located on Van Buren Street in Phoenix, Arizona.
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDERS'
OBLIGATION TO CLOSE
Shareholders' obligation to consummate the Merger and to take the other
actions required to be taken by Shareholders at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Shareholders, in whole or in part):
8.1 Accuracy of Representations. All of Parent's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 Parent's Performance.
(a) All of the covenants and obligations that Parent is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Parent must have delivered each of the documents required
to be delivered by Parent pursuant to Section 2.8 and must have
delivered the Cash Amount and the Stock Amount required to be made by
Parent pursuant to Sections 2.8(b) and 2.8(e).
(c) Parent must have consummated the acquisition of Mission
Party Ice, Inc. prior to or on the Effective Date.
8.3 Consents. Each of the Consents identified in Part 4.2 of the
Shareholders' Disclosure Letter must have been obtained and must be in full
force and effect.
8.4 Additional Documents. Parent must have caused the following
documents to be delivered to Shareholders:
(a) an opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
dated the Closing Date reasonably acceptable to Shareholders; and
(b) such other documents as Shareholders may reasonably
request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 7.4(a),
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(ii) evidencing the accuracy of any representation or warranty of
Parent, (iii) evidencing the performance by Parent of, or the compliance
by Parent with, any covenant or obligation required to be performed or
complied with by Parent, (ii) evidencing the satisfaction of any
condition referred to in this Section 8, or (v) otherwise facilitating
the consummation of any of the Contemplated Transactions.
8.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Shareholders, Company, or against any
Person affiliated with Company, any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
8.6 Release of Personal Guarantees. The current and long-term
indebtedness, the notes payable and the current long-term capitalized leases,
with respect to which the Shareholders have personally guaranteed payment or
performance, will either be paid off concurrently with the Closing by the
Company (or Parent on behalf of the Company), or Parent will take such actions
necessary to release Shareholders from such guarantees at or prior to the
Closing.
8.7 Offer of Employment. Dale Johnson shall have been offered
employment with the Parent as Chief Financial Officer and Alan Bernstein shall
have been offered employment with Parent as Vice President, Southwest Region.
8.8 No Prohibition. Neither the consummation nor the performance of
any of the contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause Shareholders or any Person
affiliated with Shareholders to suffer any material adverse consequence under,
any applicable Legal Requirement or Order.
8.9 Effective Date and Closing. All documents required to be filed
under Texas and Arizona law to effect the Merger shall have been filed.
SECTION 9. TERMINATION
9.1 Termination Events. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Parent or Shareholders if a material Breach of
any provision of this Agreement has been committed by the other party
and such Breach has not been waived; provided, however, the party
discovering the Breach shall immediately notify the other party of the
Breach and that if the breaching party notifies the non-breaching party
immediately after such Breach, then the breaching party shall have a
period of 3 days after such notification, in the case of monetary
Breaches, and 10 days, in the case of all other Breaches,
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to cure such Breach, during which period such Breach shall be deemed to
have been waived by the non-Breaching party.
(b) by mutual consent of Parent and Shareholders; or
(c) by either Parent or Shareholders if the Closing has not
occurred (other than through the failure of any party seeking to
terminate this Agreement to comply substantially with its obligations
under this Agreement) on or before Ending Date, or such later date as
the parties may agree upon;
(d) "Ending Date" shall mean April 15, 1997, or, if Parent has
obtained by such date assurance(s) of sufficient financing to complete
the Merger, but such financing has been delayed for any reason, then
April 30, 1997.
9.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 9.2(b), 9.2(c) and Section 11 will survive.
(b) If Parent and Newco fail to consummate the transactions
contemplated on its part to occur on the Closing Date, in circumstances whereby
all conditions of the Closing set forth in Section 7 have been satisfied in all
material respects or waived, Shareholders and the Company shall be entitled to
terminate this Agreement and to be reimbursed by Parent and Newco for its out-
of-pocket expenses incurred directly in connection with the negotiation,
preparation and performance of this Agreement.
(c) If Shareholders and the Company fail to consummate the
transactions contemplated on their part to occur on the Closing Date, in
circumstances whereby all conditions of the Closing set forth in Section 8 have
been satisfied in all material respects or waived, Parent's and Newco's sole
remedy shall be to (i) to require Shareholders and the Company to consummate
and specifically perform the Contemplated Transactions, in accordance with the
terms of this Agreement, and to obtain from Shareholders any attorney fees
incurred in connection with procuring such specific performance or (ii)
terminate this Agreement and obtain reimbursement of its out-of-pocket expenses
incurred directly in connection with the negotiation, preparation and
performance of this Agreement.
SECTION 10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification; Knowledge. All
representations, warranties, covenants, and obligations in this Agreement, the
Shareholders' Disclosure Letter, the certificate delivered pursuant to Section
2.8(a)(iv), and any other certificate or document delivered pursuant to this
Agreement will survive the Closing. Shareholders shall not be liable under this
Section 10 for Damages (as hereinafter defined) resulting from any event
relating to a Breach of any representation,
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warranty, covenant or agreement made in this Agreement if either Parent or
Newco had actual knowledge of such Breach on or before the Closing Date. Upon
the Closing, none of the parties shall be liable under this Section 10 or
otherwise for Damages (as hereinafter defined) resulting from the Option
Agreement, the Master Lease Agreement, the Services Agreement and the
transactions contemplated thereby (the "Option Transaction Documents") and each
party hereby fully and forever releases the other party from any and all claims
or Damages arising under the Option Transaction Documents.
10.2 Indemnification and Payment of Damages by Shareholders. Except
as provided in Sections 10.5 and 10.6, Shareholders shall jointly and severally
indemnify and hold harmless Parent, Newco and the Surviving Corporation, and
their respective Representatives, shareholders, controlling persons, and
affiliates for, and will pay to the such Persons the amount of, any loss,
liability, claim, damage, or expense (including costs of investigation and
defense and reasonable attorneys' fees), whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty (other than
Section 3.19 or Section 3.27) made by the Company, Shareholders in this
Agreement, Shareholders' Disclosure Letter, or any other certificate or
document delivered by Shareholders pursuant to this Agreement as if such
representation or warranty were made on and as of the Closing Date,
other than any such Breach that is disclosed in a supplement to the
Shareholders' Disclosure Letter, or any Breach by the Shareholders of
subsections (e) through (k) of Section 3.11, with respect to which
Parent's sole remedy shall be subsection (d) of this Section 10.2;
(b) any Breach by Shareholders of any covenant or obligation
of such Shareholders in this Agreement;
(c) any product shipped or manufactured by, or any services
provided by, the Company prior to the Closing Date;
(d) any loss, liability or expense attributable to any federal
income tax payable by Parent or the Surviving Corporation resulting from
the Merger not being treated as a tax free merger under the IRC as a
result of (i) any act or omission of Shareholders or (ii) any Breach of
a representation, warranty or covenant of Shareholders contained herein.
Notwithstanding any of the foregoing, in the event that the Contemplated
Transactions are not consummated, neither Parent nor Newco shall be entitled to
indemnification for Breaches of covenants and agreements contained herein to be
performed at or prior to the Closing or the Breach of any representation or
warranty contained herein.
10.3 Indemnification and Payment of Damages by Shareholder--
Environmental Matters. Shareholders jointly and severally will indemnify and
hold harmless Parent, and Newco, and their
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respective Representatives, shareholders, controlling persons and affiliates
for, and will pay to Parent, Newco, the Surviving Corporation and the other
Indemnified Persons the amount of, any Damages (including costs of cleanup,
containment, or other remediation to the extent required to comply with any
Environmental Laws) arising, directly or indirectly, from or in connection
with:
(a) any Breach of Section 3.19;
(b) any Environmental, Health, and Safety Liabilities arising
out of or relating to: (i) (A) the ownership, operation, or condition at
any time on or prior to the Closing Date of the Facilities or any other
properties and assets (whether real, personal, or mixed and whether
tangible or intangible) in which Shareholders or the Company has or had
an interest, or (B) any Hazardous Materials that were present on the
Facilities or such other properties and assets at any time on or prior
to the Closing Date as a result of the introduction of such Hazardous
Materials by the Company or its Representatives or as a result of the
Company's or any successor-in-interest's operations; or (ii) (A) any
Hazardous Materials, wherever located, that were, or were allegedly,
generated, transported, stored, treated, Released, or otherwise handled
by Shareholders or the Company or by any other Person for whose conduct
the Company is responsible at any time on or prior to the Closing Date,
or (B) any Hazardous Activities that were, or were allegedly, conducted
by Shareholders or the Company or by any other Person for whose conduct
the Company is responsible; or
(c) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was
incurred, or manifested itself), personal injury, property damage
(including trespass, nuisance, wrongful eviction, and deprivation of the
use of real property), or other damage of or to any Person, including
any employee or former employee of the Company or any other Person for
whose conduct the Company is or responsible, in any way arising from or
allegedly arising from any Hazardous Activity conducted or allegedly
conducted by the Company with respect to the Facilities or the operation
of the Company prior to the Closing Date, or from Hazardous Material
that was (i) introduced, generated, stored, treated, related or disposed
of by the Company on or before the Closing Date on or at the Facilities
(or present on any other property, if such Hazardous Material emanated
from any of the Facilities and was present on any of the Facilities on
or prior to the Closing Date) or (ii) Released or allegedly Released by
the Company or any other Person for whose conduct the Company is
responsible, at any time on or prior to the Closing Date.
Parent and Newco shall first seek recovery and indemnification under any
applicable insurance and indemnification from the TRIARC Companies, Inc. and
Southeastern Public Service Company ("SEPSCO") to the extent allowed by any
applicable agreements and by law, pursuing and exhausting all available
remedies against the same, before seeking indemnification from Shareholders
under this Section 10.3.
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Parent and Newco will be entitled to control any cleanup required or
mandated by Governmental Authority (a "Cleanup"), any related Proceeding, and,
any other Proceeding with respect to which indemnity may be sought under this
Section 10.3. In any Cleanup or any such Proceeding, Parent or Newco must give
timely notice to the Shareholders of the institution of only such Cleanup and
the commencement of any such Proceeding and the Shareholders will be entitled
to participate (individually and through counsel of their selection) in such
Proceeding, including (but not limited to) discovery proceedings and
administrative meetings and hearings, at Shareholders' own expense. Parent or
Newco must apprise Shareholders, in a timely fashion and to a reasonable
extent, of matters relating to any such Proceeding. Neither Parent nor Newco
shall agree to the terms and conditions of any Cleanup or settle any such
Proceeding without the prior, written approval of the Shareholders.
Notwithstanding any provision in this Agreement to the contrary, in no
event will Parent, Newco, or any of their respective Representatives,
shareholders, controlling persons, and affiliates be entitled to
indemnification under this Section 10.3 or with respect to the representations
and warranties set forth in Section 3.19 to the extent to which any liability
arising from such indemnification claim are attributable to activities or
conduct of the Company (or the Surviving Corporation), Parent, Newco, or any of
their respective Representatives, shareholders, controlling persons, agents and
affiliates from and after the Closing Date.
10.4 Indemnification and Payment of Damages by Parent. Parent and
Newco, jointly and severally, will indemnify and hold harmless Shareholders,
and will pay to Shareholders the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any Breach of any representation or
warranty made by Parent or Newco in this Agreement or in any certificate
delivered by Parent or Newco pursuant to this Agreement, (b) any Breach by
Parent or Newco of any covenant or obligation of Parent or Newco in this
Agreement, (c) any violation by Parent or Newco of any state or federal
securities law in connection with the issuance of the Parent Stock, or (d) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such Person with Parent (or any Person acting on its behalf) in connection with
any of the Contemplated Transactions, or (e) any loss, liability or expense
attributable to any Tax payable by Shareholders resulting from the Merger not
being treated as a tax-free merger under the IRC as a result of (i) any act
or omission of Parent, Newco or the Surviving Corporation (excluding any act or
omission of the Company on or prior to the Closing Date or any act or omission
of the Shareholders at any time) or (ii) any Breach of representation, warranty
or covenant of Parent or Newco contained herein.
10.5 Time Limitations. Other than the representations set forth in
Sections 3.11, 3.13 or 3.19, Shareholders will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with on or prior to the
Closing Date or representations made again as of the Closing Date, unless on or
before two years from the Closing Date, Parent notifies Shareholders of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Parent. A claim with respect to Sections 3.11, 3.13, 10.2(c),
or 10.2(d), or a claim for indemnification or reimbursement based upon any
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covenant or obligation to be performed and complied with after the Closing
Date, must be made prior to the expiration of the applicable statutory period
of limitations, including any extensions to such period, and shall thereupon
terminate. A claim with respect to Section 3.19 or Section 10.3 must be made
prior to March 25, 2000, and shall thereupon terminate. If the Closing occurs,
Parent will have no liability (for indemnification or otherwise) with respect
to any representation or warranty, or covenant or obligation to be performed
and complied with prior to the Closing Date other than those set forth in
Section 4.6, unless on or before two years from the Closing Date, Shareholders
notify Parent of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Shareholders. A claim with
respect to Section 4.6 or a claim for indemnification or reimbursement based
upon any covenant or obligation to be performed and complied with after the
Closing Date must be made prior to the expiration of the applicable statutory
period of limitations, including any extensions to such period, and shall
thereupon terminate.
10.6 Limitations on Amount -- Shareholders.
(a) Shareholders will have no liability (for indemnification or
otherwise) with respect to the matters described in Section 10.2 and Section
10.3 until the total of all Damages with respect to such matters exceeds
$75,000 in the aggregate, and then only for the amount by which such Damages
exceed $75,000 (the "Basket"); provided, however, the Basket shall not apply to
any claim for indemnification arising out of a Breach of any representations,
warranties or covenants contained in Sections 3.3, 3.6, 3.11, 3.19, 5.10, 5.11
or 5.12, or any provisions herein to the extent of their relation to any of the
Excluded Assets, including, without limitation, Shareholders' obligation to
assume all liabilities related to the Excluded Assets (except liens in
connection with the Company's bank financing). The Shareholders' maximum
liability with respect to the matters described in Section 10.2 will be limited
to $3,000,000 (the "Cap"). Notwithstanding the foregoing, the maximum liability
of each of the Shareholders -- with respect to any any claim (for
indemnification or otherwise) arising out of a Breach of any of the Company's
representations, warranties or covenants contained in Sections 3.1(c), 3.3,
3.6, 3.11, 3.19, 5.10, 5.11 or 5.12, the indemnification obligations of
subparagraph 10.2(d) or 10.3, or any provisions herein to the extent of their
relation to any of the Excluded Assets, including, without limitation,
Shareholders' obligation to assume all liabilities related to the Excluded
Assets (except liens in connection with the Company's bank financing) -- will
be the amount of cash and/or stock consideration received by each such
Shareholder under this Agreement.
(b) In case any event shall occur which would otherwise entitle any
party to assert a claim for indemnification hereunder, no claim, loss,
liability, cost or expense shall be deemed to have been sustained by such party
to the extent of any proceeds received by such party from any insurance
policies with respect thereto and of any indemnity payments or contribution by
SEPSCO, Triarch or any other party against whom indemnification is established.
10.7 Contribution by Parent. With respect to any damages assessed
against Shareholders stemming directly from any Environmental Claim,
Shareholders' will be entitled to contribution
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from Parent, Newco and the Surviving Corporation to the extent such damages are
attributable to events occurring after the Closing.
10.8 Sole Remedy. The sole and exclusive remedy of the parties
hereunder for any and all claims under this Agreement discovered after the
Closing shall be the indemnities set forth in this Section 10, as limited by
the provisions set forth elsewhere in this Section 10. Notwithstanding any
provision in this Agreement to the contrary, no party shall be able to avoid
the limitations expressly set forth in this Section 10 or Section 9.2 by
electing to pursue any other remedy.
10.9 Procedure for Indemnification -- Third Party Claims.
(a) If a Person receives notice of the commencement any
Proceeding against it which might give any party indemnification rights
under this Section 10, then promptly thereafter such Person will, if a
claim is to thus be made against such party, give notice to such party
of the commencement of such Proceeding, but the failure to notify such
party will not relieve this Person of any liability that it may have to
such party, except to the extent this party is prejudiced by the
indemnifying party's failure to give such notice.
(b) Except with respect to any Proceeding relating to a Breach
of Section 3.19 or the indemnification obligation of Section 10.3:
(i) If any Proceeding referred to in Section 10.9(a)
is brought against an indemnified party and it gives timely notice
to the indemnifying party of the commencement of such Proceeding,
the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (A) the
indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint
representation would result in a conflict of interests preventing
such joint representation, or (B) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the
defense of such Proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as
long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified
party in connection with the defense of such Proceeding, other
than reasonable costs of investigation.
(ii) If the indemnifying party assumes the defense of
a Proceeding, (A) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified
party's consent unless (1) there is no finding or admission of any
violation of Legal Requirements or any material violation of the
rights of any
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Person and no material effect on any other claims that may be made
against the indemnified party, and (2) the sole relief provided is
monetary damages that are paid in full by the indemnifying party;
and (B) the indemnified party will have no liability with respect
to any compromise or settlement of such claims effected without
its consent.
(iii) If the indemnified party objects to a settlement
which has otherwise been fully agreed to by the other parties to
the Proceeding, the indemnified party may prevent the indemnifying
party from making a settlement on indemnified party's behalf, in
which case, at the election of the indemnifying party, the
indemnifying party may pay the indemnified party the proposed cost
to them of such settlement, in cash, and the indemnified party
shall thereafter be responsible for such litigation matter and the
indemnifying parties shall thereafter have no further
indemnification responsibility with respect to such matter;
provided, however, this subsection (iii) shall not apply unless
under the settlement (1) there is no finding or admission of any
violation of Legal Requirements or any material violation of the
rights of any Person and no material effect on any other claims
that may be made against the indemnified party, and (2) the
settlement permits payment of a monetary amount that is paid in
full by the indemnifying party.
(iv) If the indemnifying party does not undertake to
defend such matter to which the indemnified party is entitled to
indemnification hereunder within a reasonable time after receiving
notice of the Proceeding's commencement, the indemnified party may
undertake such defense through counsel of its choice, at the cost
and expense of the indemnifying party, and the indemnified party
may settle such matter, and the indemnifying party shall reimburse
the indemnified party for the amount paid in such settlement and
any other liabilities, costs or expenses reasonably incurred by
the indemnified party in connection therewith, provided, however,
that under no circumstances shall the indemnified party settle any
third party claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld. The
indemnified party shall make available to the indemnifying party
all records, other materials and personnel reasonably required by
it for its use in contesting any third party claims and shall
cooperate fully with the indemnifying party in the defense of all
such claims.
(v) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable
probability that a Proceeding may materially adversely affect it
or its affiliates other than as a result of monetary damages for
which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party
will not be bound by any determination of a Proceeding so defended
or any compromise or settlement effected without its consent
(which may not be unreasonably withheld).
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10.10 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
10.11 Payment in Cash or Parent Stock. Payment of indemnification
claims under this Section 10 may be paid in either cash or Parent Stock, in the
sole discretion of Shareholders. The shares of Parent Stock shall be valued at
$10.00 per share for purposes of the payment of such indemnification claims.
10.12 Subrogation Rights. If Parent, Newco, the Surviving Corporation
or any of their respective Representatives, shareholders, controlling persons
or affiliates makes a claim for indemnification, (i) Shareholders shall have
rights of subrogation with respect to any lawful claim, right or demand of
Parent, Newco, the Company or the Surviving Corporation against any third
Person, including any common law or statutory rights of contribution or
indemnity, contractual rights or indemnification rights, (ii) Parent and Newco
shall (and shall cause the Surviving Corporation to) take all such actions
necessary to assign any and all such subrogation rights to the Shareholders,
and (iii) Parent and Newco shall (and shall cause the Surviving Corporation to)
preserve and assert any such claims of contribution and indemnity and to
provide reasonable assistance to Shareholders in asserting such subrogation
rights against any such Person.
10.13 Indemnification of Parent by Minority Shareholders.
(a) Minority Shareholders shall not be liable under this Section
10.12 for Damages resulting from any event relating to a Breach of any
representation, warranty, covenant or agreement made in this Agreement if
either Parent or Newco had actual knowledge of such Breach on or before the
Closing Date. Subject to Section 10.12(b), the Minority Shareholders shall
severally indemnify and hold harmless Parent, Newco and the Surviving
Corporation, and their respective Representatives, shareholders, controlling
persons, and affiliates for, and will pay to the such Persons the amount of
any Damages arising, directly or indirectly, from or in connection with any
Breach of Section 3.27.
(b) Minority Shareholders will have no liability (for indemnification
or otherwise) with respect any Breach of Section 3.27 unless on or before two
years from the Closing Date, Parent notifies the Minority Shareholders of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Parent. Minority Shareholders will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
3.27 or Section 10.12(b) until the total of all Damages with respect to such
matters exceeds $10,000 in the aggregate, and then only for the amount by which
such Damages exceed $10,000. The maximum liability for each Minority
Shareholder shall not exceed the amount of consideration each such Minority
Shareholder received under this Agreement.
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SECTION 11. GENERAL PROVISIONS
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party. Notwithstanding any provision in this Agreement to the
contrary, and in addition to any other rights Shareholders may have hereunder,
in the event that the Contemplated Transactions are not consummated, for any
reason other than the material Breach by Shareholders of any covenant,
agreement, representation or warranty, Parent shall pay to Shareholders and the
Company an amount equal to all of the out-of-pocket costs, fees and expenses
incurred by Shareholders and the Company in connection with the preparation,
execution and performance of this Agreement and the Contemplated Transactions,
including without limitation all fees and expenses of agents, representatives,
counsel and accountants. Prior to the Closing, the accounting and law firms
employed by the Company will submit a statement of services and fees to be paid
on the Closing. If Shareholders so elect, Parent shall pay such fees to these
firms, and the actual cash paid to the Shareholders and Minority Shareholders
pursuant to Section 2.8 shall be reduced accordingly, in proportion to the
percentage of Company stock owned by each Shareholder and Minority Shareholder.
11.2 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Parent and the
Shareholders mutually agree. Unless consented to by Parent and the Shareholders
in advance or required by Legal Requirements, prior to the Closing Shareholders
shall, and shall cause the Company to, and Parent shall and shall cause Newco
to, keep this Agreement strictly confidential and may not make any disclosure
of this Agreement to any Person. Shareholders and Parent will consult with each
other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Parent will have the right to be present for any
such communication.
11.3 Confidentiality. Each of Parent, Newco and Shareholders will
maintain in confidence, and will cause their respective the directors,
officers, employees, agents, and advisors to maintain in confidence, and not
use to the detriment of another party or the Company any written, oral, or
other information obtained in confidence from another party or the Company in
connection with this Agreement or the Contemplated Transactions, unless (a)
such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Transactions, or (c) the furnishing or
use of such information is required by or necessary or appropriate in
connection with legal proceedings.
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If the Contemplated Transactions are not consummated, each party will
return to the other party any documents, and all copies thereof, received or
obtained by it in connection with the Contemplated Transactions, without
retaining copies thereof, and will destroy all copies of analyses,
compilations, studies or other documents it has prepared containing or
reflecting any of such confidential information. Notwithstanding the return or
destruction of confidential information, each of the parties will continue to
be bound by the obligation of confidentiality and other obligations hereunder.
11.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the other
parties):
If to Parent: Packaged Ice, Inc.
Attention: President
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Facsimile No.: (713) 464-4681
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attention: Alan Schoenbaum, P.C.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
If to Shareholders: c/o Robert G. Miller
4425 West Olive Avenue, Suite 310
Glendale, Arizona 85302
Facsimile No.: (602) 435-5579
with a copy to: Luce, Forward, Hamilton and Scripps, L.L.P.
Attention: Robert Copeland, Esq.
600 West Broadway, Suite 2600
San Diego, California 92101
Facsimile No.: (619) 232-8311
If to the Company: Southwestern Ice, Inc.
Attention: Dale M. Johnson, Chief Financial Officer
4425 West Olive, Suite 310
Glendale, Arizona 85302
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Facsimile No. (602) 435-5579
If to Minority
Shareholders: (to the addresses set forth in the Minority
Shareholder Investment Letters)
11.5 Arbitration. Except with respect to any claimed breach of the
provisions of Section 11.3 hereof, the parties agree that all disputes,
controversies or claims that may arise among them (including their agents and
employees), including without limitation any dispute, controversy or claim
arising out of or relating to this Agreement or any other agreement, or the
breach, termination or invalidity thereof, whether entered into or arising
prior, on or subsequent to the date hereof, shall be submitted to, and
determined by, binding arbitration. Such arbitration shall be conducted before
a single arbitrator pursuant to the Commercial Arbitration Rules then in effect
of the American Arbitration Association, except to the extent such rules are
inconsistent with this Section 11.5. Exclusive venue for such arbitration
shall be in Bexar County, Texas. The arbitrator shall apply the laws of the
State of Texas (without regard to conflict of law rules) in determining the
substance of the dispute, controversy or claim and shall decide the same in
accordance with applicable usages and terms of trade. Evidentiary questions
shall be governed by the Federal Rules of Evidence. The arbitrator's award
shall be in writing and shall set forth findings and conclusions upon which the
arbitrator based the award. The prevailing party in any such arbitration shall
be entitled to recover its reasonable attorneys' fees, costs and expenses
incurred in connection with the arbitration. Any award pursuant to such
arbitration shall be final and binding upon the parties and judgment on the
award may be entered in any federal or state court sitting or located in Bexar
County, Texas, or in any other court having jurisdiction. The provisions of
this Section 11.5 shall survive the termination of this Agreement.
Notwithstanding the foregoing, this Section 11.5 shall not prevent any party
from seeking injunctive relief from a court of competent jurisdiction under
appropriate circumstances, provided, however, such action shall not constitute
a waiver of the provisions of this Section 11.5.
11.6 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7 Waiver. Except as expressly provided herein, the rights and
remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the documents referred to in this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver
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that may be given by a party will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
11.8 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter; provided, however, the Option Agreement dated as
of September 6, 1996 among the Parent and the Company and all documents entered
into in connection therewith (including without limitation the Master Lease
Agreement and the Services Agreement) shall survive the execution of this
Agreement, and shall remain in effect in the event this Agreement is terminated
for any reason. If the Closing occurs, the Option Agreement, Master Lease and
Services Agreement shall terminate and be of no further force and effect. This
Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
11.9 Disclosure Letters.
The disclosures in the Disclosure Letters, and those in any supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
11.10 Assignments, Successors, and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that Parent may assign any of its rights
under this Agreement to any Subsidiary of Parent. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.11 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.12 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances
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require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.13 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.14 Governing Law. This Agreement will be governed by the laws of
the State of Texas without regard to conflicts of laws principles.
11.15 Enforcement; Venue; Service of Process. In the event either
party shall seek enforcement of any covenant, warranty or other term or
provision of this Agreement or seek to recover damages fore the breach thereof,
the party which prevails in such proceedings shall be entitled to recover
reasonable attorneys' fees and expenses actually incurred by it in connection
therewith.
11.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
PARENT: PACKAGED ICE, INC.
By:
-------------------------------
James F. Stuart, President
NEWCO: PACKAGED ICE SOUTHWESTERN, INC.
By:
-------------------------------
James F. Stuart, President
THE COMPANY: SOUTHWESTERN ICE, INC.
By:
-------------------------------
Dale M. Johnson,
Chief Financial Officer
SHAREHOLDERS: ----------------------------------
Robert G. Miller
----------------------------------
Dale M. Johnson
----------------------------------
Alan Bernstein
[SIGNATURE PAGE FOLLOWS]
<PAGE> 73
SIGNATURE PAGE FOR MINORITY SHAREHOLDERS
- ----------------------------------
(Signature)
- ----------------------------------
(Printed name)
- ----------------------------------
(Shares owned of Company's
common stock)
- ----------------------------------
(Address)
- ----------------------------------
(City, state, zip code)
- ----------------------------------
(Social Security Number)
<PAGE> 1
EXHIBIT 10.7
ESCROW AGREEMENT
This Escrow Agreement, dated as of April 17, 1997 (the "Closing
Date"), is entered into by and among Packaged Ice, Inc., a Texas corporation
("Parent"), Packaged Ice Southwestern, Inc., a Texas corporation ("Newco"), and
Dale M. Johnson, Robert G. Miller and Alan Bernstein (collectively, the
"Shareholders") and Texas Commerce Bank National Association, as escrow agent
("Escrow Agent").
This is the Escrow Agreement referred to both in the Agreement and
Plan of Merger by and among Parent, Newco, Southwestern Ice, Inc. and the
Shareholders dated March 25, 1997 (the "Merger Agreement"). Capitalized
terms used in this Escrow Agreement without definition shall have the
respective meanings given to them in the Merger Agreement.
The parties, intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) Parent is depositing with Escrow Agent 60,000 shares of the $.01
par value common stock of Packaged Ice, Inc. ("Common Stock") and an amount
equal to $350,000 in immediately available funds, as increased by any earnings
thereon or losses on investments (such funds and Common Stock being the "Escrow
Fund"), for purpose of providing for indemnification claims under Section 10.2
and 10.3 of the Merger Agreement. Escrow Agent acknowledges receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
2. INVESTMENT OF FUNDS
Except as Parent and Shareholders may from time to time jointly
instruct Escrow Agent in writing, the cash portion of the Escrow Fund shall be
invested from time to time, to the extent possible, in a money market mutual
fund, including any such fund for which the Escrow Agent, or any affiliate
thereof, receives compensation with respect to such investment, until
disbursement of the entire Escrow Fund. Escrow Agent is authorized to
liquidate in accordance with its customary procedures any portion of the Escrow
Fund (other than shares of Packaged Ice, Inc. Common Stock) consisting of
investments to provide for payments required to be made under this Escrow
Agreement Agreement.
<PAGE> 2
3. CLAIMS
(a) From time to time on or before April 16, 1998, Parent may give
notice (a "Notice") to Shareholders and Escrow Agent specifying in reasonable
detail the nature and dollar amount of any claim (a "Claim") for Damages it may
have under Section 10 of the Merger Agreement. If Shareholders give notice to
Parent and Escrow Agent disputing any Claim (a "Counter Notice") within 30 days
following receipt by Escrow Agent of the Notice regarding such Claim, such
Claim shall be resolved as provided in Section 3(c) of this Escrow Agreement.
If no Counter Notice is received by Escrow Agent within such 30-day period,
then the dollar amount of damages claimed by Parent as set forth in its Notice
shall be deemed established for purposes of this Escrow Agreement and the
Merger Agreements and, at the end of such 30-day period, Escrow Agent shall pay
to Parent the dollar amount claimed in the Notice from (and only to the extent
of) the Escrow Fund. Escrow Agent shall not inquire into or consider whether a
Claim complies with the requirements of the Merger Agreements.
(b) If a Counter Notice is given with respect to a claim, Escrow
Agent shall make payment with respect thereto only in accordance with (i) joint
written instructions of Parent and Shareholders (ii) an arbitrator's award or
(iii) a final non-appealable order of a court of competent jurisdiction. Any
award or court order shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to Escrow Agent to the effect that award or the
order is final and non-appealable. Escrow Agent shall act on such court order
and legal opinion without further question.
(c) If the Escrow Fund consists of Common Stock, then for purposes
of this Agreement such stock shall be valued at $10.00 per share.
(d) If Parent is entitled to receive payment out of the Escrow Fund,
Shareholders shall have the right to contribute cash to the Escrow Fund to
cover such payment and to withdraw Common Stock equal in value to the cash
contributed.
4. CASH DIVIDENDS AND VOTING RIGHTS
Each Shareholder in whose name shares of Common Stock held as part of
the Escrow Fund are registered shall receive all cash dividends declared and
paid on such shares throughout the period such shares are held in Escrow in the
same manner as any other shareholder of Parent which dividends shall at no time
be a part of the Escrow. Each Shareholder shall retain all voting rights with
respect to his shares during the Escrow.
5. TERMINATION OF ESCROW
On April 17, 1998, Escrow Agent shall pay and distribute the amount
then present in the Escrow Fund pro rata to each of the Shareholders, unless
any Claims are then pending, in which case an amount equal to the aggregate
dollar amount of such Claims (as shown in the Notices of such Claims) shall be
retained by Escrow Agent in the Escrow Fund (and the balance paid and/or
2
<PAGE> 3
distributed to Shareholders) until satisfactory resolution of such Claim in
accordance with Section 4(b) above. This Escrow Agreement shall terminate upon
the occurrence of the earlier of (a) agreement on the part of Parent and (b)
payment by the Escrow Agent of all of the Escrow Fund in accordance with this
Escrow Agreement. Notwithstanding any termination of this Escrow Agreement,
the provisions of Sections 9, 10, 11, 12, 15 and 20 shall survive such
termination and remain in full force and effect.
6. ACCOUNT STATEMENTS
Receipt of the Escrow Fund and investment and reinvestment of the cash
portion of the Escrow Fund shall be confirmed by Escrow Agent as soon as
practicable by account statement, and any discrepancies in any such account
statement shall be noted by Parent and Representative (defined in Section 22)
to Escrow Agent within 30 calendar days after receipt thereof. Failure to
inform Escrow Agent in writing of any discrepancies in any such account
statement within such 30 day period shall be conclusively deemed confirmation
of such account statement in its entirety. For purposes of this Section 6,
each account statement shall be deemed to have been received by the party to
whom directed on the earlier to occur of (i) actual receipt thereof and (ii)
three "Business Days" (hereinafter defined) after the deposit thereof in the
United States Mail, postage prepaid. The term "Business Day" shall mean any day
of the year, excluding Saturday, Sunday and any other day on which national
banks are required or authorized to close in San Antonio, Texas.
7. TAX MATTERS
Parent and Representative shall provide Escrow Agent with its taxpayer
identification number documented by an appropriate Form W8 or Form W9 upon
execution of this Escrow Agreement. Failure to so provide such forms may
prevent or delay disbursements from the Escrow Fund and may also result in the
assessment of a penalty and Escrow Agent's being required to withhold tax on
any interest or other income earned on the Escrow Fund. Any payments of income
shall be subject to applicable withholding regulations then in force in the
United States or any other jurisdiction, as applicable.
8. SCOPE OF UNDERTAKING.
Escrow Agent's duties and responsibilities in connection with this
Escrow Agreement shall be purely ministerial and shall be limited to those
expressly set forth in this Escrow Agreement. Escrow Agent shall have no
responsibility or obligation of any kind in connection with this Escrow
Agreement or the Escrow Fund and shall not be required to deliver the Escrow
Fund or any part thereof or take any action with respect to any matters that
might arise in connection therewith, other than to receive, hold, invest,
reinvest and deliver the Escrow Fund as herein provided. Without limiting the
generality of the foregoing, it is hereby expressly agreed and stipulated by
the parties hereto the Escrow Agent shall not be required to exercise any
discretion hereunder and shall have no investment or management responsibility
and, accordingly, shall have no duty to, or liability for its failure to,
provide investment recommendations or investment advice to the Parent,
Shareholders
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<PAGE> 4
or Representative or any of them. Escrow Agent shall not be liable for any
error in judgment, any act or omission, any mistake of law or fact, or for
anything it may do or refrain from doing in connection herewith, except for,
subject to Section 9 hereinbelow, its own willful misconduct, bad faith or
gross negligence. It is the intention of the parties hereto that Escrow Agent
shall never be required to use, advance or risk its own funds or otherwise
incur financial liability in the performance of any of its duties or the
exercise of any of its rights and powers hereunder.
9. RELIANCE; LIABILITY
Escrow Agent may rely on, and shall not be liable for acting or
refraining from acting in accordance with, any written notice, instruction or
request or other paper furnished to it hereunder or pursuant hereto and
believed by it to have been signed or presented by the proper party or parties.
Escrow Agent shall be responsible for holding, investing, reinvesting and
disbursing the Escrow Fund pursuant to this Escrow Agreement; provided,
however, that Escrow Agent shall have no liability for any loss arising from
any cause beyond its control, including, but no limited to, the following: (a)
acts of God, force majeure, including, without limitation, war (whether or not
declared or existing), revolution, insurrection, riot, civil commotion,
accident, fire, explosion, stoppage of labor, strikes and other differences
with employees; (b) the act, failure or neglect of any Parent, Shareholder or
Representative of or any agent or correspondent of any of them; (c) any delay,
error, omission or default of any mail, courier, telegraph, cable or wireless
agency or separator; or (d) the acts or edicts of any government or
governmental agency or other group or entity exercising governmental powers.
Escrow Agent is not responsible or liable in any manner whatsoever for the
sufficiency, correctness, genuineness or validity of the subject matter of this
Escrow Agreement or any part hereof or for the transactions requiring or
underlying the execution of this Escrow Agreement, the form or execution hereof
or for the identity or authority of any person executing the Escrow Agreement
on behalf of the Parent, Shareholder and Representative or depositing the
Escrow Fund.
10. RIGHT OF INTERPLEADER
Subject to Section 20 hereof and without waiving the same, should any
controversy arise involving the parties hereto or any of them or any other
person, firm or entity and such controversy results in claims and demands
having made by them, or any of them in connection with or for any part of the
Escrow Fund, or should a substitute escrow agent fail to be designated as
provided in Section 16 hereof, Escrow Agent shall have the right, but not the
obligation, either to (a) withhold delivery of the Escrow Fund until the
controversy is resolved or the conflicting demands are withdrawn or (b)
institute a petition for interpleader in any court of competent jurisdiction to
determine the rights of the parties hereto. The parties hereto agree that to
the extent such controversy is between the Parent and Shareholders, such
controversy shall be resolved in accordance with Section 20 and the parties
hereto shall take such actions as may be necessary to cause the court in which
such petition for interpleader has been filed to recognize and enforce the
arbitrator's award. In the event Escrow Agent is a party to any dispute,
Escrow Agent shall have the additional right to refer such controversy to
binding arbitration. Should a petition for interpleader be instituted, or
4
<PAGE> 5
should Escrow Agent be threatened with litigation or become involved in
litigation or binding arbitration in any manner whatsoever in connection with
this Escrow Agreement or the Escrow Fund, Parent and Shareholders hereby
jointly and severally agree to reimburse Escrow Agent for its reasonable
attorney's fees and any and all other reasonable expenses, losses, costs and
damages incurred by Escrow Agent in connection with or resulting from such
threatened or actual litigation or arbitration except to the extent arising out
of the Escrow Agent's willful misconduct, bad faith or gross negligence.
11. INDEMNIFICATION
Parent and Shareholders hereby jointly and severally indemnify Escrow
Agent, its officers, directors, partners, employees and agents (each herein
called an "Indemnified Party") against, and hold each Indemnified Party
harmless from, any and all expenses, including, without limitation, attorney's
fees and court costs, losses, costs, damages and claims, including, but not
limited to, costs of investigation, litigation and arbitration, tax liability
and loss on investments suffered or incurred by any Indemnified Party in
connection with or arising from or out of this Escrow Agreement, except such
acts or omissions as may result from the willful misconduct, bad faith or gross
negligence of such Indemnified Party. IT IS THE EXPRESS INTENT OF EACH OF
PARENT AND SHAREHOLDERS TO INDEMNIFY EACH OF THE INDEMNIFIED PARTIES FOR, AND
HOLD THEM HARMLESS AGAINST, THEIR OWN NEGLIGENT ACTS OR OMISSION TO THE EXTENT
PERMITTED BY APPLICABLE LAW.
12. COMPENSATION AND REIMBURSEMENT OF EXPENSES
Parent and Shareholders hereby agree, jointly and severally, (i) to
pay Escrow Agent for its services hereunder in accordance with the fee schedule
attached hereto as Exhibit A and (ii) to pay all reasonable expenses incurred
by Escrow Agent in connection with the performance of its duties and
enforcement of its rights hereunder and otherwise in connection with the
preparation, operation, administration and enforcement of this Escrow
Agreement, including, without limitation, reasonable attorney's fees, brokerage
costs and related expenses incurred by Escrow Agent. No increase in the rate
of any fee charged by the Escrow Agent shall be valid hereunder unless
previously approved in writing by Parent and Representative. The fee of $1,500
for the initial one year period shall be paid to the Escrow Agent, one-half
(1/2) by Shareholders and one-half (1/2) by Parent upon execution of this
Escrow Agreement. As between Parent and Shareholders, any such compensation
and reimbursement to which Escrow Agent is entitled shall be borne 50% by
Parent and 50% by Shareholders.
13. NOTICES
Any notice or other communication required or permitted to be given
under this Escrow Agreement by any party hereto to any other party hereto shall
be considered as properly given if in writing and (a) delivered against receipt
therefor, (b) mailed by registered or certified mail, return
5
<PAGE> 6
receipt requested and postage prepaid of (c) sent by facsimile, in each case to
the address or facsimile number, as the case may be, set forth below:
If to Parent: Packaged Ice, Inc.
Attention: President
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Facsimile No.: (713) 464-4681
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attention: Alan Schoenbaum, P.C.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
Facsimile No.: (210) 224-2035
If to Shareholders and/or c/o Robert G. Miller
Representative: 30518 Via Marie Elena
Bonsall, CA 92003
Facsimile No.: (619) 724-8937
with a copy to: Luce, Forward, Hamilton and Scripps
Attention: Robert Copeland, Esq.
600 West Broadway, Suite 2600
San Diego, California 92101
Facsimile No.: (619) 232-8311
If to the Company: Southwestern Ice, Inc.
Attention: Dale M. Johnson, Chief Financial Officer
4425 West Olive, Suite 310
Glendale, Arizona 85302
Facsimile No. (602) 435-5579
Escrow Agent: Texas Commerce Bank, N.A.
711 Navarro, 1st Floor
San Antonio, TX 78205
Corporate Trust/Escrow Section
Attention: Angie Bendelee
Facsimile No.: (210)271-8099
Except to the extent otherwise provided in Section 6 hereinabove delivery of
any communication given in accordance herewith shall be effective only upon
actual receipt thereof by the party or parties to whom such communication is
directed. Any party to this Escrow Agreement may change
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<PAGE> 7
the address to which communications hereunder are to be directed by giving
written notice to the other party or parties hereto in the manner provided in
this section. Notwithstanding the foregoing, any notice hereunder delivered to
Representative with respect to a Claim shall only be given in accordance with
clauses (a) and (b) above, and notice to Representative by facsimile with
respect to a Claim shall not be deemed given for purposes of this Escrow
Agreement.
14. CONSULTATION WITH LEGAL COUNSEL
Escrow Agent may consult with its counsel or other counsel
satisfactory to it concerning any question relating to its duties or
responsibilities hereunder or otherwise in connection herewith and shall not be
liable for any action taken, suffered or omitted by it in good faith upon the
advice of such counsel.
15. CHOICE OF LAW; CUMULATIVE RIGHTS
This Escrow Agreement shall be construed under, and governed by, the
laws of the State of Texas, excluding, however, (a) its choice of law rules and
(b) the portions of the Texas Trust Code Sec. 111.001, et. seq. of the Texas
Property code concerning fiduciary duties and liabilities of trustees. All of
Escrow Agent's rights hereunder are cumulative of any other rights it may have
at law, in equity or otherwise. Subject to Section 20 hereof and without
waiving the same, the parties hereto agree that the forum for resolution of any
dispute arising under this Escrow Agreement shall be Bexar County, Texas, and
each of Parent, Shareholders and Representative hereby consents, and submits
itself, to the jurisdiction on any state or federal court sitting in Bexar
County, Texas.
16. RESIGNATION
The Escrow Agent may removed at any time with the written consent of
Parent and Representative. Escrow Agent may resign hereunder upon thirty (30)
days' prior notice to the Parent and Representative. If the Escrow Agent
shall resign or be removed, Parent and Representative shall appoint, as soon as
possible, a successor escrow agent. Upon the effective date of such
resignation or removal, Escrow Agent shall deliver the Escrow Fund to any
substitute escrow agent designated by Parent and Representative in writing.
Any successor escrow agent shall be deemed to have accepted the
responsibilities hereunder upon execution of this Escrow Agreement and delivery
of such executed document to Parent and Representative. If Parent and
Representative fail to designate a substitute escrow agent within thirty (30)
days after the giving of such notice, Escrow Agent may institute a petition for
interpleader. Escrow Agent's sole responsibility after such 30-day notice
period expires shall be to hold the Escrow Fund (without any obligation to
reinvest the same) and to deliver the same to a designated substitute escrow
agent, if any, or in accordance with the directions of a final order or
judgment of a court of competent jurisdiction, at which time of delivery Escrow
Agent's obligations hereunder shall cease and terminate.
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<PAGE> 8
17. ASSIGNMENT
This Escrow Agreement shall not be assigned by either of the Other
Parties without the prior written consent of Escrow Agent (such assigns of any
of Parent, Shareholders or Representative to which Escrow Agent consents, if
any, and Escrow Agent's assigns being hereinafter referred to collectively as
"Permitted Assigns').
18. SEVERABILITY
If one or more of the provisions hereof shall for any reason be held
to be invalid, illegal or unenforceable in any respect under applicable law,
such invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and this Escrow Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein,
and the remaining provisions hereof shall be given full force and effect.
19. GENERAL
The section headings contained in this Escrow Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Escrow Agreement. This Escrow Agreement and any
affidavit, certificate, instrument, agreement or other document required to be
provided hereunder may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
but one and the same instrument. Unless the context shall otherwise required,
the singular shall include the plural and vice-versa, and each pronoun in any
gender shall include all other genders. The terms and provisions of this
Escrow Agreement constitute the entire agreement among the parties hereto in
respect of the subject matter hereof, and neither Parent, Shareholders,
Representative nor Escrow Agent has relied on any representations or agreements
of the other, except as specifically set forth in this Escrow Agreement or,
with respect to the Parent and Shareholders, the Merger Agreements. This
Escrow Agreement or any provision hereof may be amended, modified, waived or
terminated only by written instrument duly signed by the parties hereto. This
Escrow Agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their respective heirs, devisees, executor, administrators,
personal representatives, successors, trustees, receivers and Permitted
Assigns. This Escrow Agreement is for the sole and exclusive benefit of
Parent, Shareholders, Representative and the Escrow Agent, and nothing in this
Escrow Agreement, express or implied, is intended to confer or shall be
construed as conferring upon any other person any rights, remedies or any other
type or types of benefits.
20. ARBITRATION
All disputes hereunder between or among any of the Shareholders,
Parent, and/or Newco shall be settled in accordance with Section 11.5 of the
Merger Agreements.
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<PAGE> 9
21. WAIVER
The rights and remedies of the parties to this Escrow Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Escrow Agreement or the
documents referred to in this Escrow Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Escrow Agreement or the documents referred to in
this Escrow Agreement can be discharged by one party, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other party; (b) no waiver that may be given by a party will be applicable
except in the specific instance for which it is given; and (c) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further
action without notice or demand as provided in this Escrow Agreement or the
documents referred to in this Escrow Agreement.
22. REPRESENTATIVE
(a) The Shareholders shall act through the Representative, who
shall be deemed authorized to act on behalf of all of the Shareholders in the
manner set forth in this Section 22. The Shareholders have selected Robert G.
Miller as their initial Representative.
(b) A Representative may resign at any time effective upon giving
written notice to each of the parties hereto. The Shareholders may at any time
remove a Representative by giving ten days' written notice to him. If a
Representative shall resign or be removed, the Shareholders may by written
election appoint any number of successor Representatives and shall so appoint
a successor if the Representative in question was the only Representative in
office. The Representative shall promptly notify Parent in writing of the
resignation or removal of any Representative and of the appointment of any
successor Representative.
(c) With respect to matters involving the Shareholders, Parent and
Escrow Agent shall rely conclusively upon any written instruction of a
Representative. Parent and Escrow Agent shall rely conclusively on the
authority of a Representative designated herein or by the Shareholders until
Parent and Escrow Agent receive a written instruction naming another person as
Representative to succeed to that position in the place of the existing
Representative, which instruction shall be signed by the Shareholders.
(d) The Representative may take any action on behalf of the
Shareholders which it deems appropriate to take with respect to any claim for
Damages ("Claim") received by it pursuant to Section 10 of the Merger
Agreement.
(e) The Representative may on behalf of the Shareholders, at any
time and without regard to whether or not proceedings for the resolution or
determination thereof have commenced, agree
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<PAGE> 10
upon, resolve, settle, or compromise any Claim under Section 10 or 11.5 of the
Merger Agreement in the sole and absolute discretion of the Representative.
(f) The Representative may on behalf of the Shareholders, in its
sole and absolute discretion, pursue, elect not to pursue, or terminate the
pursuit of any Claim or issue under Section 10 or 11.5 of the Merger Agreement,
including the conduct of arbitration of an litigation of third party claims, as
provided herein and in the Agreement.
(g) Under no circumstances shall the Representative be liable to
any Shareholder for any act it may take in its capacity as Representative, or
for the failure to take any action, or for the actions of any Shareholder, or
for any damage, loss or expense suffered or incurred resulting from the
exercise of the Representative's sole and absolute discretion in acting
hereunder, except only for acts of gross negligence, bad faith or willful
misconduct.
(h) The Representative shall be and hereby is authorized to retain
counsel, accountants, or other professional assistants to assist in determining
the validity of claims or in otherwise acting hereunder as a Representative.
Any such expenses shall be borne by the Shareholders and may be taken from the
proceeds of the Escrow Fund to be delivered to such Shareholders.
(i) The Representative shall not be liable for any expense
incurred on behalf of the Shareholders or any of them in protesting, analyzing,
resisting, arbitrating, litigating, negotiating with respect to, or defending
any claim made in connection with this Agreement, or for any amounts otherwise
expended in acting hereunder.
(j) On demand by the Representative, each Shareholder shall
contribute all sums demanded to pay the fees and expense incurred by the
Representative on behalf of the Shareholders in acting hereunder. The amount
due from each Shareholder from time to time shall be determined by talking the
product of (x) the total fees and expenses incurred multiplied by (y) the
quotient of: (v) the amount of the Acquisition Price received by such
Shareholder divided by (w) the Acquisition Price.
(k) The Representative shall keep the Shareholders reasonably
informed of actions taken by it in acting hereunder.
(SIGNATURE PAGE FOLLOWS)
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<PAGE> 11
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
PACKAGED ICE, INC.
By:
------------------------------------
James F. Stuart, President
REPRESENTATIVE:
----------------------------------------
Robert G. Miller
SHAREHOLDERS:
----------------------------------------
Alan Bernstein
----------------------------------------
Dale M. Johnson
----------------------------------------
Robert G. Miller
ESCROW AGENT:
Texas Commerce Bank National Association
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 12
ESCROW AGREEMENT
BETWEEN PACKAGED ICE, INC.,
PACKAGED ICE SOUTHWESTERN, INC.,
JOHNSON, MILLER & BERNSTEIN ("SHAREHOLDERS"),
AND ESCROW AGENT
ANNEX 1
PACKAGED ICE, INC.
STOCK CERTIFICATES HELD IN ESCROW
<TABLE>
<CAPTION>
CERT. NO. NO. OF SHARES DATE ISSUED TO:
- --------- ------------- ---- ----------
<S> <C> <C> <C>
146 2,866 04/17/97 Robert G. Miller
153 25,794 04/17/97 Robert G. Miller
------
Total: 28,660
147 1,587 04/17/97 Alan S. Bernstein
154 14,283 04/17/97 Alan S. Bernstein
------
Total: 15,870
148 1,547 04/17/97 Dale M. Johnson
155 13,923 04/17/97 Dale M. Johnson
------
Total: 15,470
GRAND TOTAL: 60,000 SHARES
</TABLE>
<PAGE> 1
EXHIBIT 10.8
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement") is made as of April 17,
1997, by and between Packaged Ice, Inc., a Texas corporation ("Parent"),
Packaged Ice Southwestern, Inc., a wholly-owned subsidiary of Parent ("Newco"),
and ____________________ (Shareholder").
RECITALS
WHEREAS, Shareholder and the respective Boards of Directors of Parent,
Newco, Southwestern Ice, Inc., an Arizona corporation ("Southwestern") each
intends to effect a merger of Southwestern with and into Newco, pursuant to the
terms and conditions of the Agreement and Plan of Merger made as of March 25,
1997 (the "Merger Agreement"); and
WHEREAS, Section 2.8(a)(iii) of the Merger Agreement requires that a
noncompetition agreement be executed and delivered by Shareholder as a
condition to the consummation of the Merger;
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
Capitalized terms not expressly defined in this Agreement shall have the
meanings ascribed to them in the Merger Agreement.
"COMPANIES" shall mean both Southwestern and the Surviving Corporation
for purposes of this Agreement.
2. ACKNOWLEDGMENTS BY SHAREHOLDER
Shareholder understands, acknowledges and agrees that (a) Shareholder
has occupied a position of trust and confidence with Southwestern prior to the
date hereof, Shareholder will occupy a position of trust and confidence with
the Surviving Corporation, Shareholder has or will become familiar with the
following, any and all of which constitute confidential information of the
Companies, (collectively the "Confidential Information"): (i) any and all trade
secrets concerning the business and affairs of Companies, product
specifications, data, know-how, formulae, compositions, processes, designs,
sketches, photographs, graphs, drawings, samples, inventions and ideas, past,
current and planned research and development, current and planned manufacturing
and distribution methods and processes, acquisition opportunities, customer
lists, current and anticipated customer requirements, price lists, market
studies, business plans, computer software and programs (including object code
and source code), computer software and database technologies, systems,
structures and
<PAGE> 2
architectures (and related processes, formulae, compositions, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information of the Companies and any other information, however documented,
of Companies that is a trade secret, (ii) any and all information concerning
the business and affairs of Companies (which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials), however documented, and (iii)
any and all notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Companies containing or based, in whole or in
part, on any information included in the foregoing; (b) the business of the
Companies and and Parent are national in scope; (c) their products and services
are marketed throughout the United States; (d) the Companies and Parent compete
with other businesses that are or could be located in any part of the United
States, and Parent is causing a merger with Southwestern in connection with its
consolidation strategy which Parent has explained in detail to Shareholder; (e)
Parent has required that Shareholder make the covenants set forth in Sections 3
and 4 of this Agreement as a condition to Parent's acquisition of Southwestern;
(f) the provisions of Sections 3 and 4 of this Agreement are reasonable and do
not impose a greater restraint on Shareholder than is necessary to protect the
goodwill or other business interest of Parent and the Companies; (g) Parent has
a legitimate interest in protecting the confidentiality of its business secrets
(including the Confidential Information); (h) the provisions set forth in
Sections 3 and 4 are not oppressive to Shareholder nor injurious to the public;
and (i) Parent would be irreparably damaged if Shareholder were to breach the
covenants set forth in Sections 3 and 4 of this Agreement.
3. CONFIDENTIAL INFORMATION
Shareholder acknowledges and agrees that all Confidential Information
known or obtained by Shareholder, whether before or after the date hereof, is
now the property of the Surviving Corporation. Therefore, Shareholder agrees
that he will not, at any time, disclose to any unauthorized Persons or use for
his own account or for the benefit of any third party any Confidential
Information, whether Shareholder has such information in his memory or embodied
in writing or other physical form, without the written consent of the Surviving
Corporation, unless and to the extent that the Confidential Information is or
becomes generally known to and available for use by the public, other than as a
result of the fault of Shareholder or any other Person bound by a duty of
confidentiality to Parent or the Surviving Corporation. Shareholder agrees to
deliver to Parent at the time of execution of this Agreement, and at any other
time Parent may request, all documents, memoranda, notes, plans, records,
reports, and other documentation, models, components, devices, or computer
software, whether embodied in a disk or in other form (and all copies of all of
the foregoing), relating to the businesses, operations, or affairs of the
Companies and any other Confidential Information that Shareholder may then
possess or have under Shareholder's control.
4. NONCOMPETITION
As an inducement for Parent to enter into the Merger Agreement and as
additional consideration to Parent in exchange for the consideration paid to
Shareholder under the Purchase Agreement, Shareholder agrees that:
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<PAGE> 3
(a) For a period of five (5) years after the Closing within the any
states in which Parent transacts, or reasonably expects to, transact business:
(i) Shareholder will not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed
by, associated with, or in any manner connected with, lend Shareholder's
name or any similar name to, lend Shareholder's credit to, or render
services or advice to, any business whose products or activities compete
in whole or in part with the products or activities of the Parent;
provided, however, that Shareholder may purchase or otherwise acquire up
to (but not more than) one percent of any class of securities of any
enterprise (but without otherwise participating in the activities of
such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section 12(g)
of the Securities Exchange Act of 1934. In addition, Shareholder shall
not be restricted with respect to the retail and wholesale business of
selling, renting and leasing commercial refrigeration equipment,
including ice machines (but specifically excluding systems which make,
bag and merchandise packaged ice.) Shareholder agrees that this
covenant is reasonable with respect to its duration, geographical area,
and scope.
(ii) Shareholder will not, directly or indirectly, either for
himself or any other Person, (A) induce or attempt to induce any
employee of Parent to leave the employ of Parent, (B) in any way
interfere with the relationship between Parent and any employee of
Parent or the Surviving Corporation, (C) except in his capacity as
officer or director of the Parent or the Surviving Corporation, employ,
or otherwise engage as an employee, independent contractor, or
otherwise, any employee of Parent, or (D) induce or attempt to induce
any customer, supplier, licensee, or business relation of Parent to
cease doing business with Parent, or in any way interfere with the
relationship between any customer, supplier, licensee, or business
relation of Parent.
(iii) Shareholder will not, directly or indirectly, either for
himself or any other Person, solicit the business of any Person known to
Shareholder to be a customer or prospective customer of Parent, whether
or not Shareholder had personal contact with such Person, with respect
to products or activities which compete in whole or in part with the
products or activities of Parent;
(b) In the event of a breach by Shareholder of any covenant set forth in
Subsection 4(a) of this Agreement, the term of such covenant will be extended
by the period of the duration of such breach;
(c) Shareholder will, for a period of five years after the Closing,
within ten days after accepting any employment which relates, or could
reasonably be construed as relating to, the ice business, advise Parent of the
identity of any employer of Shareholder. Parent may serve notice upon each such
employer that Shareholder is bound by this Agreement and furnish each such
employer with a copy of this Agreement or relevant portions thereof.
3
<PAGE> 4
5. REMEDIES
If Shareholder breaches the covenants set forth in Sections 3 or 4 of
this Agreement, Parent will be entitled to the following remedies:
(a) Damages from Shareholder; and
(b) In addition to its right to damages and any other rights it may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of
Sections 3 and 4 of this Agreement, it being agreed that money damages alone
would be inadequate to compensate the Parent and the Surviving Corporation and
would be an inadequate remedy for such breach. Such injunction shall be
available without the posting of any bond or other security, and the Employee
hereby consents to the issuance of such injunction.
The rights and remedies of the parties to this Agreement are cumulative and not
alternative.
6. SUCCESSORS AND ASSIGNS
This Agreement will be binding upon Parent and Shareholder and will
inure to the benefit of Parent and the Surviving Corporation and their
affiliates, successors and assigns and Shareholder and Shareholder's assigns,
heirs and legal representatives.
7. WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement will operate as
a waiver of such right, power, or privilege, and no single or partial exercise
of any such right, power, or privilege will preclude any other or further
exercise of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Agreement can be discharged by one party, in
whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.
8. GOVERNING LAW
This Agreement will be governed by the laws of the State of Texas
without regard to conflicts of laws principles.
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<PAGE> 5
9. JURISDICTION; SERVICE OF PROCESS
The parties hereto intend to and hereby confer jurisdiction to enforce
the covenants contained in this Agreement upon the courts of any state or other
jurisdiction in which any alleged breach of such covenant occurs. If the
courts of any one or more of such states or other jurisdictions hold that such
covenants are not wholly enforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination
not bar or in any way affect Parent or the Surviving Corporation's right to the
relief provided above in the courts of any other states or jurisdictions within
the geographical scope of such covenants, as to breaches of such covenants in
such other respective states or jurisdictions. The above covenants as they
relate to each state or jurisdiction are severable into diverse and independent
covenants.
10. SEVERABILITY
Whenever possible each provision and term of this Agreement will be
interpreted in a manner to be effective and valid but if any provision or term
of this Agreement is held to be prohibited by law or invalid, then such
provision or term will be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provision or term or the remaining provisions or terms of
this Agreement. If any of the covenants set forth in this Agreement are held
by a court of competent jurisdiction to contain limitations as to time,
geographical area or scope of activity to be restrained that are not reasonable
and impose a greater restraint than is necessary to protect the goodwill or
other business interest of Parent, the court shall reform the covenants to the
extent necessary to cause the limitations contained in the covenants as to
time, geographical area and scope of activity to be restrained to be reasonable
and to impose a restraint that is not greater than necessary to protect the
goodwill or other business interest of Parent and enforce the covenants as
reformed.
11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
12. SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
13. NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand (with written
5
<PAGE> 6
confirmation of receipt), (b) sent by facsimile (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and facsimile numbers set forth below (or to such other
addresses and facsimile numbers as a party may designate by notice to the other
parties):
If to Shareholder:
-----------------------------
-----------------------------
-----------------------------
with a copy to: Luce, Forward, Hamilton and Scripps
Attention: Robert Copeland, Esq.
600 West Broadway, Suite 2600
San Diego, California 92101
Facsimile No.: (619) 232-8311
If to Parent and Surviving
Corporation: James F. Stuart, President
Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
With a copy to: Alan Schoenbaum, P.C.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street
1500 NationsBank Plaza
San Antonio, Texas 78205
14. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter of this Agreement. This Agreement may not be
amended except by a written agreement executed by the party to be charged with
the amendment.
[SIGNATURE PAGE FOLLOWS]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
SHAREHOLDER:
-----------------------------------
PARENT:
PACKAGED ICE, INC.
By:
--------------------------------
JAMES F. STUART, PRESIDENT
NEWCO/SURVIVING CORPORATION:
PACKAGED ICE SOUTHWESTERN, INC.
By:
--------------------------------
JAMES F. STUART, PRESIDENT
7
<PAGE> 1
EXHIBIT 10.9
REGISTRATION RIGHTS AGREEMENT
DATED AS OF APRIL 17, 1997
AMONG
PACKAGED ICE, INC.,
AND
ROBERT G. MILLER,
ALAN S. BERNSTEIN
AND DALE M. JOHNSON
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(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 and Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(j) Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(k) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(l) Securities Held by the Company or Its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of April 17, 1997, among PACKAGED ICE, INC., a Texas
corporation (the "Company"), ALAN S. BERNSTEIN, ROBERT G. MILLER and DALE M.
JOHNSON (the "Investors").
This Agreement is entered into in connection with the Agreement and
Plan of Merger by and among Southwestern Ice, Inc., an Arizona Corporation, the
shareholders of Southwestern Ice, Inc., Packaged Ice Southwestern, Inc., a
Texas corporation and the Company, dated March 25, 1997 (the "Merger
Agreement").
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 individual Investor, for so long as he or she
owns any of the Registrable Securities, and each of his and her
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.
"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.
<PAGE> 4
"Inspectors" has the meaning ascribed to such term in Section 3(n)
hereof.
"Investor" 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.
"Merger Agreement" has the meaning ascribed to that term in the
preamble of this Agreement.
"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 the Common Stock issued to the
Investors pursuant to the Merger Agreement and any other securities
issued or issuable with respect to any shares of such Common Stock by
way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. 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 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.
2
<PAGE> 5
"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 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.
"Withdrawal Election" has the meaning ascribed to such term in
Section 2.2(b) hereof.
3
<PAGE> 6
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 two 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
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 an
additional 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
4
<PAGE> 7
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, 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
5
<PAGE> 8
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) 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. 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 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
6
<PAGE> 9
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 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.
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:
7
<PAGE> 10
(i) 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 two Demand Registrations the Company is required to effect
pursuant to Section 2.1 hereof.
(ii) 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 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.
(iii) 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.
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(iv) 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 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
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Prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions 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.
(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
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<PAGE> 13
underwriting 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, and of 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); 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
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.
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(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 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
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<PAGE> 15
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 (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
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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.
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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 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, liability, claim, damage 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 mended 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 "Indemnified Party") shall
promptly notify the Person against which such indemnity may be sought
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<PAGE> 18
(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 (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 liability on Claims that are the subject matter of such proceeding and
(2) does not include any
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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.
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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 departure
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 and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder at the most current address of such
Holder as set forth in stock register of the Company, which address initially
is, with respect to the Investors, the address set forth in the Merger
Agreement and (ii) if to the Company, initially at the Company's address set
forth in the Merger Agreement and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section (d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
(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.
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<PAGE> 21
(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 NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, 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 NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(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. The Merger Agreement and this
Agreement, collectively are intended by the parties as a final expression of
their agreement, 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 and the Merger Agreement
supersede 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.
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REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PACKAGED ICE, INC.
By:
-----------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
ALAN S. BERNSTEIN
----------------------------------------
ROBERT G. MILLER
----------------------------------------
DALE M. JOHNSON
----------------------------------------
<PAGE> 1
EXHIBIT 10.10
PACKAGED ICE, INC.
STOCK OPTION PLAN
Packaged Ice, Inc., a Texas corporation, hereby adopts this Stock Option Plan
for key employees of Packaged Ice, Inc. and its subsidiaries and non-employee
directors of Packaged Ice, Inc. The purposes of this Plan are as follows:
(1) To further the growth, development and financial
success of the Company by providing additional incentives to
its employees and non-employee directors.
(2) To enable the Company to attract and retain the
services of employees and non-employee directors considered
essential to the long range success of the Company by offering
them an opportunity to become owners of common stock of the
Company under Options.
(3) To align the interests of the Company's employees and
non-employee directors with those of its stockholders.
(4) To provide the Company's employees and non-employee
directors with an appropriate level of reward in return for a
superior level of appreciation in the value of the Company's
Common Stock.
(5) To emphasize the common interests of the Company's
worldwide employees.
ARTICLE 1
DEFINITIONS
SECTION 1.1 -- DEFINITIONS
Whenever the following terms are used in this Plan they shall have the meaning
specified below, unless the context otherwise requires.
"Board" shall mean the Board of Directors of Packaged Ice, Inc.
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"Cashless Exercise" shall mean a method of exercise under which certain
Optionees, in lieu of payment of the Option Price in cash, may choose to make
payment by instruction from such Optionees to sell shares of Common Stock
acquired upon such exercise on the open market through a duly registered
broker-dealer with which the Company makes an arrangement for the sale of such
shares of Common Stock under this Plan, such that the proceeds of such sale are
sufficient to pay the entire Option Price and commissions of the broker-dealer.
"Cause" shall mean Optionee's (a) criminal misconduct, (b) continuing refusal
to perform employment duties on substantially a full time basis, (c) continuing
refusal to act in accordance with any lawful instructions of a more senior
officer or employee, or (d) deliberate misconduct which could be seriously
damaging to the Company without a reasonable good faith belief by the Optionee
that his conduct was in the best interests of the Company. An Optionee's
voluntary Termination of Employment in anticipation of dismissal for Cause
shall be deemed to be a dismissal of the Optionee for Cause.
"Change of Control" shall mean any instance in which any person or group
acquires beneficial ownership of a majority of the outstanding Common Stock of
the Company or obtain the power (i) to elect a majority of the Board of
Directors of the Company or its successor or (ii) if the Company's successor is
not a corporation, to select the general partner or other person controlling
the operations and business of such successor.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board, which shall be
constituted as provided in Section 6.1.
"Common Stock" shall mean the Common Stock, par value $0.01 per share, of the
Company. To the extent the context requires, the term "Common Stock" shall
also mean any other consideration that may be issuable upon exercise of an
Option pursuant to adjustments made under Section 2.3 and 4.6 of the Plan.
"Company" shall mean Packaged Ice, Inc. and its successors. Unless the context
requires otherwise, the term "Company" shall also include the Company's
subsidiaries.
"Director" shall mean a member of the Board.
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"Disability" shall mean an Optionee's permanent disability, as determined in
good faith by the Committee or by an officer of the Company designated by the
Committee.
"Employee" shall mean any permanent full-time or part-time employee of the
Company (including any such employee of any subsidiary), whether such employee
is so employed at the time this Plan is adopted or becomes so employed
subsequent to the adoption of this Plan; provided that (i) the Committee may
determine that certain employees or all employees of a particular subsidiary
are not Employees for purposes of this Plan and (ii) the Committee may
determine that particular temporary employees, consultants or advisors of the
Company are Employees for purposes of this Plan, provided that the services
rendered by such consultants or advisors shall not be in connection with the
offer or sale of securities in a capital-raising transaction.
"Fair Market Value" on any date, shall mean either (1) in the event the Company
is publicly-traded, the average of high and low sale prices per share of Common
Stock on such date (or, if such date is not a trading day, on the next
preceding trading day) on the exchange or market as shall constitute the
principal trading market for the Common Stock, or (2) in the event the Company
is still privately-held, an independent fair market appraisal will need to be
held.
"Initial Grant Date" shall mean the date as of which Options are first granted
under the Plan.
"Non-Employee Director" shall mean a member of the Board who is not an employee
of the Company.
"Option(s)" shall mean an option granted under the Plan to purchase Common
Stock. Options include only options which are not intended to be "incentive
stock options" under Section 422 of the Internal Revenue Code of 1986, as
amended.
"Option Price" shall mean the purchase price for the shares of Common Stock
issuable upon exercise of an Option.
"Optionee" shall mean an Employee or Non-Employee Director to whom an Option is
granted under the Plan.
"Plan" shall mean this Stock Option Plan, as amended from time to time.
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"Retirement" shall mean an Employee's or Non-Employee Director's retirement as
such at age 65 or over after having been employed by the Company or having
served as a Director for at least three years; provided that the senior human
resources officer of the Company may determine that a particular Employee's
retirement at a younger age or following a shorter term of employment with the
Company shall constitute Retirement for purposes of the Plan.
"Secretary" shall mean the Secretary of the Company.
"Subsidiary" shall mean any corporation or other entity which is controlled by
the Company, directly or through one or more intermediaries, within the meaning
of Rule 405 under the Securities Act of 1933, as amended.
"Termination of Employment" shall mean, in the case of an Employee, the time
when the employee-employer relationship between the Optionee and the Company is
terminated for any reason whatsoever and, in the case of a Non-Employee
Director, the time when the Optionee ceases to be a Director for any reason
whatsoever. The Committee, in its absolute discretion, shall determine the
effect of all other matters and questions relating to Termination of
Employment, including, but not limited to, any question concerning whether
particular leaves of absence constitute Terminations of Employment and whether
any reemployment by the company is simultaneous with termination.
SECTION 1.2 -- RULES OF CONSTRUCTION
The masculine pronoun shall include the feminine and the singularly shall
include the plural, where the context so indicates.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 -- SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of Common Stock. The
aggregate number of shares of Common Stock which may be issued upon exercise of
Options shall not exceed 130,000.
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<PAGE> 5
SECTION 2.2 -- UNEXERCISED OPTIONS
If any Option expires or is canceled without having been fully exercised, the
number of shares of Common Stock subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
optioned hereunder, subject to the limitation of Section 2.1.
SECTION 2.3 -- CHANGES IN COMMON STOCK
In the event that, after the date this Plan is adopted, the outstanding shares
of Common Stock are changed into or exchanged for a different number or kind of
shares of capital stock or other securities of the Company, or other
consideration, by reason of a merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend, combination of shares or
otherwise, the Committee shall make appropriate adjustments in the number and
kind of shares or other securities for the purchase of which Options may be
granted, including adjustment of the limitation of Section 2.1 on the maximum
number and kind of shares or other securities which may be issued upon exercise
of Options.
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1 -- ELIGIBILITY
Any Employee shall be eligible to be granted Options, and Options shall be
granted to each Non-Employee Director in accordance with Section 3.2.
SECTION 3.2 -- GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its absolute discretion:
(1) Select from among the Employees (including those to
whom Options have been previously granted under the Plan) such
of them as shall be granted Options; and
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<PAGE> 6
(2) Determine the number of shares of Common Stock to be
subject to Options granted to Employees; and
(3) Determine the terms and conditions of the Options,
including the Option Price, consistent with the Plan; and
(4) Establish such conditions as to the manner of
exercise of the Options as it may deem necessary, including
but not limited to requiring Optionees to enter into
agreements regarding transferability and other restrictions
with respect to shares of Common Stock issuable upon exercise
of such Options.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 -- EVIDENCE OF EACH OPTION
Each Option shall be evidenced by a letter from a Company officer authorized by
the Committee, setting forth the terms of the Option which are particular to
the Optionee, or in such other manner as the Committee shall determine. The
Secretary, or a person appointed by the Secretary, shall maintain a register of
all outstanding Options, which shall include the date of grant, the number of
shares of Common Stock covered by the grant, the Option Price and the name and
address of the Optionee.
SECTION 4.2 -- OPTION PRICE
Unless the Committee determines otherwise at the time of any grant, the Option
Price per share of the Common Stock subject to each Option shall be the Fair
Market Value per share on the date such Option is granted.
SECTION 4.3 -- WHEN OPTIONS BECOME EXERCISABLE
Subject to the provisions of Section 4.4 (b) and 4.7 unless the Committee
determines otherwise at the time of grant, each Option shall become exercisable
as follows:
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(a) Except to the extent that such Option becomes
exercisable sooner pursuant to paragraph (b), each Option
shall become exercisable as to 20 percent of the shares of
Common Stock covered thereby on each anniversary of the
Initial Grant Date and as to the balance of the shares of
Common Stock covered thereby on the fifth anniversary of the
Initial Grant Date.
(b) At any time following the first anniversary of the
Initial Grant Date, the Committee may, but shall not be
required to, make such adjustments as it considers appropriate
to the terms of any or all of the then outstanding Options.
Such adjustments may include, without limitation, an
acceleration of the time at which such Option may become
exercisable. In determining whether to make any such
adjustment, the Committee shall take into account the purposes
of this Plan, the financial performance of the Company and
such other considerations as it deems relevant. Following the
third anniversary of the Initial Grant Date, if no Options
have then become exercisable pursuant to Section 4.3(b), the
Committee shall review the terms of all outstanding Options to
determine whether any adjustments pursuant to this paragraph
may be appropriate. Any adjustment made to an Option pursuant
to this paragraph shall not, without the consent of the holder
of the Option, adversely affect any rights or obligations of
the holder of the Option in any material respect.
(c) At any time prior to the end of the fifth year of the
Initial Grant Date, the Company has an initial public
offering, every Option shall become immediately exercisable.
SECTION 4.4 -- EXPIRATION OF OPTIONS; TERMINATION OF EMPLOYMENT
(a) No Option may be exercised to any extent by anyone
after, and every Option shall expire, ten years from the
Option grant date.
(b) Subject to the provisions of paragraph (a), unless
the Committee determines otherwise at the time of any grant,
each Option shall contain the following terms:
(i) The Option shall expire on the tenth
anniversary of the date of grant.
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<PAGE> 8
(ii) The Option shall expire or become exercisable
in connection with a Termination of Employment as
follows: (A) if the Termination of Employment
results from the Optionee's death, Disability or
Retirement, all Options then held by the Optionee
shall become exercisable as to all shares of Common
Stock covered thereby and may be exercised until the
earlier of the first anniversary of such Termination
of Employment or their stated expiration date; (B) if
the Termination of Employment results from the
Optionee's dismissal for Cause, all Options then held
by the Optionee shall automatically expire and become
unexercisable on the date of such Termination of
Employment; (C) if the Termination of Employment
results from any other circumstances, all Options
then held by the Optionee which are exercisable on
the date of Termination of Employment shall continue
to be exercisable until the earlier of 90 days after
such date or their stated expiration date, and all
such Options which are not exercisable on the date of
Termination of Employment shall automatically expire
on such date.
SECTION 4.5 -- NO RIGHT TO CONTINUE IN EMPLOYMENT; NO RIGHT TO GRANT OF
OPTIONS; NO RIGHTS AS STOCKHOLDER
Nothing in this Plan or in any Option granted hereunder shall confer upon any
Optionee any right to continue in the employ of the Company or any of its
Subsidiaries or shall interfere with or restrict in any way the rights of the
Company and its Subsidiaries, which are hereby expressly reserved, to discharge
any Optionee at any time for any reason whatsoever, with or without cause. No
employee shall be entitled to be granted an Option under the Plan, regardless
of his position or term of service with the Company, the fact that he has been
granted an Option under the Plan or stock options or other benefits under any
other benefit plan, or any other facts and circumstances. Grant of Options
shall be made in the sole and absolute discretion of the Committee. No holder
of an Option as such shall be, or shall have any of the rights and privileges
of, a holder of any shares of Common Stock.
SECTION 4.6 -- ADJUSTMENTS IN OUTSTANDING OPTIONS
In the event that the outstanding shares of Common Stock subject to Options
are, from time to time, changed into or exchanged for a different number or
kind of shares of the Company or other consideration by reason of a merger,
consolidation recapitalization, reclassification, stock split-up, stock
dividend, combination of shares or otherwise, the Committee shall make an
appropriate and
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<PAGE> 9
equitable adjustment in the number and kind of shares or other consideration as
to which all outstanding Options, or portions thereof then unexercised, shall
be exercisable. such adjustment in an outstanding Option shall be made without
change in the total price applicable to the Option or the unexercised portion
of the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in Option Price per share. Any such adjustment made
by the Committee shall be final and binding upon all Optionees, the Company and
all other interested persons.
SECTION 4.7 -- ACCELERATION OF EXERCISABILITY IN CERTAIN EVENTS
(a) All outstanding Options issued under the Plan shall
immediately become exercisable as to all shares of Common
Stock covered thereby in the event that (i) following, or in
connection with, a Change of Control of the Company, the
Company merges with or into, or consolidates with, another
entity, or engages in a recapitalization or other similar
transaction the Common Stock is changed into or exchanged for
other consideration or (ii) the Company merges with or into,
or consolidates with, another entity, or engages in
recapitalization or other similar transaction, and as a result
of the transaction the Common Stock either (A) is no longer a
voting equity security of the Company or (B) is no longer
listed on a national securities exchange or authorized for
quotation on an inter-dealer quotation system of a national
securities association or (iii) the Company (A) sells,
exchanges or otherwise disposes of all or substantially all of
its assets or (B) is liquidated or dissolved. In connection
with any such transaction the Committee may, but shall not be
required to, provide that all outstanding Options shall
automatically be converted into the right to receive from the
Company or its successor, not later than 30 days after the
transaction, cash in an amount equal to the number of shares
of Common Stock covered by the Options immediately prior to
the transaction times (i) the fair market value of the
consideration receivable by the holder of one share of Common
Stock immediately following the transaction less (ii) the
exercise price per share of Common Stock covered by the
Options immediately prior to the transaction, or (iii) upon an
initial public offering (IPO). For purposes of this paragraph
(a), the term "Company" shall not include any Subsidiary.
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<PAGE> 10
(b) The Company shall promptly notify each holder of an
Option of any event which shall cause the acceleration of all
outstanding Options and of any conversion of Options into the
right to receive cash as described in the preceding paragraph.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 -- PERSONS ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only the Optionee or the Optionee's
guardian may exercise an Option granted to the Optionee. After the Optionee's
death, any Option granted to the Optionee may, prior to the time when such
portion becomes unexercisable under Section 4.4 or Section 4.7, be exercised by
the Optionee's personal representative or by any person empowered to do so
under the deceased Optionee's will or under the then applicable laws of descent
and distribution.
SECTION 5.2 -- PARTIAL EXERCISE
At any time and from time to time prior to the time when any exercisable Option
or exercisable portion thereof expires or becomes unexercisable under Section
4.4 or Section 4.7, such Option or portion thereof may be exercised in whole or
in part; provided, however, that the Company shall not be required to issue
fractional shares of Common Stock and the Committee may establish guidelines
that require any partial exercise to be with respect to a specified minimum
number if shares of Common Stock.
SECTION 5.3 -- MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary or his office, or another person designated
by him, of all the following prior to the time when such Option or such portion
becomes unexercisable under Section 4.4 or Section 4.7:
(a) Notice from the Optionee or other person then
entitled to exercise such Option or portion thereof, stating
that such Option or portion thereof is exercised; provided
that the Committee may adopt rules as to the manner, content
and timing of such notice; and
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(b) Full payment of the Option Price (in cash or by
check) for the shares of Common Stock with respect to which
such Option or portion thereof is thereby exercised, together
with payment or arrangement for payment of any federal income
tax or other tax required to be withheld by the Company with
respect to such shares of Common Stock; provide that with
respect to certain Optionees, subject to Section 5.4 and any
related rules adopted by the Committee, payment of the Option
Price may be made by Cashless Exercise; and
(c) Such representations and documents, if any, as the
committee reasonably deems necessary or advisable to effect
compliance with all applicable provisions of the Securities
Act of 1933, and any other federal, state or foreign
securities laws or regulations. The Committee may, in its
absolute discretion, also take whatever additional actions it
may deem appropriate to effect such compliance, including,
without limitation, placing legends on share certificates and
issuing stop-transfer orders to transfer agents and
registrars; and
(d) In the event that the Option or portion thereof shall
be exercised pursuant to Section 5.1 by any person or persons
other than the Optionee, appropriate proof of the right of
such person or persons to exercise the Option or portion
thereof.
SECTION 5.4 -- CASHLESS EXERCISE
(a) Subject to guidelines which may be established from
time to time by the Committee, Options may be exercised by
Cashless Exercise. The Committee may at any time, however,
expand or further restrict eligibility for Cashless Exercise,
amend the provisions of the Plan relating to Cashless
Exercise, or provide that Options may no longer be exercised
by Cashless Exercise, for any reason whatsoever, including
without limitation, any change in accounting principles or
practices, exchange controls or applicable laws or
regulations.
(b) If Cashless Exercise is elected, the Option will be
deemed to be exercised simultaneously with the sale by the
broker-dealer of shares of Common Stock acquired on the
exercise of the Option sufficient to pay the entire Option
Price and the broker-dealer's commission. If the shares of
Common Stock to be acquired on
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<PAGE> 12
such exercise cannot be sold for a price equal to or greater
than the full Option Price plus the broker-dealer's
commission, then the Option shall not be exercised.
(c) Election of Cashless Exercise shall constitute an
authorization to the Company to deliver shares of Common Stock
to the relevant broker-dealer. The broker-dealer will remit
the Option Price and the amount of any applicable withholding
taxes to the Company, and will remit any remaining proceeds to
the Optionee after withholding the broker-dealer's commission.
The broker-dealer's commission shall be for the account of the
person exercising the Option.
ARTICLE VI
ADMINISTRATION
SECTION 6.1 -- COMPENSATION COMMITTEE
The Committee shall consist of at least three Directors. It shall be appointed
by and shall serve at the pleasure of the Board. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members
may resign at any time by delivering written notice to the Board. Vacancies in
the Committee shall be filled by the Board.
SECTION 6.2 -- DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general administration of
the Plan in accordance with its provisions. The Committee shall have the
power to interpret the Plan and the Options and to adopt such rules for the
administration, interpretation, and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Any such
interpretations and rules shall be consistent with the basic purposes of the
Plan. In its absolute discretion, the Board may at any time, and from time to
time, exercise any and all rights and duties of the Committee under the Plan.
SECTION 6.3 -- COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and the officers and
Directors of the Company shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
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upon all Optionees, the Company an all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination or interpretation.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 -- OPTIONS NOT TRANSFERABLE
No Option or interest or right therein shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means, whether such disposition may be voluntary or involuntary or by
operation of law or by judgment, levy, attachment, garnishment or any other
legal or equitable proceeding (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect; provided, however,
that nothing in this Section 7.1 shall prevent transfers by will or by the
applicable laws of descent and distribution.
SECTION 7.2 -- AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Committee or the Board.
However, the approval of the Company's stockholders shall be required for any
modification or amendment of the Plan or outstanding Options. The amendment,
suspension or termination of the Plan shall not, without the consent of the
holder of an Option, adversely affect any rights or obligations of the Optionee
under any outstanding Option in any material respect. No Option may be granted
during any period of suspension nor after termination of the Plan, and in no
event may any Option be granted under this Plan after the expiration of ten
years from the date the Plan is adopted or the date the stockholders of the
Company approve this Plan, if earlier.
SECTION 7.3 -- EFFECT OF PLAN UPON OTHER OPTIONS AND COMPENSATION PLANS
The adoption of this plan shall not affect any other compensation or incentive
plans in effect for the Company or any Subsidiary. Nothing in this Plan shall
be constituted to limit the right of the Company or any of its Subsidiaries (a)
to establish any other forms of incentives or compensation for employees of the
Company or any of its Subsidiaries or (b) to grant or assume options otherwise
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than under this Plan in connection with any proper corporate purpose,
including, but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporate or other entity.
SECTION 7.4 -- FOREIGN EMPLOYEES
Notwithstanding anything to the contrary in Articles III, IV and V (other than
Section 4.4 (a) and Section 5.1), the Committee may grant Options to eligible
Employees who are not United States citizens or residents on such terms and
conditions as may, in the judgment of the Committee, be necessary or desirable
to foster the purposes of the Plan. In furtherance of the purposes of the
Plan, the Committee may adopt such modifications to the terms of Options and
such procedures and guidelines, and may cause the Company to take such other
actions, as may be necessary or advisable to comply with foreign laws and
practices.
SECTION 7.5 -- TITLES
Titles are provided herein for convenience only and are not to serve as a basis
for interpretation or construction of the Plan.
SECTION 7.6 -- GOVERNING LAW
The laws of the State of Texas shall govern the Plan and each Option,
regardless of the citizenship or residence of any Optionee.
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EXHIBIT 10.11
PACKAGED ICE, INC.
STOCK OPTION PLAN AGREEMENT
AGREEMENT made and entered into as of the ____ day of ____________,
199__, by and between Packaged Ice, Inc., a Texas corporation (the "Company"),
and __________________________ (the "Employee").
WHEREAS, pursuant to the Packaged Ice, Inc. Stock Option Plan (the
"Plan"), the Company, having determined that its interests will be advanced by
providing an incentive to the Employee to acquire a proprietary interest in the
Company and, as a stockholder, to share in its success, with added incentive to
work effectively for and in the Company's interest.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereby agree as follows:
SECTION ONE
GRANT
The Company hereby grants to the Employee, as a matter of separate
agreement and not in lieu of salary or any other compensation for services, the
right and option (the "Option" or "Options"), to purchase _______________ full
shares of authorized but unissued common stock of the Company on the terms and
conditions set forth in this Agreement.
SECTION TWO
PRICE
The purchase price of said shares of common stock underlying the
Options shall be the fair market value of the shares at the close of business
on the date hereof (the "Date of Grant"), $_____ per share.
SECTION THREE
WHEN EXERCISABLE
The Options shall become exercisable in five equal annual installments
of ________ shares each, beginning one year after the Date of Grant. The
Options shall be exercisable only as follows:
(a) At any time after five years from the Date of Grant, the Options
shall be exercisable in full except to the extent they have already been
exercised or have expired.
(b) Upon a Change of Control, as defined in the Plan, the Options shall
become immediately exercisable.
<PAGE> 2
(c) Upon an initial public offering (IPO) by the Company, the Options
shall become immediately exercisable.
(d) Except as otherwise provided in this Agreement, the Options shall
expire ten years from the Date of Grant.
SECTION FOUR
HOW EXERCISABLE
The Employee, or his or her personal representative in the event of
the Employee's death, shall exercise the Options by written notice to the
Company, which notice shall specify the number of shares to be purchased and
shall be accompanied by (i) cash or a check payable and acceptable to the
Company or (ii) shares owned by the Employee having an aggregate market value
as of the date of exercise which is not greater than the full Option purchase
price for the shares with respect to which the Options are being exercised;
provided, however, that if the Employee tenders shares having an aggregate
market value as of the date of exercise which is greater than the full Option
purchase price for the shares with respect to which the Options are being
exercised, the Board of Directors or a committee composed of non-employee
members of the Board of Directors (either entity hereinafter referred to as the
"Committee") may, upon confirming that the Employee owns the number of
additional shares being tendered, authorize the issuance of a new certificate
for the number of shares being acquired pursuant to the exercise of the Options
less the number of shares being tendered upon the exercise plus the number of
any shares in excess of those being tendered as consideration for the Option
purchase price. Any exercise pursuant to (ii) shall be subject to the approval
of the Committee. Any tender of shares pursuant to (ii) that does not account
for the full purchase price of the shares to be issued under the exercise of
the Options shall be accompanied by cash or a check payable and acceptable to
the Company for the balance of the purchase price of the Options exercised.
Payment instruments will be received subject to collection.
The Employee agrees that all shares purchased by him under the Options
are acquired for investment and not for distribution, and that any notice of
exercise of the Options shall be accompanied by a written representation,
signed by him, to that effect. Additionally, the Employee acknowledges that the
shares issued hereunder may be subject to certain purchase and sale
restrictions under a shareholder agreement between the Company and certain of
its shareholders and the Employee agrees to execute a shareholder agreement
substantially in the form of the Amended and Restated Shareholders Agreement
attached hereto as Exhibit A.
SECTION FIVE
TRANSFER
The Options shall not be transferable by the Employee other than by
will and the laws of descent and distribution. During the lifetime of the
Employee, the Options shall be exercisable only by him. The Options shall not
otherwise be transferred, assigned, pledged or hypothecated for any purpose
whatsoever and are not subject, in whole or in part, to execution, attachment
or similar process. Any attempted assignment, transfer, pledge or hypothecation
or other disposition of the Options, other than in accordance with the terms
set forth herein, shall be void and of no effect.
2
<PAGE> 3
SECTION SIX
TERMINATION OF OPTIONS
(a) In the event of termination of the employment of the Employee for
any cause, other than death, disability, retirement or for cause, whether by
reason of resignation or discharge, the Options shall terminate 30 days from
the date on which such employment terminated.
(b) All Options shall immediately become exercisable upon the
Employee's death, disability or retirement, and shall terminate at the earlier
of six months from the date of the Employee's death, permanent disability,
retirement or the expiration date of the Options.
(c) Upon termination for cause, the Options shall expire and become
unexercisable on the date of termination.
SECTION SEVEN
IMPACT ON OTHER BENEFITS
The value of the Options (either on the Date of Grant or at the time
the Options are vested) shall not be includable as compensation or earnings for
purposes of any other benefit plan offered by the Company.
SECTION EIGHT
ADMINISTRATION
The Committee shall have full authority and discretion (subject only
to the express provisions of the Plan) to decide all matters relating to the
administration and interpretation of the Plan and this Agreement. All such
Committee determinations shall be final, conclusive, and binding upon the
Company, the Employee, and any and all interested parties.
SECTION NINE
AGREEMENT TO CONTINUE IN EMPLOYMENT
Nothing in the Plan or this Agreement shall confer on the Employee any
right to continue in the employ of the Company or interfere in any way with the
right of the Company to terminate his or her employment at any time.
SECTION TEN
AMENDMENTS
This Agreement shall be subject to the terms of the Plan as amended
except that the Options that are the subject of this Agreement may not in any
way be amended or terminated after the Date of Grant without the Employee's
written consent.
3
<PAGE> 4
SECTION ELEVEN
FORCE AND EFFECT
The various provisions of this Agreement are severable in their
entirety. Any determination of invalidity or unenforceability of any one
provision shall have no effect on the continuing force and effect of the
remaining provisions.
SECTION TWELVE
NOTICE OF DISPOSITION OF SHARES
The Employee agrees that if he or she should dispose of any shares of
stock acquired on the exercise of the Options, including a disposition by sale,
exchange, gift or transfer of legal title within six months from the date such
shares are transferred to the Employee, the Employee shall notify the Company
promptly of such disposition.
SECTION THIRTEEN
GOVERNING LAWS
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Texas.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date hereof.
PACKAGED ICE, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
EMPLOYEE:
---------------------------------------
4
<PAGE> 1
EXHIBIT 10.12
===============================================================================
WARRANT AGREEMENT
Dated as of April 17, 1997
Between
PACKAGED ICE, INC.
and
U.S. TRUST COMPANY OF TEXAS, N.A.
as Warrant Agent
-----------------------
Warrants to Purchase Shares of Common Stock
Par Value $.01 Per Share
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
<S> <C> <C>
SECTION 1.01. Issuance of Warrants...............................................................................1
SECTION 1.02. Form of Warrant Certificates.......................................................................1
SECTION 1.03. Execution of Warrant Certificates..................................................................2
SECTION 1.04. Authentication and Delivery........................................................................2
SECTION 1.05. Temporary Warrant Certificates.....................................................................3
SECTION 1.06. Separation of Warrants and Notes...................................................................3
SECTION 1.07. Registration.......................................................................................3
SECTION 1.08. Registration of Transfers and Exchanges............................................................4
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates...................................................................................10
SECTION 1.10. Offices for Exercise, etc.........................................................................11
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants..............................................................................11
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery.................................................12
SECTION 2.03. Cancellation of Warrant Certificates..............................................................13
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights.............................................................................13
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes..................................................................................14
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number of Shares Issuable........................................14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.02. Fractional Interest...............................................................................18
SECTION 5.03. When Adjustment Not Required......................................................................18
SECTION 5.04. Challenge to Good Faith Determination.............................................................18
SECTION 5.05. Treasury Stock....................................................................................19
SECTION 5.06. Notices to Warrant Holders........................................................................19
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent.....................................................................................20
SECTION 6.02. Conditions of Warrant Agent's Obligations.........................................................20
SECTION 6.03. Resignation and Appointment of Successor..........................................................23
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment.........................................................................................25
SECTION 7.02. Notices and Demands to the Company and Warrant Agent..............................................25
SECTION 7.03. Addresses for Notices to Parties and for Transmission of
Documents......................................................................................25
SECTION 7.04. Notices to Holders................................................................................26
SECTION 7.05. Applicable Law....................................................................................26
SECTION 7.06. Obtaining of Governmental Approvals...............................................................26
SECTION 7.07. Persons Having Rights Under Agreement.............................................................26
SECTION 7.08. Headings..........................................................................................27
SECTION 7.09. Counterparts......................................................................................27
SECTION 7.10. Inspection of Agreement...........................................................................27
SECTION 7.11. Successors........................................................................................27
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate To Be Delivered upon Exchange or Registration of Transfer of
Warrants
EXHIBIT C - Transferee Letter of Representation
</TABLE>
-ii-
<PAGE> 4
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Term Section
- ------------ -------
<S> <C>
Agreement .......................................................................... Recitals
Business Day ....................................................................... 2.01
Common Stock........................................................................ 1.01
Company............................................................................. Recitals
Convertible Securities.............................................................. 5.01(c)
Definitive Warrants................................................................. 1.02
Distribution........................................................................ 5.02(c)
Effective Date...................................................................... Recitals
Election to Exercise................................................................ 2.02(b)
Exercisability Date................................................................. 2.02(a)
Exercise Date ...................................................................... 2.02(d)
Expiration Date..................................................................... 2.01
Global Warrants..................................................................... 1.02
Indenture........................................................................... Recitals
Initial Purchasers.................................................................. Recitals
Majority Holders.................................................................... 5.04
Notes............................................................................... Recitals
Prospectus.......................................................................... 4.02
Purchase Shares..................................................................... 5.01(e)
Registrar........................................................................... 1.07
Related Parties..................................................................... 6.02(e)
Resale Restriction Termination Date................................................. 1.08
Securities Act...................................................................... 1.06
Shares.............................................................................. 1.01
Time of Determination............................................................... 5.01(g)
Trustee............................................................................. Recitals
Units............................................................................... Recitals
Warrant Agent....................................................................... 6.01
Warrant Agent Office................................................................ 1.10
Warrant Certificates................................................................ Recitals
Warrant Exercise Office............................................................. 2.02(b)
Warrant Register.................................................................... 1.07
Warrants............................................................................ Recitals
</TABLE>
-iii-
<PAGE> 5
WARRANT AGREEMENT
WARRANT AGREEMENT ("Agreement"), dated as of April 17, 1997 (the
"Effective Date") by Packaged Ice, Inc., a Texas corporation (together with any
successor thereto, the "Company"), and U.S. Trust Company of Texas, N.A., a
national banking association, as warrant agent (with any successor Warrant
Agent, the "Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement dated April
11, 1997 with Jefferies & Company, Inc. (the "Initial Purchaser") in which the
Company has agreed, among other things, to sell to the Initial Purchaser (A)
50,000 units (the "Units") consisting in the aggregate of (i) $50,000,000
aggregate principal amount of 12% Senior Notes due 2004 (the "Notes") of the
Company to be issued under an indenture dated as of April 17, 1997 (the
"Indenture"), among the Company, the Subsidiary Guarantors named therein and
U.S. Trust Company of Texas, N.A., as trustee (the "Trustee"), and (ii) 50,000
Warrants to purchase an aggregate of 511,885 of shares of common stock, $.01
par value per share (the "Common Stock"), of the Company (the "Note Warrants")
and (B) 127,972 warrants to purchase an equal number of shares of Common Stock
(the "Additional Warrants" and, together with the Note Warrants, the
"Warrants"), and the certificates evidencing the Warrants being hereinafter
referred to as "Warrant Certificates"), in each case subject to adjustment in
accordance with the terms hereof; and
WHEREAS, the Note Warrants and the Notes comprising part of the Units
shall be separately transferable immediately; and
WHEREAS, the Company desires the Warrant Agent as warrant agent to
assist the Company in connection with the issuance, exchange, cancellation,
replacement and exercise of the Warrants, and in this Agreement wishes to set
forth, among other things, the terms and conditions on which the Warrants may
be issued, exchanged, canceled, replaced and exercised;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants. Each Warrant Certificate shall
evidence the number of Warrants specified therein, each Note Warrant evidenced
thereby shall represent the right, subject to the provisions contained herein
and therein, to purchase from the Company (and the Company shall issue and sell
to such holder of the Note Warrant) 10.2377 fully paid and non-assessable
shares of the Company's Common Stock, and each Additional Warrant evidenced
thereby shall represent the right, subject to the provisions contained herein
and therein, to purchase from the Company (and the Company shall issue and sell
to such holder of the Additional Warrant) one fully paid and non-assessable
share of the Company's Common Stock (the shares of Common Stock purchasable
upon exercise of a Warrant being hereinafter referred to as the "Shares" and,
where appropriate, such term shall also mean the other securities or property
purchasable and deliverable upon exercise of a Warrant as provided in Article
V) at the price specified herein and therein, in each case subject to
adjustment as provided herein and therein.
-1-
<PAGE> 6
SECTION 1.02. Form of Warrant Certificates. Warrant Certificates
representing Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Warrants (the "Global
Warrants"), substantially in the form of Exhibit A hereto (including footnote 1
thereto). Warrants offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
sentence shall be issued in the form of definitive Warrant Certificates (the
"Definitive Warrants"). The Warrant Certificates evidencing the Global Warrants
or the Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto. Such Global
Warrants shall represent such of the outstanding Warrants as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that the aggregate
amount of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a Global Warrant to
reflect the amount of any increase or decrease in the amount of outstanding
Warrants represented thereby shall be made by the Warrant Agent and Depositary
(as defined below) in accordance with instructions given by the holder thereof.
The Depository Trust Company shall act as the Depositary with respect to the
Global Warrants until a successor shall be appointed by the Company. Upon
written request, a Warrant holder may receive from the Warrant Agent Definitive
Warrants as set forth in Section 1.08 hereof.
SECTION 1.03. Execution of Warrant Certificates. The Warrant
Certificates shall be executed on behalf of the Company by the chairman of its
Board of Directors, its president or any vice president and attested by its
secretary or assistant secretary, under its corporate seal. Such signatures may
be the manual or facsimile signatures of the present or any future such
officers. The seal of the Company may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be countersigned and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the person who signed such
Warrant Certificate had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such person was not such an officer.
SECTION 1.04. Authentication and Delivery. Subject to the immediately
following paragraph, Warrant Certificates shall be authenticated by manual
signature and dated the date of authentication by the Warrant Agent and shall
not be valid for any purpose unless so authenticated and dated. The Warrant
Certificates shall be numbered and shall be registered in the Warrant Register
(as defined in Section 1.07 hereof).
Upon the receipt by the Warrant Agent of a written order of the
Company, which order shall be signed by the chairman of its Board of Directors,
its president or any vice president and attested
-2-
<PAGE> 7
by its secretary or assistant secretary, and shall specify the amount of
Warrants to be authenticated, whether the Warrants are to be Global Warrants or
Definitive Warrants, the date of such Warrants and such other information as
the Warrant Agent may reasonably request, without any further action by the
Company, the Warrant Agent is authorized, upon receipt from the Company at any
time and from time to time of the Warrant Certificates, duly executed as
provided in Section 1.03 hereof, to authenticate the Warrant Certificates and
deliver them. Such authentication shall be by a duly authorized signatory of
the Warrant Agent (although it shall not be necessary for the same signatory to
sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be such authorized
signatory before the warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who authenticated such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and any Warrant Certificate may be
authenticated on behalf of the Warrant Agent by such persons as, at the actual
time of authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not such an
authorized signatory.
The Warrant Agent's authentication on all Warrant Certificates shall
be in substantially the form set forth in Exhibit A hereto.
SECTION 1.05. Temporary Warrant Certificates. Pending the preparation
of definitive Warrant Certificates, the Company may execute, and, upon receipt
of an authentication order in accordance with Section 1.04 hereof, the Warrant
Agent shall authenticate and deliver, temporary Warrant Certificates, which are
printed, lithographed, typewritten or otherwise produced, substantially of the
tenor of the definitive Warrant Certificates in lieu of which they are issued
and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Warrant Certificates may determine,
as evidenced by their execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 1.10 hereof.
Subject to the provisions of Section 4.01 hereof, such exchange shall be
without charge to the holder. Upon surrender for cancellation of any one or
more temporary Warrant Certificates, the Company shall execute, and, upon
receipt of an authentication order in accordance with Section 1.04 hereof, the
Warrant Agent shall authenticate and deliver in exchange therefor, one or more
definitive Warrant Certificates representing in the aggregate a like number of
Warrants. Until so exchanged, the holder of a temporary Warrant Certificate
shall in all respects be entitled to the same benefits under this Agreement as
a holder of a definitive Warrant Certificate.
SECTION 1.06. Separation of Warrants and Notes. The Notes and
Warrants will be separately transferable immediately.
-3-
<PAGE> 8
SECTION 1.07. Registration. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and
exchange of, Warrants as provided in this Article. Each person designated by
the Company from time to time as a person authorized to register the transfer
and exchange of the Warrants is hereinafter called, individually and
collectively, the "Registrar". The Company hereby initially appoints the
Warrant Agent as Registrar. Upon written notice to the Warrant Agent and any
acting Registrar, the Company may appoint a successor Registrar for such
purposes.
The Company will at all times designate one person (who may be the
Company and who need not be a Registrar) to act as repository of a master list
of names and addresses of the holders of Warrants (the "Warrant Register"). The
Warrant Agent will act as such repository unless and until some other person
is, by written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall cause each
Registrar to furnish to such repository, on a current basis, such information
as to all registrations of transfer and exchanges effected by such Registrar,
as may be necessary to enable such repository to maintain the Warrant Register
on as current a basis as is practicable.
SECTION 1.08. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants. When Definitive
Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants;
or
(ii) to exchange such Definitive Warrants for an equal
number of Definitive Warrants,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Warrant Agreement as set forth in this Section
1.08 hereof for such transactions are met; provided, however, that the
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Company and the Warrant Agent, duly executed by the
holder thereof or by his attorney, duly authorized
in writing; and
(y) in the case of Warrants the offer and sale of which
have not been registered under the Securities Act and
are presented for transfer or exchange prior to (x)
the date which is three years after the later of the
date of original issue and the last date on which the
Company or any affiliate of the Company was the owner
of such Warrant, or any predecessor thereto and (y)
such later date, if any, as may be required by any
subsequent change in applicable law (the "Resale
Restriction Termination Date"), such Warrants shall
be accompanied, in the sole discretion of the
Company, by the following additional information and
documents, as applicable:
-4-
<PAGE> 9
(A) if such Warrant is being delivered to the
Warrant Agent by a holder for registration
in the name of such holder, without
transfer, a certification from such holder
to that effect (in substantially the form
of Exhibit B hereto); or
(B) if such Warrant is being transferred to a
qualified institutional buyer (as defined
in Rule 144A under the Securities Act) in
accordance with Rule 144A under the
Securities Act or pursuant to an exemption
from registration in accordance with Rule
144 or Regulation S under the Securities
Act, a certification to that effect (in
substantially the form of Exhibit B
hereto); or
(C) if such Warrant is being transferred to an
institutional "accredited investor" within
the meaning of subparagraphs (a)(l),
(a)(2), (a)(3) or (a)(7) of Rule 501 under
the Securities Act, delivery of a
Certificate of Transfer in the form of
Exhibit C hereto and an opinion of counsel
and/or other information satisfactory to
the Company to the effect that such
transfer is in compliance with the
Securities Act; or
(D) if such Warrant is being transferred in
reliance on another exemption from the
registration requirements of the Securities
Act, a certification to that effect (in
substantially the form of Exhibit B hereto)
and an opinion of counsel reasonably
acceptable to the Company to the effect
that such transfer is in compliance with
the Securities Act.
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
Interest in a Global Warrant. A Definitive Warrant may not be transferred for a
beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Warrant Agent, together with:
(A) certification, substantially in the form of Exhibit B hereto,
that such Definitive Warrant is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities Act; and
(B) written instructions directing the Warrant Agent to make, or
to direct the Depositary to make, an endorsement on the
Global Warrant to reflect an increase in the aggregate amount
of the Warrants represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or
direct the Depositary to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Warrant Agent, the
number of Warrants represented by the Global Warrant to be increased
accordingly. If no Global Warrant is then outstanding, the Company shall issue
and the Warrant Agent shall authenticate a new Global Warrant in the
appropriate amount.
-5-
<PAGE> 10
(c) Transfer and Exchange of Global Warrants. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Section 1.08 and the procedures
of the Depositary therefor.
(d) Transfer of a Beneficial Interest in a Global Warrant for a
Definitive Warrant.
(i) Any person having a beneficial interest in a Global
Warrant may upon request transfer such beneficial
interest for a Definitive Warrant. Upon receipt by the
Warrant Agent of written instructions or such other
form of instructions as is customary for the Depositary
from the Depositary or its nominee on behalf of any
person having a beneficial interest in a Global Warrant
and upon receipt by the Warrant Agent of a written
order or such other form of instructions as is
customary for the Depositary or the person designated
by the Depositary as having such a beneficial interest
containing registration instructions and, in the case
of any such transfer or exchange prior to the Resale
Restriction Termination Date, the following additional
information and documents:
(A) if such beneficial interest is being
transferred to the person designated by the
Depositary as being the beneficial owner, a
certification from such person to that
effect (in substantially the form of
Exhibit B hereto); or
(B) if such beneficial interest is being
transferred to a qualified institutional
buyer (as defined in Rule 144A under the
Securities Act) in accordance with Rule
144A under the Securities Act or pursuant
to an exemption from registration in
accordance with Rule 144 or Regulation S
under the Securities Act, a certification
to that effect from the transferee or
transferor (in substantially the form of
Exhibit B hereto); or
(C) if such beneficial interest is being
transferred to an institutional "accredited
investor" within the meaning of
subparagraphs (a)(l), (a)(2), (a)(3) or
(a)(7) of Rule 501 under the Securities
Act, delivery of a Certificate of Transfer
in the form of Exhibit C hereto and an
opinion of counsel and/or other information
satisfactory to the Company to the effect
that such transfer is in compliance with
the Securities Act; or
(D) if such beneficial interest is being
transferred in reliance on another
exemption from the registration
requirements of the Securities Act, a
certification to that effect (in
substantially the form of Exhibit B hereto)
and an opinion of counsel reasonably
acceptable to the Company to the effect
that such transfer is in compliance with
the Securities Act,
-6-
<PAGE> 11
then the Warrant Agent will cause, in accordance
with the standing instructions and procedures
existing between the Depositary and the Warrant
Agent, the aggregate amount of the Global Warrant
to be reduced and, following such reduction, the
Company will execute and, upon receipt of an
authentication order in the form of an Officers'
Certificate (as defined), the Warrant Agent will
authenticate and deliver to the transferee a
Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section
1.08(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant
to instructions from its direct or indirect
participants or otherwise, shall instruct the Warrant
Agent in writing. The Warrant Agent shall deliver such
Definitive Warrants to the persons in whose names such
Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary.
If at any time:
(i) the Depositary for the Warrants notifies the Company
that the Depositary is unwilling or unable to
continue as Depositary for the Global Warrant and a
successor Depositary for the Global Warrant is not
appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the
Warrant Agent in writing that it elects to cause the
issuance of Definitive Warrants under this Warrant
Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must
be the principal executive officer, principal financial officer or principal
accounting officer) (an "Officers' Certificate") requesting the authentication
and delivery of Definitive Warrants, will authenticate and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of warrants
represented by the Global Warrant, in exchange for such Global Warrant.
(g) Legends.
(i) Except to the extent permitted by the following
paragraph (ii), each Warrant Certificate evidencing
the Global Warrants and the Definitive Warrants (and
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<PAGE> 12
all Warrants issued in exchange therefor or
substitution thereof) shall bear a legend
substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" ( AS DEFINED IN RULE 501 (A)(l), (2), (3) OR (7)
PROMULGATED UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO
PACKAGED ICE, INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE WARRANT AGENT A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 PROMULGATED UNDER THE SECURITIES ACT (IF AVAILABLE), OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT
AGENT AND THE
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<PAGE> 13
COMPANY SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT DATED AS
OF APRIL 17, 1997 AMONG JEFFERIES & COMPANY, INC. AND THE
COMPANY, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
To the extent a Warrant Certificate evidences a
Global Warrant, such Warrant Certificate shall also
bear the legend with respect thereto substantially
in the form set forth on Exhibit A hereto.
(ii) Upon any sale or transfer of a Warrant pursuant to
Rule 144 under the Securities Act in accordance with
Section 1.08 hereof or an effective registration
statement under the Securities Act:
(A) in the case of any Warrant that is a
Definitive Warrant, the Warrant Agent shall
permit the holder thereof to exchange such
Warrant for a Definitive Warrant that does
not bear the first paragraph of the legend
set forth above and rescind any related
restriction on the transfer of such
Warrant; and
(B) any such Warrant represented by a Global Warrant
shall not be subject to the provisions set forth
in (i) above (such sales or transfers being
subject only to the provisions of Section
1.08 (c) hereof) provided, however, that with
respect to any request for an exchange of a
Warrant that is represented by a Global Warrant
for a Definitive Warrant that does not bear the
first paragraph of the legend set forth above,
which request is made in reliance upon Rule 144
under the Securities Act, the holder thereof
shall certify in writing to the Warrant Agent
that such request is being made pursuant to Rule
144 under the Securities Act (such certification
to be substantially in the form of Exhibit B
hereto).
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<PAGE> 14
(h) Cancellation and/or Adjustment of a Global Warrant. At such time
as all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to or retained and cancelled by the Warrant Agent. At any
time prior to such cancellation, if any beneficial interest in a Global Warrant
is exchanged for Definitive Warrants, redeemed, repurchased or cancelled, the
number of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of
Definitive Warrants.
(i) To permit registrations of transfers and exchanges,
the Company shall execute, at the Warrant Agent's
request, and the Warrant Agent shall, upon receipt
of an authentication order in accordance with
Section 1.04 hereof, authenticate Definitive
Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued
upon any registration, transfer or exchange of
Definitive Warrants or Global Warrants shall be the
valid obligations of the Company, entitled to the
same benefits under this Warrant Agreement as the
Definitive Warrants or Global Warrants surrendered
upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of
transfer of any Warrant, the Warrant Agent and the
Company may deem and treat the person in whose name
any Warrant is registered as the absolute owner of
such Warrant, and neither the Warrant Agent nor the
Company shall be affected by notice to the contrary.
(j) Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the initial issuance of the Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for the Shares in a name
other than that of the registered holder of a Warrant Certificate surrendered
upon the exercise of a Warrant, and the Company shall not be required to issue
or deliver such Warrant Certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent
of the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity reasonably satisfactory to them
and, in the case of mutilation or defacement, upon surrender thereof to the
Warrant Agent for cancellation, then, in the absence of notice to the Company
or the Warrant Agent that such Warrant Certificate has been acquired by a bona
fide purchaser or holder in due course, the Company shall execute, and, upon
receipt of an authentication order in accordance with Section 1.04 hereof, an
authorized signatory of the Warrant Agent shall manually authenticate and
deliver, in exchange for
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<PAGE> 15
or in lieu of the lost, stolen, destroyed, defaced or mutilated Warrant
Certificate, a new Warrant Certificate representing a like number of Warrants,
bearing a number or other distinguishing symbol not contemporaneously
outstanding. Upon the issuance of any new Warrant Certificate under this
Section, the Company may require the payment from the holder of such Warrant
Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled
to the benefits of (but shall be subject to all the limitations of rights set
forth in) this Agreement equally and proportionately with any and all other
Warrant Certificates duly executed and delivered hereunder. The provisions of
this Section 1.09 are exclusive with respect to the replacement of lost,
stolen, destroyed, defaced or mutilated Warrant Certificates and shall preclude
(to the extent lawful) any and all other rights or remedies notwithstanding any
law or statute existing or hereafter enacted to the contrary with respect to
the replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
The Warrant Agent is hereby authorized to authenticate in accordance
with the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
SECTION 1.10. Offices for Exercise, etc. So long as any of the
Warrants remain outstanding, the Company will designate and maintain in the
Borough of Manhattan, The City of New York: (a) an office or agency where the
Warrant Certificates may be presented for exercise, (b) an office or agency
where the Warrant Certificates may be presented for registration of transfer
and for exchange (including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 1.05 hereof), and (c) an
office or agency where notices and demands to or upon the Company in respect of
the Warrants or of this Agreement may be served. The Company may from time to
time change or rescind such designation, as it may deem desirable or expedient;
provided, however, that an office or agency shall at all times be maintained in
the Borough of Manhattan, The City of New York, as provided in the first
sentence of this Section. In addition to such office or offices or agency or
agencies, the Company may from time to time designate and maintain one or more
additional offices or agencies within or outside The City of New York, where
Warrant Certificates may be presented for exercise or for registration of
transfer or for exchange, and the Company may from time to time change or
rescind such designation, as it may deem desirable or expedient. The Company
will give to the Warrant Agent written notice of the location of any such
office or agency and of any change of location thereof. The Company hereby
designates the office of United States Trust Company, an affiliate of the
Warrant Agent, in the Borough of Manhattan, the City of New York (the "Warrant
Agent Office"), as the initial agency maintained for each such purpose.
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<PAGE> 16
ARTICLE II
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
SECTION 2.01. Duration of Warrants. Subject to the terms and
conditions established herein, the Warrants shall expire at 5:00 p.m., Dallas,
Texas time, on April 15, 2004 (the "Expiration Date"). Each Warrant may be
exercised on any Business Day (as defined below) on or after the Exercisability
Date (as defined below) and on or prior to the Expiration Date.
Any Warrant not exercised on or prior to the Expiration Date relating
to such Warrant shall become void, and all rights of the holder under the
Warrant Certificate evidencing such Warrant and under this Agreement shall
cease.
"Business Day" shall mean any day on which (i) banks in Dallas, Texas,
(ii) the principal national securities exchange or market on which the Common
Stock is listed or admitted to trading and (iii) the principal national
securities exchange or market, if any, on which the Warrants are listed or
admitted to trading are open for business.
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery. (a)
Subject to the provisions of this Agreement, (i) a holder of Note Warrants
shall have the right to purchase from the Company on or after the Effective
Date (the "Exercisability Date") and on or prior to the Expiration Date 10.2377
fully paid, registered and non-assessable Shares, subject to adjustment in
accordance with Article V hereof, at the purchase price of $.102377 for each
Note Warrant exercised (the "Note Warrant Exercise Price") and (ii) a holder of
Additional Warrants shall have the right to purchase from the Company on or
after the Exercisability Date and on or prior to the Expiration Date one fully
paid, registered and non-assessable Share, subject to adjustment in accordance
with Article V hereof, at the purchase price of $.01 for each Additional
Warrant exercised (the "Additional Warrant Exercise Price"). The term "Exercise
Price" as used herein shall mean either the Note Warrant Exercise Price or the
Warrant Exercise Price, as applicable.
(b) Warrants may be exercised on or after the Exercisability Date by
(i) surrendering at any office or agency maintained for that purpose by the
Company pursuant to Section 1.10 (each a "Warrant Exercise Office") the Warrant
Certificate evidencing such Warrants with the form of election to purchase
Shares set forth on the reverse side of the Warrant Certificate (the "Election
to Exercise") duly completed and signed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, and (ii) paying in full the Exercise Price for each such
Warrant exercised and any other amounts required to be paid pursuant to Section
1.08(j) hereof. Each Warrant may be exercised only in whole.
(c) Simultaneously with the exercise of each Warrant, payment in full
of the Exercise Price shall be made in cash or by certified or official bank
check to be delivered to the office or agency where the Warrant Certificate is
being surrendered. No payment or adjustment shall be made on account of any
dividends on the Shares issued upon exercise of a Warrant.
(d) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Exercise Office (other than any
Warrant Exercise Office that also is an office of the Warrant Agent), such
Warrant Certificate and payment shall be promptly delivered to the Warrant
Agent. The "Exercise Date" for a Warrant shall be the date when all of the
items referred to in the first sentence of paragraphs (b) and (c) of this
Section 2.02 are received by the Warrant Agent at or prior to 2:00 p.m.,
Dallas, Texas time, on a Business Day and the exercise of
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<PAGE> 17
the Warrants will be effective as of such Exercise Date. If any items referred
to in the first sentence of paragraphs (b) and (c) are received after 2:00
p.m., Dallas, Texas time, on a Business Day, the exercise of the Warrants to
which such item relates will be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on the
Expiration Date (as defined in Section 2.01), if all of the items referred to
in the first sentence of paragraphs (b) and (c) are received by the Warrant
Agent at or prior to 5:00 p.m., Dallas, Texas time, on such Expiration Date,
the exercise of the Warrants to which such items relate will be effective on
the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price,
the Warrant Agent shall: (i) cause an amount equal to the Exercise Price to be
paid to the Company by crediting the same to the account designated by the
Company in writing to the Warrant Agent for that purpose; (ii) advise the
Company immediately by telephone of the amount so deposited to the Company's
account and promptly confirm such telephonic advice in writing and (iii) as
soon as practicable, advise the Company in writing of the number of Warrants
(giving effect to Section 5.01(i) below) exercised in accordance with the terms
and conditions of this Agreement and the Warrant Certificates, the instructions
of each exercising holder of the Warrant Certificates with respect to delivery
of the Shares to which such holder is entitled upon such exercise, and such
other information as the Company shall reasonably request.
(f) Subject to Section 5.02 hereof, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, the
Company shall issue or cause to be issued to or upon the written order of the
registered holder of the Warrant Certificate evidencing such exercised Warrant
or Warrants, a certificate or certificates evidencing the Shares to which such
holder is entitled, in fully registered form, registered in such name or names
as may be directed by such holder pursuant to the Election to Exercise, as set
forth on the reverse of the Warrant Certificate. The Warrant Agent shall have
no obligation to ascertain the number of Shares to be issued with respect to
the exercised Warrant or Warrants. Such certificate or certificates evidencing
the Shares shall be deemed to have been issued and any persons who are
designated to be named therein shall be deemed to have become the holder of
record of such Shares as of the close of business on the Exercise Date. After
such exercise of any Warrant or Warrants, the Company shall also issue or cause
to be issued to or upon the written order of the registered holder of such
Warrant Certificate, a new Warrant Certificate, countersigned by the Warrant
Agent pursuant to the Company's written instruction, evidencing the number of
Warrants, if any, remaining unexercised unless such Warrants shall have
expired.
SECTION 2.03. Cancellation of Warrant Certificates. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and
if so delivered, shall be canceled by it and retired. The Warrant Agent shall
cancel all Warrant Certificates properly surrendered for exchange,
substitution, transfer or exercise. The Warrant Agent shall destroy canceled
Warrant Certificates held by it and deliver a certificate of destruction to the
Company. The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay to the Company all monies received
by the Warrant Agent for the purchase of Warrant Shares through the exercise of
such Warrants.
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<PAGE> 18
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights. (a) Notwithstanding any of the
provisions of this Agreement, any holder of any Warrant Certificate, without
the consent of the Warrant Agent, the holder of any Shares or the holder of any
other Warrant Certificate, may, in and for his own behalf, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, his right to exercise the Warrant or Warrants evidenced by
his Warrant Certificate in the manner provided in such Warrant Certificate and
in this Agreement.
(b) Neither the Warrants nor any Warrant Certificate shall entitle the
holders thereof to any of the rights of a holder of Shares, including, without
limitation, the right to vote or to receive any dividends or other payments or
to consent or to receive notice as stockholders in respect of the meetings of
stockholders or for the election of directors of the Company or to share in the
assets of the Company in the event of the liquidation, dissolution or winding
up of the Company's affairs or any other matter, or any rights whatsoever as
stockholders of the Company.
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of the Shares
upon the exercise of Warrants or to the separation of the Warrants and Notes as
described in Section 4.01; provided, however, that the Company shall not be
required to pay any tax or other governmental charge which may be payable in
respect of any transfer or exchange of any Warrant Certificates or any
certificates for Shares in a name other than the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant. In any such case, no
transfer or exchange shall be made unless or until the person or persons
requesting issuance thereof shall have paid to the Company the amount of such
tax or other governmental charge or shall have established to the satisfaction
of the Company that such tax or other governmental charge has been paid or an
exemption is available therefrom.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Price and Number of Shares
Issuable. The number and kind of Shares purchasable upon the exercise of
Warrants and the Exercise Price shall be subject to adjustment from time to
time as follows:
(a) Stock Splits, Combinations, etc. In case the Company shall
hereafter (A) 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), (B) subdivide its outstanding shares of Common Stock or
(C) combine its outstanding shares of Common Stock into a smaller number of
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<PAGE> 19
shares, the number of Shares purchasable upon exercise of each Warrant
immediately prior thereto shall be adjusted so that the holder of any Warrant
thereafter exercised shall be entitled to receive the number of Shares which
such holder would have owned immediately following such action had such Warrant
been exercised immediately prior thereto. 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 any 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
(whose determination shall be conclusive) shall 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 5.01(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 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 Article V. 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 Agreement
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 which shall be as nearly equivalent as
practicable to the adjustments provided for in this Article V. The foregoing
provisions of this Section 5.01(b) shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
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<PAGE> 20
(c) Issuance of Common Stock, Options or Convertible Securities. For
the purposes of this Warrant Agreement, "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) shares of Common Stock or 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 any Convertible Securities (other than upon
exercise of any Option), 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 int he 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, the term "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 5.01(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 such Options or upon the conversion or
exchange of such Convertible Securities
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<PAGE> 21
(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 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
5.01(e)) on the record date for the issuance, sale, distribution or granting of
such Options (any such event being herein called a "Distribution") 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 or Convertible Securities), a portion of such Common
Stock 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.
(e) 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 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 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 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 10 business days, and
(c) otherwise, the value of the security most recently determined as of a date
within the six months preceding such day by the Company's Board of Directors.
(f) 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 in good faith 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, 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.
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(g) Changes in Options and Convertible Securities. If the exercise
price provided for in any Options referred to in Section 5.01(d) above, the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in Section 5.01(d) above, or the rate at
which any Convertible Securities referred to in Section 5.01(d) above are
convertible into or exchangeable for Common Stock shall change at any time to a
price which is less than the Current Market Value thereof as of the Issuance
Date, then the Company shall make the offer to holders of the Warrants as
required by Section 5.01(d) above.
(h) 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 Article V, then the number of 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 such issuance shall be deemed to be of, or
in respect of, Common Stock for purposes of this Article V; 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 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 which a record holder of the
same number of 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.
(i) Statement of Warrants. Irrespective of any adjustment in the
number or kind of Shares issuable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued shall continue to express the same number and
kind of shares as are stated in the Warrants initially issuable pursuant to
this Agreement.
SECTION 5.02. Fractional Interest. The Company shall not be required
to issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by
the same holder, the number of full shares of Common Stock which shall be
issuable upon such exercise shall be computed on the basis of the aggregate
number of shares of Common Stock acquirable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section, be issuable on the exercise of any 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 5.01(e))
multiplied by such fraction computed to the nearest whole cent. Holders of
Warrants, by their acceptances of the Warrant Certificates, expressly waive 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.
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<PAGE> 23
SECTION 5.03. 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.
SECTION 5.04. Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a determination in
good faith of the fair value of any item under this Article V, such
determination may be challenged in good faith by holders holding a majority of
the outstanding Warrants (the "Majority Holders"), and any dispute shall be
resolved by an investment banking firm of national standing selected by the
Company. 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 is
more than 95% of 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.
SECTION 5.05. 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.
SECTION 5.06. Notices to Warrant Holders. In connection with any
adjustment pursuant to this Article V, the Company shall (i) promptly after
such adjustment or, if earlier, at least five (5) days prior to the date on
which notice of such adjustment is required to be given, if at all, to The
Depository Trust Company cause to be filed with the Warrant Agent a certificate
of an officer of the Company setting forth the number of shares (or portion
thereof) issuable after such adjustment, upon exercise of a Warrant, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) promptly after such adjustment cause to be given to
each of the registered holders of the Warrant Certificates at his address
appearing on the Warrant Register written notice of such adjustments by
first-class mail, postage prepaid. The Warrant Agent shall be entitled to
conclusively rely on the above-referenced officer's certificate and shall be
under no duty or responsibility with respect to any such certificate, except to
exhibit the same from time to time to any holder desiring an inspection thereof
during normal business hours upon reasonable notice. The Warrant Agent shall
not at any time be under any duty or responsibility to any holder to determine
whether any facts exist that may require any adjustment of the number of Shares
issuable on exercise of the Warrants or the Exercise Price, or with respect to
the nature or extent of any such adjustment when made, or with respect to the
method employed in making such adjustment or the validity or value (or the kind
or amount) of any Shares which may be issuable on exercise of the Warrants. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates or other common stock or property upon the exercise of any
Warrant.
The Company shall, in addition, promptly notify the holders of the
Warrants of any determination of its Board of Directors pursuant to Section
5.01(i) that any actions affecting its Common Stock will not require an
adjustment to the number of Shares for which a Warrant is
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<PAGE> 24
exercisable, and shall specify in such notice the reasons for such
determination. In the event that the Majority holders shall challenge any of
the calculations set forth in such notice within 20 days after the Company's
delivery thereof, the Company shall retain a firm of independent certified
public accountants or law firm of national standing selected by the Company to
prepare and execute a certificate verifying that no adjustment is required. The
Company shall promptly cause a signed copy of any certificate prepared pursuant
to this Section 5.06 to be delivered to each holder at his address appearing in
the Warrant Register. The Company shall keep at its office or agency designated
pursuant to Section 1.10 copies of all such certificates and cause the same to
be available for inspection at said office during normal business hours upon
reasonable notice by any holder or any prospective purchaser of a Warrant
designated by a holder thereof.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent. The Company hereby appoints U.S. Trust
Company of Texas, N.A. as warrant agent (and in all capacities in this
Agreement, the "Warrant Agent") of the Company in respect of the Warrants and
the Warrant Certificates upon the terms and subject to the conditions herein
and in the Warrant Certificates set forth; and U.S. Trust Company of Texas,
N.A. hereby accepts such appointment. The Warrant Agent shall have the powers
and authority specifically granted to and conferred upon it in the Warrant
Certificates and hereby and such further powers and authority to act on behalf
of the Company as the Company may hereafter grant to or confer upon it and it
shall accept in writing. All of the terms and provisions with respect to such
powers and authority contained in the Warrant Certificates are subject to and
governed by the terms and provisions hereof.
SECTION 6.02. Conditions of Warrant Agent's Obligations. The Warrant
Agent accepts its obligations herein set forth upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of
which the Company agrees and to all of which the rights hereunder of the
holders from time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be agreed
upon with the Company in writing for all services rendered by it and the
Company agrees promptly to pay such compensation and to reimburse the Warrant
Agent for its reasonable out-of-pocket expenses (including reasonable fees and
expenses of counsel) incurred without gross negligence or willful misconduct on
its part in connection with the services rendered by it hereunder. The Company
also agrees to indemnify the Warrant Agent, each predecessor Warrant Agent, and
their respective directors, officers, affiliates, agents and employees for, and
to hold it and its directors, officers, affiliates, agents and employees
harmless against, any loss, liability or expense of any nature whatsoever
(including, without limitation, fees and expenses of counsel) incurred without
gross negligence or willful misconduct on the part of the Warrant Agent or
predecessor Warrant Agent, arising out of or in connection with its acting as
such Warrant Agent hereunder and its exercise or failure to exercise of its
rights and performance of its obligations hereunder. The obligations of the
Company under this Section 6.02 shall survive the exercise and the expiration
of the Warrant Certificates and the resignation and removal of the Warrant
Agent.
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<PAGE> 25
(b) In acting under this Agreement and in connection with the Warrant
Certificates, the Warrant Agent is acting solely as agent of the Company and
does not assume any obligation or relationship of agency or trust for or with
any of the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel and any advice or
written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or opinion.
(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or thing
suffered by it in reliance upon any Warrant Certificate, notice, direction,
consent, certificate, affidavit, opinion of counsel, instruction, statement or
other paper or document reasonably believed by it, in the absence of bad faith,
to be genuine and to have been presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("Related Parties"), may become the owners of, or acquire any
interest in, Warrant Certificates, shares or other obligations of the Company
with the same rights that it or they would have it if were not the Warrant
Agent hereunder and, to the extent permitted by applicable law, it or they may
engage or be interested in any financial or other transaction with the Company
and may act on, or as depositary, trustee or agent for, any committee or body
of holders of shares or other obligations of the Company as freely as if it
were not the Warrant Agent hereunder. Nothing in this Agreement shall be deemed
to prevent the Warrant Agent or such Related Parties from acting in any other
capacity for the Company.
(f) The Warrant Agent shall not be under any liability for interest
on, and shall not be required to invest, any monies at any time received by it
pursuant to any of the provisions of this Agreement or of the Warrant
Certificates.
(g) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement (or any term or provision hereof) or the
execution and delivery hereof (except the due execution and delivery hereof by
the Warrant Agent) or in respect of the validity or execution of any Warrant
Certificate (except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication thereon)
shall be taken as the statements of the Company and the Warrant Agent assumes
no responsibility for the correctness of the same. The Warrant Agent does not
make any representation as to the validity or sufficiency of this Agreement or
the Warrant Certificates, except for its due execution and delivery of this
Agreement; provided, however, that the Warrant Agent shall not be relieved of
its duty to authenticate the Warrant Certificates as authorized by this
Agreement. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with respect
to any matter contemplated by this Warrant Agreement, it may require:
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<PAGE> 26
(1) an Officers' Certificate (as defined in the Indenture)
stating that, in the opinion of the signers, all conditions precedent,
if any, provided for in this Warrant Agreement relating to the
proposed action have been complied with; and
(2) if reasonably necessary in the sole judgment of the
Warrant Agent, an opinion of counsel for the Company stating that, in
the opinion of such counsel, all such conditions precedent have been
complied with.
Each Officers' Certificate or, if requested, an opinion of counsel
with respect to compliance with a condition or covenant provided for in this
Warrant Agreement shall include:
(1) a statement that the person making such certificate
or opinion has read such
covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or
she has made such examination or investigation as is necessary to
enable him or her to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
(j) The Warrant Agent shall be obligated to perform such duties as are
herein and in the Warrant Certificates specifically set forth and no implied
duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant Agent and
delivered by it to the Company pursuant to this Agreement. The Warrant Agent
shall have no duty or responsibility in case of any default by the Company in
the performance of its covenants or agreements contained in the Warrant
Certificates or in the case of the receipt of any written demand from a holder
of a Warrant Certificate with respect to such default, including, without
limiting the generality of the foregoing, any duty or responsibility to
initiate or attempt to initiate any proceedings at law or otherwise or, except
as provided in Section 7.02 hereof, to make any demand upon the Company. The
Warrant Agent shall not be obligated to perform any duty to the extent
prohibited by law.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if
signed by its chairman of the Board of Directors, its president, its treasurer,
its controller or any vice president or its secretary or any assistant
secretary.
(1) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.
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<PAGE> 27
(m) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the chairman of the Board of Directors, the president, the
treasurer, the controller, any vice president or the secretary of the Company
or any other officer or official of the Company reasonably believed to be
authorized to give such instructions and to apply to such officers or officials
for advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions with respect to any matter arising in connection
with the Warrant Agent's duties and obligations arising under this Agreement.
Such application by the Warrant Agent for written instructions from the Company
may, at the option of the Warrant Agent, set forth in writing any action
proposed to be taken or omitted by the Warrant Agent with respect to its duties
or obligations under this Agreement and the date on or after which such action
shall be taken and the Warrant Agent shall not be liable for any action taken
or omitted in accordance with a proposal included in any such application on or
after the date specified therein (which date shall be not less than 10 Business
Days after the Company receives such application unless the Company consents to
a shorter period), provided that (i) such application includes a statement to
the effect that it is being made pursuant to this paragraph (n) and that unless
objected to prior to such date specified in the application, the Warrant Agent
will not be liable for any such action or omission to the extent set forth in
such application and (ii) prior to taking or omitting any such action, the
Warrant Agent has not received written instructions objecting to such proposed
action or omission.
(o) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the chairman of the Board of
Directors, the president, the treasurer, the controller, any vice president or
the secretary of the Company or any other officer or official of the Company
reasonably believed to be authorized to give such instructions and delivered to
the Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(p) The Warrant Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder.
SECTION 6.03. Resignation and Appointment of Successor. (a) The
Company agrees, for the benefit of the holders from time to time of the Warrant
Certificates, that there shall at all times be a Warrant Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective, provided that
such date shall be at least 30 days after the date on which such
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<PAGE> 28
notice is given unless the Company agrees to accept less notice. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
Warrant Agent, qualified as provided in Section 6.03(d) hereof, by written
instrument in duplicate signed on behalf of the Company, one copy of which
shall be delivered to the resigning Warrant Agent and one copy to the successor
Warrant Agent. As provided in Section 6.03(d) hereof, such resignation shall
become effective upon the earlier of (x) the acceptance of the appointment by
the successor Warrant Agent or (y) 30 days after receipt by the Company of
notice of such resignation. The Company may, at any time and for any reason,
and shall, upon any event set forth in the next succeeding sentence, remove the
Warrant Agent and appoint a successor Warrant Agent by written instrument in
duplicate, specifying such removal and the date on which it is intended to
become effective, signed on behalf of the Company, one copy of which shall be
delivered to the Warrant Agent being removed and one copy to the successor
Warrant Agent. The Warrant Agent shall be removed as aforesaid if it shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Warrant Agent or of its property shall be appointed, or any
public officer shall take charge or control of it or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation. Any removal of
the Warrant Agent and any appointment of a successor Warrant Agent shall become
effective upon acceptance of appointment by the successor Warrant Agent as
provided in Section 6.03(d). As soon as practicable after appointment of the
successor Warrant Agent, the Company shall cause written notice of the change
in the Warrant Agent to be given to each of the registered holders of the
Warrants in the manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant Agent, if the Company
shall fail to appoint a successor Warrant Agent within a period of 30 days
after receipt of such notice of resignation or removal, then the holder of any
Warrant Certificate or the Warrant Agent may apply to a court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to the Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company.
(d) Any successor Warrant Agent, whether appointed by the Company or
by a court, shall be a bank or trust company in good standing, incorporated
under the laws of the United States of America or any State thereof and having,
at the time of its appointment, a combined capital surplus of at least $50
million. Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder and all the provisions of this Agreement, and thereupon such
successor Warrant Agent, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Warrant Agent
hereunder, and such predecessor shall thereupon become obligated to (i)
transfer and deliver, and such successor Warrant Agent shall be entitled to
receive, all securities, records or other property on deposit with or held by
such predecessor as Warrant Agent hereunder and (ii) upon payment of the
amounts then due it pursuant to Section 6.02(a) hereof, pay over, and such
successor Warrant Agent shall be entitled to receive, all monies deposited with
or held by any predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder may
be merged or converted, or any corporation or bank with which the Warrant Agent
may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or otherwise
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<PAGE> 29
transfer all or substantially all of its corporate trust business, shall be the
successor to the Warrant Agent under this Agreement (provided that such
corporation or bank shall be qualified as aforesaid) without the execution or
filing of any document or any further act on the part of any of the parties
hereto.
(f) No Warrant Agent under this Warrant Agreement shall be personally
liable for any action or omission of any successor Warrant Agent or of the
Company.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment. This Agreement and the terms of the Warrants
may be amended by the Company and the Warrant Agent, without the consent of the
holder of any Warrant Certificate, for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective or inconsistent provision
contained herein or therein or in any other manner which the Company may deem
necessary or desirable and which shall not adversely affect in any material
respect the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement and the
terms of the Warrants with the consent of not less than a majority in number of
the then outstanding Warrants for the purpose of adding any provision to or
changing in any manner or eliminating any of the provisions of this Agreement
or modifying in any manner the rights of the holders of the outstanding
Warrants; provided, however, that no such modification that decreases the
Exercise Rate, reduces the period of time during which the Warrants are
exercisable hereunder, otherwise materially and adversely affects the exercise
rights of the holders of the Warrants, reduces the percentage required for
modification, or effects any change to this Section 7.01 may be made with
respect to an outstanding Warrant without the consent of the holder of such
Warrant.
Any modification or amendment made in accordance with this Agreement
will be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and Warrant Agent. If
the Warrant Agent shall receive any notice or demand addressed to the Company
by the holder of a Warrant Certificate pursuant to the provisions hereof or of
the Warrant Certificates, the Warrant Agent shall promptly forward such notice
or demand to the Company.
SECTION 7.03. Addresses for Notices to Parties and for Transmission of
Documents. All notices hereunder to the parties hereto shall be deemed to have
been given when sent by certified or registered mail, postage prepaid, or by
telex or telecopy, confirmed by first class mail, postage prepaid, addressed to
any party hereto as follows:
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<PAGE> 30
To the Company:
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Attention: Chief Executive Officer
with copies to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent Street
Suite 1500
San Antonio, Texas 78205
Attention: Alan Schoenbaum
Facsimile: (210) 224-2035
Telephone: (210) 270-0800
To the Warrant Agent:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust Department
or at any other address of which either of the foregoing shall have notified
the other in writing.
SECTION 7.04. Notices to Holders. Notices to holders of Warrants shall
be mailed to such holders at the addresses of such holders as they appear in
the Warrant Register. Any such notice shall be sufficiently given if sent by
first-class mail, postage prepaid.
SECTION 7.05. APPLICABLE LAW. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER AND
OF THE RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
SECTION 7.06. Obtaining of Governmental Approvals. The Company will
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and securities acts filings
under United States Federal and State laws, and the rules and regulations of
all stock exchanges on which the Warrants are listed which may be or become
requisite in connection with
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the issuance, sale, transfer, and delivery of the Warrant Certificates, the
exercise of the Warrants or the issuance, sale, transfer and delivery of the
shares issued upon exercise of the Warrants.
SECTION 7.07. Persons Having Rights Under Agreement. Nothing in this
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Warrant Agent and the
holders of the Warrant Certificates any right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation, promise or
agreement hereof; and all covenants, conditions, stipulations, promises and
agreements in this Agreement contained shall be for the sole and exclusive
benefit of the Company and the Warrant Agent and their successors and of the
holders of the Warrant Certificates.
SECTION 7.08. Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
SECTION 7.09. Counterparts. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
SECTION 7.10. Inspection of Agreement. A copy of this Agreement shall
be available at all reasonable times at the principal corporate trust office of
the Warrant Agent, for inspection by the holder of any Warrant Certificate. The
Warrant Agent may require such holder to submit his Warrant Certificate for
inspection by it.
SECTION 7.11. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
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<PAGE> 32
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
PACKAGED ICE, INC.
By:
------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
U.S. TRUST COMPANY OF TEXAS, N.A.,
as Warrant Agent
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
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<PAGE> 33
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for Warrants in
certificated form, this Warrant may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.](1)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (
AS DEFINED IN RULE 501 (A)(l), (2), (3) OR (7) PROMULGATED UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO PACKAGED ICE, INC. (THE "COMPANY") OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A PROMULGATED UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT, (E) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 PROMULGATED UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
- ---------------
(1) This paragraph is to be included only if the Warrant is in global
form.
-29-
<PAGE> 34
TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE WARRANT AGENT
AND THE COMPANY SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT DATED AS OF APRIL 17, 1997
AMONG JEFFERIES & COMPANY, INC. AND THE COMPANY, A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE COMPANY.
CUSIP #[ ]
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
PACKAGED ICE, INC.
This Warrant Certificate certifies that [ ], or registered
assigns, is the registered holder of [ ] Warrants (the "Warrants") to
purchase shares of Common Stock, par value $.01 per share (the "Common Stock"),
of PACKAGED ICE, INC., a Texas corporation (the "Company"). Each Warrant
entitles the holder to purchase from the Company at any time on or after April
17, 1997 until 5:00 p.m., Dallas, Texas time, on April 15, 2004 (the
"Expiration Date"), one fully paid and non-assessable share of Common Stock (a
"Share", or, if adjusted, the "Shares", which may also include any other
securities or property purchasable upon exercise of a Warrant, such adjustment
and inclusion each as provided in the Warrant Agreement) at the exercise price
(the "Exercise Price") of $.01 per Warrant upon surrender of this Warrant
Certificate and payment of the Exercise Price at any office or agency
maintained for that purpose by the Company (the "Warrant Agent Office"),
subject to the conditions set forth herein and in the Warrant Agreement.
The Exercise Price shall be payable by cash, certified check or
official bank check or by such other means as is acceptable to the Company in
the lawful currency of the United States of America which as of the time of
payment is legal tender for payment of public or private debts. The Company has
initially designated the office of United States Trust Company, an affiliate of
the Warrant Agent, at its agent's office in the Borough of Manhattan, the City
of New York, as the initial Warrant Agent Office. The number of Shares issuable
upon exercise of the Warrants ("Exercise Rate") is subject to adjustment upon
the occurrence of certain events set forth in the Warrant Agreement.
-30-
<PAGE> 35
Any Warrants not exercised on or prior to 5:00 p.m., Dallas, Texas
time, on April 15, 2004 shall thereafter be void.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place. Capitalized terms used in this Warrant
Certificate but not defined herein shall have the meanings ascribed thereto in
the Warrant Agreement.
This Warrant Certificate shall not be valid unless authenticated by
the Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
WITNESS the facsimile seal of the Company and facsimile signatures of
its duly authorized officers.
Dated:
PACKAGED ICE, INC.
[Seal] By:
----------------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
U.S. TRUST COMPANY OF TEXAS, N.A.
as Warrant Agent
By:
------------------------------
Authorized Signatory
-31-
<PAGE> 36
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
PACKAGED ICE, INC.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, each of which represents the right to purchase at
any time on or after April 17, 1997, until 5:00 p.m., Dallas, Texas time, on
April 15, 2004, one share of Common Stock of the Company, subject to adjustment
as set forth in the Warrant Agreement. The Warrants are issued pursuant to a
Warrant Agreement dated as of April 17, 1997 (the "Warrant Agreement"), duly
executed and delivered by the Company to U.S. Trust Company of Texas, N.A., as
Warrant Agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. Warrants may be exercised by (i)
surrendering at any Warrant Agent Office this Warrant Certificate with the form
of Election to Exercise set forth hereon duly completed and executed and (ii)
paying in full the Warrant Exercise Price for each such Warrant exercised and
any other amounts required to be paid pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 2:00 p.m., Dallas,
Texas time, on a Business Day, the exercise of the Warrant to which such items
relate will be effective on such Business Day. If any items referred to in the
last sentence of the preceding paragraph are received after 2:00 p.m., Dallas,
Texas time, on a Business Day, the exercise of the Warrants to which such item
relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on the
Expiration Date, if all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to 5:00 p.m.,
Dallas, Texas time, on such Expiration Date, the exercise of the Warrants to
which such items relate will be effective on the Expiration Date.
Subject to the terms of the Warrant Agreement, as soon as practicable
after the exercise of any Warrant or Warrants, the Company shall issue or cause
to be issued to or upon the written order of the registered holder of this
Warrant Certificate, a certificate or certificates evidencing the Share or such
holder pursuant to the Election to Exercise, as set forth on the reverse of
this warrant Certificate. Such certificate or certificates evidencing the Share
or Shares shall be deemed to have been issued and any persons who are
designated to be named therein shall be deemed to have become the holder of
record of such Share or Shares as of the close of business on the date upon
which the exercise of this Warrant was deemed to be effective as provided in
the preceding paragraph.
The Company will not be required to issue fractional shares of Common
Stock upon exercise of the Warrants or distribute Share certificates that
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, there shall be paid to the registered holder of this Warrant
Certificate at the time such Warrant Certificate is exercised an amount in cash
equal to the
-32-
<PAGE> 37
same fraction of the Current Market Value per share as determined in accordance
with the Warrant Agreement.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may
be exchanged for a new Warrant Certificate or new Warrant Certificates
evidencing in the aggregate a like number of Warrants, in the manner and
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection
therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection
therewith.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone) for the purpose of any exercise hereof and for all other purposes, and
neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary.
The term "Business Day" shall mean any day on which (i) banks in
Dallas, Texas, (ii) the principal national securities exchange or market on
which the Common Stock is listed or admitted to trading and (iii) the principal
national securities exchange or market on which the Warrants are listed or
admitted to trading are open for business.
-33-
<PAGE> 38
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise ______ of the
Warrants represented by this Warrant Certificate and purchase the whole number
of Shares issuable upon the exercise of such Warrants and herewith tenders
payment for such Shares in the amount of $_________ in cash or by certified or
official bank check, in accordance with the terms hereof. The undersigned
requests that a certificate representing such Shares be registered in the name
of ___________________________ whose address is ______________________________
and that such certificate be delivered to ___________________________ whose
address is __________________________________. Any cash payments to be paid in
lieu of a fractional Share should be made to __________________________________
whose address is ________________________________ and the check representing
payment thereof should be delivered to ____________________________ whose
address is ___________________________.
Dated _________________, ___
Name of holder of
Warrant Certificate:
(Please Print)
Tax Identification or
Social Security Number:
Address:
Signature:
Note: The above signature must correspond with the
name as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change
whatever.
Dated ___________________, ___
-34-
<PAGE> 39
[FORM OF ASSIGNMENT]
For value received ________________________ hereby sells, assigns and
transfers unto _________________________the within Warrant Certificate,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint _________________________________ attorney,
to transfer said Warrant Certificate on the books of the within-named Company,
with full power of substitution in the premises.
Dated ___________________, ___
Signature:
Note: The above signature must correspond
with the name as written upon the
face of this Warrant Certificate in
every particular, without
alteration or enlargement or any
change whatever.
-35-
<PAGE> 40
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS(2)
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
<TABLE>
<CAPTION>
Number of Warrants
Amount of decrease Amount of increase in of this Global
in Number of Number of Warrants Warrant following Signature of
Date of Warrants of this of this Global such decrease (or authorized officer of
Exchange Global Warrant Warrant increase) Warrant Agent
- --------------- -------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ---------------
(2) This is to be included only if the Warrant is in global form.
-36-
<PAGE> 41
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Packaged Ice, Inc.
This Certificate relates to ________ Warrants held in* book-entry or*
__________ certificated form by __________________ (the "Transferor" ).
The Transferor:*
[ ] has requested the Warrant Agent by written order to deliver in exchange
for its beneficial interest in the Global Warrant held by the Depositary a
Warrant or Warrants in definitive, registered form of authorized denominations
and an aggregate number equal to its beneficial interest in such Global Warrant
(or the portion thereof indicated above); or
[ ] has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant,
the Transferor does hereby certify that the Transferor is familiar with the
Warrant Agreement relating to the above captioned Warrants and the restrictions
on transfers thereof as provided in Section 1.08 of such Warrant Agreement, and
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Act") because[*]:
[ ] Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 1.08(a)(y)(A) or Section
1.08(d)(i)(A) of the Warrant Agreement.
[ ] Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Act), in reliance on Rule 144A or in
accordance with Regulation S under the Act.
[ ] Such Warrant is being transferred in accordance with Rule 144 under the
Act.
[ ] Such Warrant is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the Act, other than Rule
144A or Rule 144 or Regulation S under the Act. An opinion of counsel to the
effect that such transfer does not require registration under the Act
accompanies this Certificate.
[INSERT NAME OF TRANSFEROR]
By:
Date:
*Check applicable box.
B-1
<PAGE> 42
EXHIBIT C
Transferee Letter of Representation
Packaged Ice, Inc.
8572 Katy Freeway
Suite 101
Houston, Texas 77024
Ladies and Gentlemen:
In connection with our proposed purchase of warrants to purchase
Common Stock, par value $.01 per share, (the "Securities") of Packaged Ice,
Inc. (the "Company") we confirm that:
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") and, unless so
registered, may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which we are
purchasing Securities to offer, sell or otherwise transfer such Securities
prior to the date which is three years after the later of the date of original
issue and the last date on which the Company or any affiliate of the Company
was the owner of such Securities, or any predecessor thereto (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) so long as the Securities are eligible for resale pursuant to Rule
144A, under the Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act that is purchasing for his own account or for the account of
such an institutional "accredited investor, or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and to compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter
to the warrant agent under the Warrant Agreement pursuant to which the
Securities were issued (the "Warrant Agent") which shall provide, among other
things, that the transferee is an institutional "accredited investor" within
the meaning of subparagraph (a)(l), (2), (3) or (7) of Rule 501 under the
Securities Act and that it is acquiring such Securities for investment purposes
and not for distribution in violation of the Securities Act. The Warrant Agent
and the Company reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Securities pursuant to
clause (e) or (f) above to require the delivery of a written opinion of
counsel, certifications, and or other information satisfactory to the Company
and the Warrant Agent.
C-1
<PAGE> 43
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Securities for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act and we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Securities, and we and any accounts for which we
are acting are each able to bear the economic risk of our or its investment for
an indefinite period.
3. We are acquiring the Securities purchased by us for our own account
or for one or more accounts as to each of which we exercise sole investment
discretion.
4. You, the Warrant Agent and your respective counsel are entitled to
rely upon this letter and you are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours,
(Name of Purchaser)
By:
Date:
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
C-2
<PAGE> 1
EXHIBIT 10.13
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made and entered into as of the 23rd
day of December, 1993, among PACKAGED ICE, INC., a Texas corporation (the
"Company"), and the Investors named in Schedule A attached hereto and
incorporated herein by reference (collectively "Investors" and individually
"Investor").
W I T N E S S E T H:
WHEREAS, certain of the Investors, namely, Frances H. Billups
("Billups"), James W. Gorman ("Gorman"), Hugh Halff, Jr. ("Halff"), A.J. Lewis,
Jr. ("Lewis, Jr."), A. J. Lewis, III ("Lewis, III"), Steve C. Lewis ("S.
Lewis"), and Steven P. Rosenberg ("Rosenberg"), (hereinafter collectively the
"1991 Investors") are parties to that one certain Investment Agreement dated
June 7, 1991, as amended by that one certain First Amendment to Investment
Agreement dated December 31, 1991 (together, the "1991 Investment Agreement");
and
WHEREAS, the obligations of the 1991 Investors under the 1991
Investment Agreement were conditioned upon certain events taking place on or
before December 31, 1992, which events have not taken place, and certain of the
1991 Investors have determined not to waive such conditions; and
WHEREAS, the 1991 Investors are desirous of making an additional
investment in the Company and in consideration of the Company entering into
this Stock Purchase Agreement, the 1991 Investors, except Rosenberg, are
desirous of relinquishing their rights under the 1991 Investment Agreement; and
WHEREAS, Rosenberg is desirous of waiving certain conditions of the
Investment Agreement, and the 1991 Investors are desirous of making certain
other modifications thereto; and
WHEREAS, to obtain additional equity financing, the Company desires to
issue and sell shares of its $.01 par value Common Stock ("Common Stock") to
the Investors, and the Investors, acting independently, desire to purchase such
Common Stock, at the prices, 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. Subject to the terms and
conditions of this Agreement and on the basis of the representations and
warranties set forth herein, at the Closing the Company agrees to issue and
sell to each Investor, and each Investor independently agrees to
<PAGE> 2
purchase from the Company, the number of shares of Common Stock as set forth
opposite the name of each Investor on Schedule A hereto, and at the prices as
set forth on said Schedule A opposite the name of each such Investor.
1.2 Delivery and Payment. At the Closing, the Company will
execute and deliver to each Investor certificates evidencing the number of
shares of Common Stock purchased at the Closing, as set forth opposite the name
of each Investor on Schedule A hereto, against payment, in immediately
available funds, by each Investor to the Company of the purchase price for the
shares of Common Stock to be purchased at the Closing as set forth opposite the
name of each Investor on Schedule A hereto.
1.3 Closing. The consummation of the issuance, sale and purchase
of the Common Stock to be purchased pursuant to this Agreement shall be
effected (the "Closing") at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1500 NationsBank Plaza, 300 Convent St., San Antonio, Texas 78205,
commencing at 10:00 a.m., on January 4, 1993 (the "Closing Date") or at such
other time or place as the Company and the Investors shall mutually agree.
1.4 Failure of an Investor to Close. In the event the Company
fulfills all conditions required to be fulfilled by it under this Agreement,
and, notwithstanding such fulfillment, if an Investor fails (the "Defaulting
Investor") to purchase in accordance with the terms of this Agreement, all of
the shares of Common Stock which such Defaulting Investor has agreed to
purchase, in addition to all other legal and equitable remedies of the Company
and the other Investors, the Company shall notify the Investors who are not
Defaulting Investors of the Defaulting Investor's failure and they shall have
the option, for a period of five (5) additional days after the scheduled
Closing, to purchase such portion of the Common Stock which the Defaulting
Investor had the right to purchase as the number of shares of Common Stock
owned by each of the Investors (excluding the defaulting Investor) at such time
shall bear to the total number of shares of Common Stock owned by the other
Investors, excluding the Defaulting Investor. If any Investor does not
purchase his or her full portion of such shares of Common Stock, the remaining
shares of Common Stock may be purchased by the other Investors pro rata in the
same manner within such five (5) day period after the scheduled Closing.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors as follows:
2.1 Organization and Standing of the Company. Each of the Company
and its subsidiary 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 own its properties and assets and to
carry on its business as now conducted and as proposed to be conducted. Each
of the Company and its subsidiary is duly qualified to transact business and is
in good standing in all jurisdictions in which such qualification is required.
2
<PAGE> 3
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 1,559,621 shares are issued and
outstanding and 5,000,000 shares of preferred stock, par value $.01 per share,
none of which are outstanding. Except as set forth on 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
subsidiary, 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.
2.3 Duly Issued. All of the issued and outstanding shares of
Common Stock have been duly authorized, are validly issued, fully paid and
non-assessable and were issued in compliance with applicable federal and state
securities laws. Upon issuance and delivery to each of the Investors of the
number of shares of the Common Stock set forth opposite each Investor's name on
Schedule A against payment of the purchase price therefor pursuant to this
Agreement, such shares will be validly issued, fully paid and non-assessable.
2.4 Authorization. This Agreement has, 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 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.
2.6 Financial Position.
(a) Attached hereto as Schedule 2.6 is the Company's
unaudited balance sheet as at December 31, 1992 (the "1992 Balance Sheet"),
and the related statement of income for the fiscal year then ended, and the
unaudited, consolidated balance sheet of the Company as at October 31, 1993
(the "October 31 Balance Sheet"), and the related consolidated statement of
income for the eleven months ended on October 31, 1993 (such balance sheets and
related statements are collectively referred to herein as the "Financial
Statements"). The Financial Statements present fairly the financial position
of the Company and the subsidiary as at December 31, 1992 and October 31, 1993,
respectively, all in conformity with the Company's normal accounting practices
applied on a basis consistent with the Company's prior practice.
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(b) Except as set forth on the Disclosure Schedule, since
the date of the October 31 Balance Sheet, no event or condition has occurred,
and no event or condition is to the knowledge of the Company's officers
threatened, which has had a materially adverse effect, or could reasonably be
expected to have a materially adverse effect, on the Company's properties,
assets, or financial position. Except as set forth in the Disclosure Schedule,
the Company has no material liabilities or financial obligations not disclosed
in the October 31 Balance Sheet. Except as disclosed in the Financial
Statements, the Company is not an indemnitor or guarantor of any indebtedness
of any other person, firm or corporation. The Company maintains and will
continue to maintain a standard system of accounting procedures.
2.7 Tax Returns. The Company has timely filed all tax returns and
reports required by law and has paid all taxes required to be paid, together
with any penalties and interest. These returns and reports are true and
correct in all material respects. There is no pending dispute with any taxing
authority relating to any of the Company's returns. There is no tax audit of
any return of the Company pending or currently in process. The Company has
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 341(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.
The Company has 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.
2.8 Title to Properties. Except as set forth in the Disclosure
Schedule, each of the Company and its subsidiary 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.
2.9 Contracts and Leases. A description of all material
contracts, commitments, leases and agreements to which the Company or its
subsidiary is a party, written and oral, is set forth on the Disclosure
Schedule.
2.10 Directors and Officers. As of the date of this Agreement, the
Company's Board of Directors is comprised of four members, James F. Stuart,
Steven P. Rosenberg, A. J. Lewis, III, and Jack Stazo. The Company's only
officers are James F. Stuart, President and Secretary, Allen Butcher, Vice
President, and Jack Stazo, Vice-President.
2.11 Employee Benefit Plans. Except as set forth in the Disclosure
Schedule, the Company has no pension, profit sharing, insurance, stock
purchase, stock option or other employee benefit plans, nor any "Employee
Benefit Plan" as defined in the Employee Retirement Income Security Act of
1974, as amended.
2.12 No Breach. Except as set forth in the Disclosure Schedule,
neither the Company nor its subsidiary is in breach or default of any term or
provision of its Articles of Incorporation or its
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Bylaws, or any material term or provision of any mortgage, indenture,
instrument, lease, contract, commitment or other agreement to which the Company
or its subsidiary 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 its subsidiary. 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 its
subsidiary, (ii) any agreement or instrument to which the Company or its
subsidiary is now a party or by which either 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 its subsidiary, 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 its subsidiary.
2.13 Litigation. There is no litigation or proceeding pending or,
to the knowledge of the officers of the Company, threatened against or relating
to the Company, its subsidiary, or their respective properties or business.
2.14 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.
2.15 Franchises, Permits, Consents and Patent. Each of the Company
and its subsidiary possesses all governmental franchises, certificates of
convenience and necessity, operating rights, licenses, permits, consents,
authorizations, exemptions and orders, required by the Company and its
subsidiary to carry on their businesses as now being conducted, and all such
items which the Company or its subsidiary possesses are described in the
Disclosure Schedule. All registrations, designations and filings with all
governmental authorities required in the conduct of the businesses of the
Company or its subsidiary or in connection with the consummation of the
transactions contemplated by this Agreement have been made or obtained.
2.16 Insurance. The Company has in force, and has paid all
premiums due on, liability, casualty and other insurance policies in the
amounts and of the types set forth in the Disclosure Schedule.
2.17 Securities Law Compliance. The offer, issuance and sale of
the Common Stock 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 Common Stock (or similar
securities) for sale to, or solicited offers to buy any of the Common Stock (or
similar securities) from, any prospective purchaser, so as to make the issuance
and sale of the Common Stock hereunder subject to the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act"), or applicable
state securities laws.
2.18 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.
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2.19 Intellectual Property.
Except as set forth on the Disclosure Schedule, to the actual
knowledge of the Company's officers:
(a) The Company and its subsidiary 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 medium) (collectively, "Intellectual
Property"), currently being used in the operation of the Company's business.
(b) None of the Company and its subsidiary 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 subsidiary 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
subsidiary, no third party has interfered with, infringed upon, or
misappropriated in any material respect any Intellectual Property rights of any
of the Company and its subsidiary.
(c) The Disclosure Schedule identifies each patent or
registration which has been issued to any of the Company and its subsidiary
with respect to any of its Intellectual Property, identifies each pending
patent application or application for registration which any of the Company and
its subsidiary has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which any of the
Company and its subsidiary has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). The Disclosure
Schedule also identifies each trade name or unregistered trademark used by any
of the Company and its subsidiary. With respect to each such item of
Intellectual Property required to be identified in the Disclosure Schedule:
i. the Company and its subsidiary 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;
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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 subsidiary, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item; and
(d) The Disclosure Statement identifies each material
item of Intellectual Property that any third party owns and that any of the
Company and its subsidiary uses pursuant to license, sublicense, agreement, or
permission. The Company has delivered or made available at its offices to the
Investors 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
which 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 subsidiary has granted any sublicense or
similar right with respect to the license, sublicense, agreement, or
permission.
2.20 Environment, Health, and Safety. To the actual knowledge of
the Company's officers, each of the Company and its subsidiary 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) which have jurisdiction over the Company and its subsidiary 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 so to comply. Without
limiting the generality of the preceding sentence, each of the Company and its
subsidiary has obtained and been in compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are
required under, and has complied, in all material
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respects, with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in such laws.
2.21 Product Liability. To the actual knowledge of the Company's
officers, none of the Company and its subsidiary has any liability (and to such
officers' actual knowledge there is no factual basis for any present 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
subsidiary.
2.22 Disclosure. The representations and warranties contained in
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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each of the Investors severally, and not jointly, represents and
warrants to the Company, the following:
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' rights generally. Each
Investor which is not a natural person 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
Common Stock for investment purposes only, for his 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 shares of Common Stock 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
Common Stock certificates 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 LAW AND THEY
MAY NOT BE OFFERED FOR SALE OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT THEREUNDER OR AN OPINION
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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 which he has requested in order to evaluate
the merits and risks of the purchase of the Common Stock hereunder.
3.4 Investor Due Diligence. In making the investment in the
Company and its Common Stock, the Investor is not acting on the basis of, or
relying upon, any promotional materials, business plans, financial projections,
representations or warranties other than those express representations and
warranties contained in this Agreement, and the Investor has performed his or
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 his decision to purchase Common Stock 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 he or it is capable of evaluating the merits
and risks of the purchase of the Common Stock, (ii) is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act, and (iii) he has the ability to bear the risk of losing his
entire investment in the Common Stock.
3.6 Finders' 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 in
accordance with the provisions of Section 10.2 of this Agreement is first
obtained, from and after the Closing Date the Company will fully comply with
each of the following covenants of this Article 4.
4.1 Financial Information. The Company will deliver at its
expense to each Investor the following:
(a) no later than sixty (60) days after the end of each
fiscal quarter, unaudited consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of the quarter,
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and unaudited consolidated statements of income and cash flow of the Company
and its subsidiaries, if any, for the quarter and for the current fiscal
year-to-date; and
(b) no later than one hundred twenty (120) days after the
end of each fiscal year, unaudited consolidated financial statements of the
Company and its subsidiaries, if any, for and as of the end of the preceding
fiscal year (including a balance sheet and statements of income and cash flow),
in reasonable detail, prepared in accordance with generally accepted accounting
principles consistently applied.
4.2 Inspection. The Company will permit each Investor, or any
designee 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.
4.3 Meetings of Board of Directors. Each Investor shall be
permitted to attend, receive two (2) days advance notice of, and make comments
at, all meetings at which the Board of Directors intends to consider the
issuance and sale of securities.
4.4 Use of Proceeds. The Company will use the proceeds of the
investments made by the Investors hereunder to lease or purchase the components
of systems which make, bag and merchandise packaged ice (the "Systems"),
install the Systems in retail and industrial locations, purchase inventories of
replacement parts and plastic bags, market the Systems, maintain the Systems,
and for general working capital purposes relating to the Company's business.
ARTICLE 5
CONDITIONS TO INVESTORS' OBLIGATIONS
The obligation of each Investor to purchase and pay for the Common
Stock 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
that 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 Investors 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.
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5.3 Shareholders Agreement. Each of the Investors shall have
entered into a counterpart of the Shareholders Agreement originally dated
January 9, 1992 by and among the Company and its shareholders (the
"Shareholders Agreement").
5.4 Parallel Exit Agreement. James F. Stuart and the Company
shall have entered into the Parallel Exit Agreement in the form of Exhibit 5.4
attached hereto.
5.5 Proceeds to the Company. The aggregate proceeds to the
Company resulting from the sale of Common Stock under this Agreement shall not
be less than $3,750,000, and if Rosenberg consummates the purchase of 250,000
shares of Common Stock hereunder, shall not be less than $4,750,000.
5.6 Stock Certificates. The Company shall have delivered to each
of the Investors a stock certificate evidencing the number of shares of Common
Stock purchased hereunder.
5.7 Voting Agreement. The holders of a majority of the Common
Stock of the Company issued and outstanding, giving pro forma effect to the
exercise of all options, warrants and conversion rights outstanding, shall have
entered into a voting agreement in the form attached hereto as Exhibit 5.7 (the
"Voting Agreement").
5.8 Opinion of Counsel. The Company shall have delivered to the
Investors the opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. dated the
Closing Date, substantially in the form of Exhibit 5.8.
ARTICLE 6
CONDITIONS TO COMPANY'S OBLIGATIONS
The obligation of the Company to issue and sell the Common Stock to
the Investors hereunder is subject to the fulfillment by each Investor, at or
before the Closing, of the following conditions:
6.1 Compliance with Representations and Warranties. The
representations and warranties of each of the Investors contained in Article 3
hereof shall be true on and as of the Closing Date with the same effect as
though made on that date.
6.2 Voting Agreement. The holders of a majority of the Common
Stock of the Company issued and outstanding, giving pro forma effect to the
exercise of all options, warrants and conversion rights outstanding, shall have
entered into the Voting Agreement.
6.3 Shareholders Agreement. Each of the Investors shall have
entered into the Shareholders Agreement.
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ARTICLE 7
INDEMNIFICATION
The Company shall indemnify and hold harmless the Investors, and the
Investors, severally and not jointly, shall indemnify and hold harmless the
Company, against all 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.
ARTICLE 8
REGISTRATION RIGHTS
8.1 Definitions. As used in this Article 8:
(a) The terms "register," "registered" and "registration"
refer to a registration of securities effected by preparing and filing a
registration statement in compliance with the Securities Act (and all related
registrations or qualifications required under state securities laws) and the
declaration or ordering of the effectiveness thereof.
(b) The term "Registerable Securities" means (i) shares
of Common Stock, and (ii) shares of Common Stock issued or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as a dividend or other distribution with respect to or in exchange for shares
of Common Stock; provided, that, "Registerable Securities" shall not include
any Common Stock which has previously been offered and sold pursuant to an
effective registration statement under the Securities Act.
(c) The term "SEC" means the United States Securities and
Exchange Commission, or any successor thereto.
8.2 Piggyback Registration.
(a) Each time the Company determines to register any of
its equity securities for the account of a holder of Common Stock (other than a
registration solely to implement an employee benefit plan or a transaction to
which Rule 145 under the Securities Act is applicable), the Company shall (i)
promptly give to each Investor written notice thereof, and (ii) include in the
registration, and in any underwritten offering made in connection therewith,
the Registerable Securities of the Investors specified in any written requests
given to the Company by any such Investor desiring to participate in the
registration and offering within five (5) days after the date of the Company's
notice to the Investors.
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(b) If the registration is in connection with an
underwritten offering, the right of any Investor to registration pursuant to
this Section shall be conditioned upon the Investor's participation in the
underwriting and the inclusion of the Investor's Registerable Securities in the
underwriting. All Investors proposing to distribute Registerable Securities
through the underwriting (together with the Company and any other shareholders
distributing their securities through the underwriting) shall enter into an
underwriting agreement in customary form with the underwriter selected by the
Company. Notwithstanding any other provision of this Section 8.2, if the
underwriter determines in its sole discretion that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may
limit the number of Registerable Securities to be included in the registration
and underwriting. If necessary, the Registerable Securities to be included in
the registration and underwriting will be allocated among all Investors who
have elected to participate therein and other shareholders who have been given
the right to participate therein, proportionately, based upon the number of
shares of Registerable Securities held by each participating shareholder.
Subject to the terms and conditions of the underwriting agreement, any
participating shareholder may elect at any time to withdraw from the
registration and underwriting by written notice to the Company, the underwriter
and the other participants.
8.3 Expenses of Registration. All expenses incurred in connection
with any registration pursuant to this Article, including without limitation,
all related registration or filing fees, printing expenses, escrow fees, fees
of counsel for the Company and one special counsel retained by the
participating shareholders, and accountants' and other experts' fees, shall be
borne by the Company; provided, however, that the Company will not be required
to pay stock transfer taxes or underwriters' fees, discounts or commissions
allocable to the Registerable Securities.
8.4 Registration Procedures. The Company shall keep each Investor
participating in a registration pursuant to this Article fully informed of the
progress thereof. At its expense, the Company will (a) keep the registration
effective for so long as is reasonably necessary, but in no event for longer
than nine months, and (b) furnish a number of prospectuses (preliminary, final
and amended) and other documents incident thereto as an Investor from time to
time reasonably may request.
8.5 Indemnification.
(a) With respect to any registration pursuant to this
Article, the Company shall, to the fullest extent permitted by applicable law,
indemnify and hold harmless each participating Investor, each such Investor's
partners, officers and directors, each participating underwriter, and each
person, if any, who controls, is controlled by or is under common control with
any such Investor or underwriter within the meaning of the Securities Act
(hereinafter collectively referred to as the "Investor-Underwriters"), as
follows:
i. against any and all loss, liability, claim,
damage and expense whatsoever arising out of any alleged untrue statement of a
material fact contained in the registration statement (or any amendment
thereto) or in any preliminary prospectus or prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or arising
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out of any violation or alleged violation by the Company of the Securities Act,
the Securities Exchange Act of 1934, as amended (the "1934 Act"), any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law (collectively, such untrue statements,
omissions, or violations being referred to herein as a "Violation"), unless the
Violation or alleged Violation was made in reliance upon and in conformity with
written information furnished to the Company by the Investor-Underwriter
expressly for use in the registration statement (or any amendment thereto) or
preliminary prospectus or prospectus (or any amendment or supplement thereto);
ii. against any and all loss, liability, claim,
damage, and expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, commenced or threatened, or of any claim
whatsoever based upon any alleged Violation, if the settlement is effected with
the written consent of the Company which consent shall not be unreasonably
withheld; and
iii. against any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against or
settling any litigation, commenced or threatened, or any claim whatsoever based
upon any alleged Violation.
In no case will the Company be liable under the foregoing
indemnity with respect to any loss, liability, claim, damage or expense with
respect to any claim made against an Investor-Underwriter unless the Company is
notified in writing of the commencement and the nature of any action, including
any governmental action, within a reasonable time after the commencement
thereof, but failure to notify the Company will not relieve the Company from
any liability which it may have incurred otherwise than on account of the
foregoing indemnity. In case of any such notice, the Company may participate
at its expense in the defense, or if it so elects within a reasonable time
after receipt of such notice, assume the defense of the action, but if it
elects to assume the defense, the defense will be conducted by counsel chosen
by it and approved by the Investor-Underwriters and other defendants, if any,
in the action, which approval will not be withheld unreasonably. If the
Company elects to assume the defense of any action and retain counsel as herein
provided, the Investor-Underwriters and other defendants, if any, will bear the
fees and expenses of any additional counsel thereafter retained by them.
(b) Each participating Investor shall, upon the written
request of the Company, agree to indemnify and hold harmless the Company to the
same extent and subject to the same terms and conditions as are set forth above
for the Company, but only with respect to written information expressly
provided by the Investor for use in a registration statement or prospectus.
8.6 Reports Under the Securities Exchange Act of 1934. With a
view to making available to the Investors the benefits of any rule or
regulation under the Securities Act which may permit the sale of the
Registerable Securities to the public without registration, the Company will:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times as required pursuant to the 1934 Act
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following the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the 1934
Act; and
(c) furnish to each Investor forthwith upon its request
(i) a written statement by the Company as to its compliance with the public
information requirements of Rule 144 (at any time after the effective date of
the first registration statement filed by the Company), (ii) a copy of the most
recent annual or quarterly report of the Company, and (iii) any other reports,
documents and information as reasonably may be requested in availing any
Investor of any rule or regulation of the SEC permitting the sale of securities
without registration.
8.7 Future Rights. In the event that the Company grants to any
person piggy back registration rights which are more favorable than the piggy
back registration rights granted to the Investors hereunder, the provisions of
this Article shall automatically be amended to incorporate the more favorable
piggy back registration rights granted to such person.
ARTICLE 9
1991 INVESTMENT AGREEMENT
9.1 Modifications and Amendments to 1991 Investment Agreement.
(a) For the purposes of this Section 9.1, the following
defined terms as used in this Section 9.1 shall have the same meaning as in the
1991 Investment Agreement: "Lewis Group", "Investment Stage", "Third Closing",
"Third Closing Date", "Defaulting Investors".
(b) The parties agree that in the event of a conflict of
interpretation, meaning, construction or operation between the 1991 Investment
Agreement and this Agreement, this Agreement shall control.
(c) The fifth sentence of Section 1.1 of the 1991
Investment Agreement is hereby modified and amended to read as follows:
"The third Investment Stage consists of 190,849
shares of Common Stock in the aggregate to be
purchased by Steven P. Rosenberg at the Third Closing
(hereinafter defined)."
(d) The third sentence of Section 1.3(c) of the 1991
Investment Agreement is hereby modified and amended to read as follows:
"Notwithstanding anything to the contrary contained
in this Agreement, December 31, 1994 shall be the
outside date by which the Company shall
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have placed in use two hundred fifty (250) Systems,
provided that Steven P. Rosenberg may waive this
condition as it applies to his right to acquire
shares of Common Stock."
(e) Section 6.3(a) of the 1991 Investment Agreement is
hereby modified and amended to read as follows:
"(a) The Company shall have placed in use a
minimum of 250 Systems at retail locations on terms
which the Company believes to be commercially
reasonable on or before December 31, 1994."
9.2 Relinquishment of Rights. Each of the Lewis Group hereby
relinquishes all of his or her rights to purchase shares of Common Stock under
the 1991 Investment Agreement, save and except such rights as may accrue under
Section 1.4 thereof relating to Defaulting Investors. In furtherance thereof,
each of the Lewis Group hereby releases and holds the Company harmless from any
further obligations the Company may have under the 1991 Investment Agreement to
sell and issue shares of Common Stock to any of the Lewis Group, except as may
accrue under Section 1.4 of the 1991 Investment Agreement. It is hereby agreed
that upon the consummation of the transactions contemplated hereby, each of the
Lewis Group and the Company shall be deemed to have fulfilled all of their
respective obligations to each other under the 1991 Investment Agreement.
9.3 Rosenberg's Rights. It is hereby agreed that upon the
consummation of the transactions contemplated hereby, each of the Company and
Rosenberg shall be deemed to have fulfilled all of their respective obligations
to each other with respect to the purchase, sale, and issuance of shares under
the first and second Investment Stages of the 1991 Investment Agreement. It is
further agreed that the 1991 Investment Agreement is hereby modified and
amended to provide that Rosenberg shall have the right and obligation to
purchase 190,849 shares of Common Stock at a price of $6.2222 per share under
the 1991 Investment Agreement, in accordance with its terms, at the Third
Closing. Rosenberg hereby waives any breach of the 1991 Investment Agreement
by the Company as a result of the Company's failure to have placed in use 250
Systems by December 31, 1992.
ARTICLE 10
MISCELLANEOUS
10.1 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 deemed to have been duly given when actually received, or when mailed,
first class postage prepaid, certified mail, return receipt requested, to an
Investor at the address set forth below his name on Schedule A hereto, to the
Company at the address set forth below, or to such other address as may be
designated hereafter by prior written notice from the recipient to the sender:
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If by mail, to: Packaged Ice, Inc.
P.O. Box 79233
Houston, Texas 77279-9233
If by hand delivery or
overnight mail, to: Packaged Ice, Inc.
342 Town & Country Village
Houston, Texas 77024
If by FAX, to: Packaged Ice, Inc.
Fax: (713) 464-4681
10.2 Modification and Waiver.
(a) No amendment or modification to this Agreement shall
be made, and no condition or continuing covenant contained in this Agreement
may be waived without the affirmative vote or written consent of all of the
parties to this Agreement.
(b) Notwithstanding anything to the contrary herein
contained, the fulfillment by the Company of a condition precedent to an
Investor's obligation to purchase Common Stock hereunder may be waived from
time to time by any such Investor by written consent to, or waiver of, any such
condition.
10.3 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 resulting in aggregate net proceeds to the Company and its
shareholders of $5,000,000 or more; provided, however, the obligations of the
Company and the rights of the Investors as set forth in Article 8 of this
Agreement shall remain in effect notwithstanding the termination of this
Agreement pursuant to this Section 10.3.
10.4 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.
10.5 Gender. Wherever 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.
10.6 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.
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<PAGE> 18
10.7 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.
10.8 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, notwithstanding the
execution and delivery of this Agreement or such other agreements by any of the
other parties hereto or thereto other than the Company.
10.9 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.
10.10 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 summary term sheets heretofore executed or examined by the parties, the
letter agreement dated December 14, 1993 by and among the Company, James F.
Gallivan, Jr., G. Houston Hall and James C. Smith; the 1991 Investment
Agreement as modified hereby shall remain in effect.
10.11 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 TEXAS.
10.12 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof, and shall not be
appealable.
10.13 Expenses and Attorneys' Fees. The Company shall pay all costs
and expenses that it incurs 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 and each of the Investors shall pay all costs and expenses that it
incurs 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. Should litigation
be instituted by any party to this Agreement, or any of the other agreements
required to be entered into pursuant to the terms and conditions of this
Agreement,
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<PAGE> 19
against any other party thereto regarding the enforcement or interpretation of
the provisions thereof, the prevailing party shall be entitled to recover its
reasonable and necessary costs and expenses incurred in pursuit of or defense
of the action, including its reasonable attorneys' fees, in addition to any
other relief to which it may be entitled.
10.14 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.
10.15 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 provisions hereof and this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
10.16 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.
10.17 No Third-Party Beneficiaries. Nothing contained in this
Agreement shall be construed to give any person other than the Company and
Investors any legal or equitable right, remedy or claim under or with respect
to this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
COMPANY: PACKAGED ICE, INC.
By:
-------------------------------------
JAMES F. STUART, PRESIDENT
INVESTORS: P-I PARTNERS, L.P.
By: GHS Management, Inc.,
General Partner
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE> 20
---------------------------------------
FRANCES H. BILLUPS
---------------------------------------
JAMES W. GORMAN
---------------------------------------
HUGH HALFF, JR.
---------------------------------------
A.J. LEWIS, JR.
---------------------------------------
A.J. LEWIS, III
---------------------------------------
STEVE C. LEWIS
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<PAGE> 21
---------------------------------------
STEVEN P. ROSENBERG
---------------------------------------
STANLEY SCHOENBAUM, TRUSTEE
---------------------------------------
HARRY GEE, JR., TRUSTEE
---------------------------------------
JACK STAZO
---------------------------------------
KENNETH H. JOHNSON, TRUSTEE
---------------------------------------
ALFRED Y.K. HEW, JR., TRUSTEE
---------------------------------------
LANCER CORPORATION, TRUSTEE
By:
------------------------------------
Alfred A. Schroeder,
Chairman of the Board
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Attachments:
Disclosure Schedule
Schedule A - Investors
Schedule 2.6 - Financial Statements
Exhibit 5.4 - Parallel Exit Agreement
Exhibit 5.7 - Voting Agreement
Exhibit 5.8 - Opinion of Counsel
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<PAGE> 1
EXHIBIT 10.14
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made and entered into as of the 20th
day of September, 1995, among PACKAGED ICE, INC., a Texas corporation (the
"Company"), and the Investors named in Schedule A attached hereto and incorpo-
rated herein by reference (collectively "Investors" and individually "Inves-
tor").
W I T N E S S E T H:
WHEREAS, to obtain additional equity financing, the Company desires to
issue and sell shares of its $.01 par value Common Stock ("Common Stock") to
the Investors, and each Investor desires to purchase such Common Stock, at the
prices, 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 Authorization of Securities. The Company will authorize the
issuance and sale of 270,000 shares of Common Stock (sometimes referred to as
the "Securities").
1.2 Issuance and Sale of Securities. At the Closing, 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 each
Investor, and each Investor severally agrees to purchase from the Company, the
number of shares of Common Stock, at the respective purchase prices, as set
forth opposite the name of each Investor on Schedule A hereto.
1.3 Delivery and Payment. At the Closing, the Company will execute
and deliver to each Investor certificates evidencing the number of shares of
Common Stock purchased hereunder, as set forth opposite the name of each
Investor on Schedule A hereto, against payment, in immediately available funds,
by each Investor to the Company of the purchase price for the shares of Series
A Preferred Stock and Common Stock as set forth opposite the name of each
Investor on Schedule A hereto.
1.4 Closing. The consummation of the issuance, sale and purchase of
the Common Stock to be purchased pursuant to this Agreement shall be effected
(the "Closing") at the offices of Vinson & Elkins, 2300 First City Tower, 1001
Fannin Street, Houston, Texas 77002-6760, commencing at 10:00 a.m., on
September 20, 1995 (the "Closing Date") or at such other time or place as the
Company and the Investors shall mutually agree.
<PAGE> 2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors 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.
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 2,626,371 shares are issued and outstand-
ing and 5,000,000 shares of preferred stock, par value $.01 per share, 450,000
of which are outstanding. Except as set forth on Section 2.2 of the Disclosure
Schedule, attached hereto as Schedule B 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
subsidiary, 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. 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 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 Common
Stock have been duly authorized, are validly issued, fully paid and non-
assessable. Upon issuance and delivery to each of the Investors of the number
of shares of Common Stock set forth opposite each Investor's name on Schedule A
against payment of the purchase price therefor pursuant to this Agreement, such
shares will be validly issued, fully paid and non-assessable.
2.4 Authorization. This Agreement has, 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 Disclo-
sure Schedule, the Company has no subsidiaries and does not, directly or
indirectly, own any interest in any
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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 corpora-
tion, 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) Attached hereto as Section 2.6 of the Disclosure Schedule
is the Company's unaudited, consolidated balance sheet as of December 31, 1994
(the "1994 Balance Sheet"), and the related unaudited, consolidated statements
of income and cash flow for the fiscal year then ended, together with the draft
report thereon of Deloitte & Touche, certified public accountants, and the
unaudited, consolidated balance sheet of the Company as at July 31, 1995 (the
"July 31 Balance Sheet"), and the related, unaudited consolidated statements of
income and cash flow for the seven month period ended on July 31, 1995 (such
balance sheets and related statements are collectively referred to herein as
the "Financial Statements"). Except as set forth in Section 2.6 of the
Disclosure Schedule, 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 interim financial statements the
Company's normal internal accounting practices.
(b) Except as set forth on Section 2.6 of the Disclosure
Schedule, since the date of the July 31 Balance Sheet, no event or condition
has occurred, and no event or condition is to the knowledge of the Company's
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. Except as set
forth in Section 2.6 of the Disclosure Schedule, the Company has no material
liabilities or financial obligations not disclosed in the July 31 Balance
Sheet. Except as disclosed in the Financial Statements, the Company is not an
indemnitor or guarantor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain its books and
records in accordance with generally accepted accounting principles
consistently applied. Except as set forth in Section 2.6 of the Disclosure
Schedule, since the July 31 Balance Sheet, neither the Company nor its
subsidiaries has (i) incurred any debts, obligations or liabilities, absolute,
accrued or contingent and whether due or to become due, except current
liabilities incurred in the ordinary course of business, which (individually or
in the aggregate) will not materially and adversely affect the business,
properties or prospects of the Company or its subsidiaries; (ii) paid any
obligation or liability other than, or discharged or satisfied any liens or
encumbrances other than those securing current liabilities, in each case in the
ordinary course of business; (iii) declared or made any payment or distribution
to its shareholders as such or purchased or redeemed any of its shares of
capital stock or other securities, or obligated itself to do so; (iv) sold,
transferred or leased any of its assets except in the ordinary course of
business; (v) issued or sold any shares of capital stock or other securities or
granted any options, warrants or other purchase rights with respect thereto
other than as contemplated by this Agreement. There has been no material
adverse change in the condition, financial or otherwise, or operations, results
of operations or business of the Company or its subsidiaries since the July 31
Balance Sheet.
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2.7 Tax Returns. Each of the Company and its subsidiaries has timely
filed all Tax Returns required by law and has paid all Taxes required to be
paid, together with any penalties and interest. These 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 subsidiaries' returns. There is
no tax audit of any 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 341(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. 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 of all mortgages, liens, claims and encumbrances.
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
Internal Revenue Code as amended ("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
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<PAGE> 5
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 which 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 (l) 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 ("PBGC") (other than
for the payment of current premiums which 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 which 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 which
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 which 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(1) 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,
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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. Except as set forth on Section 2.10 of the Disclosure
Schedule, 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.
2.11 Litigation. Except as set forth on Section 2.11 of the
Disclosure Schedule, 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.
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 in force, and
have paid all premiums due on, liability, casualty and other insurance policies
in the amounts and of the types set forth on Section 2.14 of the Disclosure
Schedule.
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.
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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 of 1933, as amended (the
"Securities Act"), or applicable state securities laws.
2.16 Finders' Fees. Except as set forth on Section 2.16 of the
Disclosure Schedule, 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.
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 medium) (collectively, "Intellectual
Property"), currently being 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 subsidiary 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 misappro-
priated in any material respect any Intellectual Property rights of any of the
Company and its subsidiaries.
(c) The Disclosure Schedule identifies each patent or
registration which 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 which 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 which 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
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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 which 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 Investors 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 which 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 thereun-
der) of federal, state, local, and foreign governments (and all agencies
thereof) which 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
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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 so to
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
which are required under, and has complied, in all material respects, with all
other limitations, restrictions, conditions, standards, prohibitions, require-
ments, 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 which does business with the Company or its
subsidiaries, or (b) in any property, asset or right which 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 manufac-
tured by Lancer Corporation (the "Equipment") has received approval by the
National Sanitation Foundation. To the knowledge of the Company, the ice
making equipment manufactured by Hoshizaki America, Inc. has received approval
of the National Sanitation Foundation. The list of equipment currently
installed set forth in Section 2.21 of the Disclosure Schedule is true and
correct as of the date hereof. The Equipment functions in accordance with its
intended purpose, and has no design defects.
2.22 Material Contracts. Set forth in Section 2.22 of the Disclosure
Schedule are the following:
(a) A list of all written and oral contracts, agreements,
subcontracts, purchase orders, commitments and arrangements involving payments
remaining to or from the Company or any of its subsidiaries in excess of
$10,000, and other agreements material to the Company's or its subsidiaries'
business to which the Company or any of its subsidiaries is a party or by which
it is bound under which full performance (including payment) has not been
rendered by any party thereto;
(b) A listing of all employment agreements, consulting agree-
ments, noncompetition agreements, all nondisclosure agreements which restrict
the Company from
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<PAGE> 10
disclosing information obtained from third parties, entered into or adopted by
the Company or any of its subsidiaries;
(c) A listing of all deeds of trusts, mortgages, security
agreements, pledge agreements and other agreements or arrangements whereby any
of the assets or properties of the Company or any of its subsidiaries are
subject to any lien, encumbrance, security interest or charge.
2.23 Disclosure. The Company has not knowingly withheld from the
Investors 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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each of the Investors severally, and not jointly, represents and
warrants to the Company, the following:
3.1 Authorization. This Agreement has been duly executed and deliv-
ered by such 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 condi-
tions 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' rights generally. If the
Investor is not a natural person, it 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 Securi-
ties for investment purposes only, for his 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 LAW AND THEY
MAY NOT BE OFFERED FOR SALE OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT THEREUNDER OR AN OPINION
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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
Investors 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 each Investor has bee permitted
to have access to all information which he 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 is not acting on the basis of, or relying
upon, any promotional materials, business plans, financial projections,
representations or warranties other than those express representations and
warranties contained in this Agreement, and 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 his entire
investment in the Securities.
3.6 Finders' 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 in
accordance with the provisions of Section 11.2 of this Agreement is first
obtained, from and after the Closing Date the Company will fully comply with
each of the following covenants 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 Securities and Exchange Commission and who are
one of the so-called "Bix Six" accounting
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firms, and have annual audits made by such independent public accountants in
the course of which such accountants shall make such examinations, in accor-
dance 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 Securities
and Exchange 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 each Investor:
(a) as soon as practicable, but in any event within 30 days
after the close 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 for 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 180 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) within 90 days after the end of each fiscal year, written
notice of the current Conversion Price for the Series A Preferred Stock,
including a brief statement indicating any adjustments reasonably anticipated;
(d) promptly after the submission thereof to the Company,
copies of all reports and recommendations submitted by independent public
accounts in connection with any annual or interim audit of the accounts of the
Company or any of its subsidiaries made by such accountants;
(e) promptly after transmission thereof, copies of all
reports, proxy statements, registration statements and notifications filed by
it with the Securities and Exchange Commission pursuant to any act administered
by the Securities and Exchange Commission or furnished to shareholders of the
Company or to any national securities exchange;
(f) 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
Investors may reasonably request;
(g) promptly following the issuance of any additional shares
of Common Stock or of any securities convertible into Common Stock, or any
options, warrants or other rights to
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<PAGE> 13
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
(h) 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, which 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 is 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 each Investor.
4.4 Inspection. The Company will permit the Investors, or any
designee 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.
4.5 Use of Proceeds. The Company will use the proceeds of the
investments made by the Investors to pay expenses incurred in connection with
this Agreement, lease or purchase the components of systems which make, bag and
merchandise packaged ice and/or dispense purified water (collectively,
"Systems"), install Systems in retail and industrial locations, purchase
inventories (including, without limitation, replacement parts and plastic
bags), market the Systems, maintain the Systems, make acquisitions of other
related businesses, and for general working capital purposes related to the
Company's business.
4.6 Other Restrictions. 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, 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.
(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.
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(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 the 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 share-
holder of the Company or any officer or director of any subsidiary), firm,
association or corporation, except advances to suppliers, customers and
employees made in the ordinary course of business; or
(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 or partnership, or
acquire a business (by asset purchase, stock purchase, merger or otherwise),
acquire any assets or make any investment in excess of $500,000 in the Same
Line of Business as is currently pursued by the Company. "Same Line of
Business" shall mean the distribution of packaged ice systems and bags for use
in those systems.
(g) organize any subsidiary, joint venture or partnership, or
acquire a business (by asset purchase, stock purchase, merger or otherwise) in
any activity which is not in the Same Line of Business as is currently pursued
by the Company.
(h) issue any securities (including without limitation
options, warrants, other rights to purchase capital stock or convertible
securities of the Company) at a price which would result in an adjustment of
the Conversion Price for the Series A Preferred Stock pursuant to the
Certificate of Designation; or
(i) mortgage, pledge, or create a security interest in all or
substantially all of the Company's assets as collateral.
ARTICLE 5
CONDITIONS TO INVESTORS' OBLIGATIONS
The obligation of each Investor to purchase and pay for the Securities
to be delivered to it hereunder at the Closing Date is subject to the fulfill-
ment, on or before the Closing Date, of each of the following conditions:
5.1 Compliance with Representations and Warranties. The representa-
tions 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 that date,
and the Company shall have performed and complied with all
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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
Investors 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 Opinion of Counsel. The Company shall have delivered to the
Investors the opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. dated the
Closing Date, substantially in the form of Exhibit 5.3.
5.4 Investment by Other Investors. On the Closing Date, concurrently
with the purchase by such Investor, each other Investor shall have purchased
and paid for the Securities being purchased by it hereunder.
5.5 Voting Agreement. The holders of at least 80% of the outstanding
Common Stock shall have entered into the Amended and Restated Voting Agreement
in the form of Exhibit 5.5 attached hereto.
5.6 Shareholders Agreement. The holders of at least 80% of the
outstanding Common Stock shall have entered into the Amended and Restated
Shareholders Agreement in the form of Exhibit 5.6 attached hereto.
5.7 Parallel Exit Agreement. James F. Stuart, Jack Stazo, the
Company and each Investor shall have entered into the Parallel Exit Agreement
in the form of Exhibit 5.7 attached hereto ("Parallel Exit Agreement").
ARTICLE 6
CONDITIONS TO COMPANY'S OBLIGATIONS
The obligation of the Company to issue and sell the Securities to the
Investors hereunder is subject to the fulfillment by each Investor, at or
before the Closing, of the following conditions:
6.1 Compliance with Representations and Warranties. The representa-
tions and warranties of each of the Investors contained in Article 3 hereof
shall be 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. Each of the Investors shall have entered into
the Amended and Restated Shareholders Agreement.
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ARTICLE 7
INDEMNIFICATION
The Company shall indemnify and hold harmless the Investors, and the
Investors, severally and not jointly and severally, 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 each Investor (referred to
hereinafter in this Article 8 as the "Offeree") a right of first refusal to
purchase all or any part of any issue of New Securities (as defined
hereinbelow) 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 Definition of 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;
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; and (iv) shares of the
Company's capital stock issued in connection with any existing option or right
listed on the Disclosure Schedule, stock split or stock dividend by the
Company.
8.3 Notice and Allocation Periods. If the Company or, when applica-
ble, its subsidiary, proposes to undertake a bona fide issuance of New
Securities, then it shall give each 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. Each Offeree shall be given at least twenty (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 each Offeree,
that portion of the number of shares of New
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<PAGE> 17
Securities proposed to be issued which 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 which 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
one hundred twenty (120) days thereafter to sell the New Securities respecting
which 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 Offerees. 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
$7.5 million.
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
REGISTRATION RIGHTS
9.1 Definitions. As used in this Article 9:
(a) The terms "register," "registered" and "registration"
refer to a registration of securities effected by preparing and filing a
registration statement in compliance with the Securities Act (and all related
registrations or qualifications required under state securities laws) and the
declaration or ordering of the effectiveness thereof.
(b) The term "Registerable Securities" means (i) shares of
Common Stock, and (ii) shares of Common Stock issued or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as a dividend or other distribution with respect to or in exchange for shares
of Common Stock; provided, that, "Registerable Securities" shall not include
any Common Stock which has previously been offered and sold pursuant to an
effective registration statement under the Securities Act.
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(c) The term "SEC" means the United States Securities and
Exchange Commission, or any successor thereto.
9.2 Piggyback Registration.
(a) Each time the Company determines to register any of its
equity securities for the account of a holder of Common Stock (other than a
registration solely to implement an employee benefit plan or a transaction to
which Rule 145 under the Securities Act is applicable), the Company shall (i)
promptly give to each Investor written notice thereof, and (ii) include in the
registration, and in any underwritten offering made in connection therewith,
the Registerable Securities of the Investors specified in any written requests
given to the Company by any such Investor desiring to participate in the
registration and offering within five (5) days after the date of the Company's
notice to the Investors.
(b) If the registration is in connection with an underwritten
offering, the right of any Investor to registration pursuant to this Section
shall be conditioned upon the Investor's participation in the underwriting and
the inclusion of the Investor's Registerable Securities in the underwriting.
All Investors proposing to distribute Registerable Securities through the
underwriting (together with the Company and any other shareholders distributing
their securities through the underwriting) shall enter into an underwriting
agreement in customary form with the underwriter selected by the Company.
Notwithstanding any other provision of this Section 8.2, if the underwriter
determines in its sole discretion that marketing factors require a limitation
of the number of shares to be underwritten, the underwriter may limit the
number of Registerable Securities to be included in the registration and
underwriting. If necessary, the Registerable Securities to be included in the
registration and underwriting will be allocated among all Investors who have
elected to participate therein and other shareholders who have been given the
right to participate therein, proportionately, based upon the number of shares
of Registerable Securities held by each participating shareholder. Subject to
the terms and conditions of the underwriting agreement, any participating
shareholder may elect at any time to withdraw from the registration and
underwriting by written notice to the Company, the underwriter and the other
participants.
9.3 Expenses of Registration. All expenses incurred in connection
with any registration pursuant to this Article, including without limitation,
all related registration or filing fees, printing expenses, escrow fees, fees
of counsel for the Company and one special counsel retained by the participat-
ing shareholders, and accountants' and other experts' fees, shall be borne by
the Company; provided, however, that the Company will not be required to pay
stock transfer taxes or underwriters' fees, discounts or commissions allocable
to the Registerable Securities.
9.4 Registration Procedures. The Company shall keep each Investor
participating in a registration pursuant to this Article fully informed of the
progress thereof. At its expense, the Company will (a) keep the registration
effective for so long as is reasonably necessary, but in no event for longer
than nine months, and (b) furnish a number of prospectuses (preliminary, final
and amended) and other documents incident thereto as an Investor from time to
time reasonably may request.
18
<PAGE> 19
9.5 Indemnification.
(a) With respect to any registration pursuant to this Article,
the Company shall, to the fullest extent permitted by applicable law, indemnify
and hold harmless each participating Investor, each such Investor's partners,
officers and directors, each participating underwriter, and each person, if
any, who controls, is controlled by or is under common control with any such
Investor or underwriter within the meaning of the Securities Act (hereinafter
collectively referred to as the "Investor-Underwriters"), as follows:
i. against any and all loss, liability, claim, damage
and expense whatsoever arising out of any alleged untrue statement of a
material fact contained in the registration statement (or any amendment
thereto) or in any preliminary prospectus or prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or arising out of any violation or alleged violation by
the Company of the Securities Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), any state securities law or any rule or regulation
promulgated under the Securities Act, the 1934 Act or any state securities law
(collectively, such untrue statements, omissions, or violations being referred
to herein as a "Violation"), unless the Violation or alleged Violation was made
in reliance upon and in conformity with written information furnished to the
Company by the Investor-Underwriter expressly for use in the registration
statement (or any amendment thereto) or preliminary prospectus or prospectus
(or any amendment or supplement thereto);
ii. against any and all loss, liability, claim, damage,
and expense whatsoever to the extent of the aggregate amount paid in settlement
of any litigation, commenced or threatened, or of any claim whatsoever based
upon any alleged Violation, if the settlement is effected with the written
consent of the Company which consent shall not be unreasonably withheld; and
iii. against any and all expense whatsoever reasonably
incurred in investigating, preparing or defending against or settling any
litigation, commenced or threatened, or any claim whatsoever based upon any
alleged Violation.
In no case will the Company be liable under the foregoing
indemnity with respect to any loss, liability, claim, damage or expense with
respect to any claim made against an Investor-Underwriter unless the Company is
notified in writing of the commencement and the nature of any action, including
any governmental action, within a reasonable time after the commencement
thereof, but failure to notify the Company will not relieve the Company from
any liability which it may have incurred otherwise than on account of the
foregoing indemnity. In case of any such notice, the Company may participate
at its expense in the defense, or if it so elects within a reasonable time
after receipt of such notice, assume the defense of the action, but if it
elects to assume the defense, the defense will be conducted by counsel chosen
by it and approved by the Investor-Underwriters and other defendants, if any,
in the action, which approval will not be withheld unreasonably. If the
Company elects to assume the defense of any action and retain counsel as herein
provided, the
19
<PAGE> 20
Investor-Underwriters and other defendants, if any, will bear the fees and
expenses of any additional counsel thereafter retained by them.
(b) Each participating Investor shall, upon the written
request of the Company, agree to indemnify and hold harmless the Company to the
same extent and subject to the same terms and conditions as are set forth above
for the Company, but only with respect to written information expressly
provided by the Investor for use in a registration statement or prospectus.
9.6 Reports Under the Securities Exchange Act of 1934. With a view
to making available to the Investors the benefits of any rule or regulation
under the Securities Act which may permit the sale of the Registerable
Securities to the public without registration, the Company will:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
as required pursuant to the 1934 Act following the effective date of the first
registration statement filed by the Company for an offering of its securities
to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the 1934 Act;
and
(c) furnish to each Investor forthwith upon its request (i) a
written statement by the Company as to its compliance with the public informa-
tion requirements of Rule 144 (at any time after the effective date of the
first registration statement filed by the Company), (ii) a copy of the most
recent annual or quarterly report of the Company, and (iii) any other reports,
documents and information as reasonably may be requested in availing any
Investor of any rule or regulation of the SEC permitting the sale of securities
without registration.
9.7 Future Rights. In the event that the Company grants to any
person piggy back registration rights which are more favorable than the piggy
back registration rights granted to the Investors hereunder, the provisions of
this Article shall automatically be amended to incorporate the more favorable
piggy back registration rights granted to such person.
20
<PAGE> 21
ARTICLE 10
1991 INVESTMENT AGREEMENT
This Stock Purchase shall be deemed to be the Third Closing pursuant to
the 1991 Investment Agreement dated June 7, 1991 ("Investment Agreement")
between the Company and certain Investors as amended by that certain First
Amendment to Investment Agreement dated December 31, 1991 and that certain
Stock Purchase Agreement dated December 23, 1993. After the Closing, the
Investment Agreement shall be terminated in all respects and neither the
Company nor any Investor under that Agreement shall claim any rights, obliga-
tions or liabilities pursuant thereto. However, this Article 10 shall not
terminate or otherwise affect any rights of Steven P. Rosenberg ("Rosenberg")
pursuant to the Option Agreement dated June 9, 1992 ("Option Agreement")
whereby Rosenberg has the option to acquire up to 80,358 shares of the
Company's common stock or any rights or obligations of the Company pursuant to
that Option Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 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 an Investor at the address set forth below his name on
Schedule A hereto, to the Company at the address set forth below, or to such
other address as may be designated hereafter by prior written notice from the
recipient to the sender:
If by mail, to: Packaged Ice, Inc.
P.O. Box 79233
Houston, Texas 77279-9233
If by hand delivery or
overnight mail, to: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
21
<PAGE> 22
If by FAX, to: Packaged Ice, Inc.
Fax: (713) 464-4681
11.2 Modification and Waiver.
(a) No amendment or modification to this Agreement shall be
made.
(b) Approval, wavier and consent by the Investors hereunder
shall require the affirmative vote of the holders of two-thirds of all
Securities held by said Investors.
(c) Notwithstanding anything to the contrary herein contained,
the fulfillment by the Company of a condition precedent to an Investor's
obligation to purchase Securities hereunder may be waived from time to time by
any such Investor by written consent to, or waiver of, any such condition.
11.3 Termination. This Agreement shall continue in effect from the
date of execution until the Company has completed an initial Public Offering.
11.4 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.
11.5 Gender. Wherever 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.
11.6 Headings. The headings contained in this Agreement, and in each
other agreement required to be entered into pursuant to the terms and condi-
tions of this Agreement, are for reference purposes only and shall not in any
way affect their meaning or interpretation.
11.7 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 instru-
ment.
11.8 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.
11.9 Survival. All covenants, agreements, representations and warran-
ties made herein, and in each other agreement required to be entered into
pursuant to the terms and conditions of this
22
<PAGE> 23
Agreement, or otherwise in writing in connection therewith, shall survive the
execution and delivery thereof and the consummation of the transactions
contemplated thereby.
11.10 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 letters of intent and summary term sheets heretofore executed or examined
by the parties.
11.11 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
TEXAS.
11.12 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 Houston, Texas, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof, and shall
not be appealable.
11.13 Expenses and Attorneys' Fees. The Company shall pay up to
$10,000 of all Steven P. Rosenberg's reasonable costs and expenses that are
incurred with respect to the negotiation, execution, closing, delivery and
performance of this Agreement, each other agreement required to be entered into
pursuant to the terms and conditions of this Agreement and the prior agreement
negotiated but not executed with Alfredo Brener and American Breco Corporation
Texas, Inc. by Steven P. Rosenberg. The Company's obligation to pay Steven P.
Rosenberg's expenses shall not be incurred by the Company until the Closing.
11.14 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.
11.15 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 provisions hereof and this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
11.16 Waiver. No waiver by any party of the performance of any provi-
sion, 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.
23
<PAGE> 24
11.17 No Third-Party Beneficiaries. Nothing contained in this
Agreement shall be construed to give any person other than the Company and
Investors, their successors and assigns, any legal or equitable right, remedy
or claim under or with respect to this Agreement.
SIGNATURE PAGE FOLLOWS
24
<PAGE> 25
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:
- -------- --------------------------------
James F. Stuart, President
THE INVESTORS:
- -------- -----------------------------------
(Signature)
- -------- -----------------------------------
(Printed Name)
- -------- -----------------------------------
(Title, if applicable)
25
<PAGE> 26
Attachments:
Schedule A - Investors
Schedule B - Disclosure Schedule
Exhibit 5.3 - Opinion of Counsel
Exhibit 5.5 - Amended and Restated Voting Agreement
Exhibit 5.6 - Amended and Restated Shareholders Agreement
Exhibit 5.7 - Parallel Exit Agreement
26
<PAGE> 27
SCHEDULE A
<TABLE>
<CAPTION>
SHARES OF
INVESTOR COMMON STOCK PRICE TOTAL
----------------------------------------------------------------------------
<S> <C> <C> <C>
Erica Jesselson, Lucy Lang, 50,000 $5.00 $250,000
Claire Strauss, Michael G.
Jesselson, Benjamin J. Jesselson
Trustees UID 12/18/80 FBO
Michael G. Jesselson
1301 Avenue of the Americas,
Suite 4101
New York, New York 10019
Erica Jesselson, Lucy Lang, 50,000 $5.00 $250,000
Claire Strauss, Michael G.
Jesselson, Benjamin J. Jesselson
UID 12/18/80 FBO Grandchildren
1301 Avenue of the Americas,
Suite 4101
New York, New York 10019
Steven P. Rosenberg 100,000 $5.00 $500,000
12124 Madeleine Circle
Dallas, TX 75230
J. Brad Fillmore 10,000 $5.00 $50,000
Alliance Capital
3050 Post Oak Blvd.
Suite 500
Houston, TX 77056
Lancer Corporation 45,000 $5.00 $225,000
235 W. Turbo
San Antonio, TX 78216
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
SHARES OF
INVESTOR COMMON STOCK PRICE TOTAL
----------------------------------------------------------------------------
<S> <C> <C> <C>
Southwest Texas Equipment 15,000 $5.00 $75,000
Distributors, Inc.
Attention: Jack Lewis, III,
President
1120 E. Durango
San Antonio, TX 78210
Jeff Hinson 5,000 $5.00 $25,000
Alliance Capital
3050 Post Oak Blvd.
Suite 500
Houston, TX 77056
Alexander Cunningham Lasater 5,000 $5.00 $25,000
Grupo Comercial Santa Fe
Diego de Almagro #105 Pte.
Col. Mirasierra
San Pedro Garza Carcia, N.L.
C.P. 66240
</TABLE>
27
<PAGE> 1
EXHIBIT 10.15
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
AND
CONSENT AND WAIVER OF RIGHT
TO PURCHASE ADDITIONAL SECURITIES
This Amendment, Consent and Waiver ("Amendment, Consent and Waiver") is
dated as of January 10, 1997 by and among Packaged Ice, Inc., a Texas
corporation (the "Corporation"), and the persons whose signatures are set forth
on the signature page hereof (the "Consenting Shareholders").
W I T N E S S E T H
WHEREAS, the persons listed on Exhibit A attached hereto (the
"Investors") purchased shares of the Corporation's $.01 par value common stock,
(the "Common Stock") pursuant to a Stock Purchase Agreement dated as of
September 20, 1995 (the "Stock Purchase Agreement"), which Stock Purchase
Agreement is incorporated herein by reference; and
WHEREAS, defined terms used herein shall have the meaning given to such
terms in the Stock Purchase Agreement unless otherwise defined herein; and
WHEREAS, Article 8 of the Stock Purchase Agreement grants the Investors
the right of first refusal to purchase additional securities; and
WHEREAS, on December 11, 1996 the Corporation issued promissory notes,
bearing interest at a rate of 10% compounded monthly, convertible into Series B
Convertible Preferred Stock of the Corporation to Norwest Equity Partners V, a
Minnesota Limited Partnership, The Food Fund II Limited Partnership and Steven
P. Rosenberg in the aggregate amount of $750,000 (the "Notes"); and
WHEREAS, the Corporation is desirous of issuing on or before May 31,
1997 at a price of not less than $6.07 per share an aggregate of up to 200,000
shares of Series B Convertible Preferred Stock with the powers, rights and
preferences as are set forth in the Certificate of Resolution attached hereto
as Exhibit B and incorporated herein by reference ("Series B Preferred Stock")
to Norwest Equity Partners V, a Minnesota Limited Partnership, The Food Fund II
Limited Partnership, and Steven P. Rosenberg, in exchange for cancellation of
the Notes and forgiveness of accrued interest thereon and to other purchasers
for cash (such issuance of the Notes, the shares of Series B Preferred Stock,
and the subsequent issuance of shares of the Corporation's $.01 par value
common stock upon conversion of the Series B Preferred Stock, shall hereinafter
be referred to as the "Issuances"); and
WHEREAS, the Consenting Shareholders are desirous of consenting to each
Issuance and waiving their rights to purchase their Pro Rata Share of each
Issuance.
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto and of the mutual benefits to be gained by the performance thereof, the
parties hereto hereby agree as
<PAGE> 2
follows:
1. Each of the undersigned Consenting Shareholders hereby waives his
or her right to purchase his or her Pro Rata Share of each Issuance.
2. Other than with respect to the Issuances, the parties agree that
this Amendment, Consent and Waiver shall not be construed to be a consent
and/or waiver of Article 8 of the Stock Purchase Agreement for any sale and
purchase of any other New Securities.
3. The Stock Purchase Agreement is hereby amended by amending and
restating Section 8.2 thereof as follows:
"8.2 Definition of 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; 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 option or right listed on the Disclosure
Schedule, stock split or stock dividend by the Company."
4. The Stock Purchase Agreement is hereby amended by amending and
restating Section 11.2 thereof as follows:
"11.2 Modification and Waiver.
(a) No amendment or modification to this Agreement
shall be made without the approval of the Company and the
affirmative vote or written consent of the holders of two-thirds
of the Securities issued pursuant to this Agreement.
(b) Approval, waiver and consent by the Investors
hereunder shall require the affirmative vote or written consent
of the holders of two-thirds of the Securities issued pursuant to
this Agreement.
(c) Notwithstanding anything to the contrary herein
contained, the fulfillment by the Company of a condition
precedent to an Investor's obligation to purchase Securities
hereunder my be waived from time to time by any such Investor by
written consent to, or waiver of, any such condition."
2
<PAGE> 3
5. Except as expressly amended hereby, the Stock Purchase
Agreement is hereby ratified and confirmed in every respect and shall
remain in full force and effect in accordance with its terms.
6. The amendment set forth herein shall be effective when
executed by the Company and all the Investors holding the Securities
issued under the Stock Purchase Agreement.
7. This Amendment, Consent and Waiver shall be construed and
enforced in accordance with the laws of the State of Texas.
8. This Amendment, Consent and Waiver shall be effective as
to each Shareholder who executes a counterpart of this Amendment,
Consent and Waiver notwithstanding the failure of any other shareholder
to execute this Amendment, Consent and Waiver.
9. This Amendment, Consent and Waiver may be executed in one
or more counterparts, all of which shall together constitute a single
agreement. A facsimile of this Amendment, Consent and Waiver shall be
deemed to be an original executed counterpart.
Executed effective the day herein first written above.
PACKAGED ICE, INC.
By: ________________________________
JAMES F. STUART, PRESIDENT
SHAREHOLDERS:
____________________________________
(Signature)
____________________________________
(Printed Name)
____________________________________
(Title, if applicable)
3
<PAGE> 4
EXHIBIT A
<TABLE>
<CAPTION>
====================================================================================
INVESTORS' NAMES AND ADDRESSES SHARES OF COMMON STOCK
ISSUED UNDER STOCK
PURCHASE AGREEMENT
- ------------------------------------------------------------------------------------
<S> <C>
Erica Jesselson, Lucy Lang, Claire Strauss, 50,000
Michael G. Jesselson, Benjamin J. Jesselson
Trustees UID 12/18/80 FBO Michael G. Jesselson
1301 Avenue of the Americas
Suite 4101
New York, New York 10019
- ------------------------------------------------------------------------------------
Erica Jesselson, Lucy Lang, Claire Strauss, 50,000
Michael G. Jesselson, Benjamin J. Jesselson
Trustees
UID 12/18/80 FBO Grandchildren
1301 Avenue of the Americas
Suite 4101
New York, New York 10019
- ------------------------------------------------------------------------------------
Steven P. Rosenberg 100,000
12124 Madeleine Circle
Dallas, TX 75230
- ------------------------------------------------------------------------------------
J. Brad Fillmore 10,000
ABS Plaza
16855 Northchase Drive
Houston, TX 77060-6008
- ------------------------------------------------------------------------------------
Lancer Corporation 45,000
235 W. Turbo
San Antonio, TX 78216
- ------------------------------------------------------------------------------------
Southwest Texas Equipment 15,000
Distributors, Inc.
Attention: Jack Lewis, III, President
1120 E. Durango
San Antonio, TX 78210
- ------------------------------------------------------------------------------------
Jeff Hinson 5,000
Tichenor Media Systems
100 Crescent Court, Suite 1777
Dallas, Texas 75201
- ------------------------------------------------------------------------------------
Alexander Cunningham Lasater 5,000
Grupo Comercial Santa Fe
Diego de Almagro #105 Pte.
Col. Mirasierra
San Pedro Garza Garcia, N.L. C.P. 66240
====================================================================================
</TABLE>
4
<PAGE> 1
EXHIBIT 10.16
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
AND
CONSENT AND WAIVER
(ROSENBERG, JESSELSON, ET AL)
This Amendment No. 2 to Stock Purchase Agreement and Consent and
Waiver ("Amendment, Consent and Waiver") is dated as of March 14, 1997 by and
among Packaged Ice, Inc., a Texas corporation (the "Company"), and the persons
whose signatures are set forth on the signature page hereof (the "Consenting
Shareholders").
W I T N E S S E T H
WHEREAS, the persons listed on Exhibit A attached hereto (the
"Investors") purchased shares of the Company's $.01 par value common stock,
(the "Common Stock") pursuant to a Stock Purchase Agreement dated as of
September 20, 1995 (the "Stock Purchase Agreement"), which Stock Purchase
Agreement is incorporated herein by reference; and
WHEREAS, defined terms used herein shall have the meanings given to
such terms in the Stock Purchase Agreement unless otherwise defined herein; and
WHEREAS, Article 4 of the Stock Purchase Agreement contains certain
continuing covenants of the Company; and
WHEREAS, the Company is desirous of obtaining a waiver and estoppel
from the Consenting Shareholders that all of the covenants have been met to
their satisfaction; and
WHEREAS, Article 8 of the Stock Purchase Agreement grants the
Investors the right of first refusal to purchase additional securities; and
WHEREAS, the Company is desirous of issuing, on or before May 31,
1997, up to 1,000,000 shares of Common Stock in connection with the
acquisitions of Mission Party Ice, Inc., South Texas Packaged Ice, Inc., and
Southwestern Ice, Inc. at an agreed price of $10.00 per share, to A.J. Lewis,
III, Liza B. Lewis, Robert G. Miller, Dale M. Johnson and Alan Bernstein, et al
(such issuances of Common Stock shall hereinafter collectively be referred to
as the "Acquisitions Issuance"); and
WHEREAS, the Company is desirous of issuing a minimum of $50 million
of investment units (the "Units") to institutional investors pursuant to a
private offering managed by Jefferies & Company, Inc., with Units to consist of
senior notes due 2004 ("Notes") and warrants (the "Unit Warrants") granting the
institutional investors the right to purchase shares of Common Stock at an
exercise price of $.01 per share (such issuance of Unit Warrants shall
hereinafter be referred to as the "Units Issuance").
WHEREAS, the Consenting Shareholders are desirous of consenting to the
Acquisitions
<PAGE> 2
Issuance and the Units Issuance and waiving their rights to purchase their Pro
Rata Share of each of the Acquisitions Issuance and the Units Issuance and
amending the definition of "New Securities."
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto and of the mutual benefits to be gained by the performance thereof, the
parties hereto hereby agree as follows:
1. Each of the undersigned Consenting Shareholders hereby (i)
confirms that all covenants set forth in Article 4 of the Stock Purchase
Agreement have been met to their satisfaction, and (ii) hereby waives any and
all noncompliances by the Company with respect to said covenants.
2. Each of the undersigned Consenting Shareholders hereby
consents to the issuance of the Notes, the Acquisitions Issuance and the Units
Issuance and hereby waives his or her right to purchase his or her Pro Rata
Share of each of the Acquisitions Issuance and the Units Issuance and any and
all Common Stock issued as a result of the exercise of the Unit Warrants.
3. Other than with respect to the Acquisitions Issuance and the
Units Issuance, the parties agree that this Amendment, Consent and Waiver shall
not be construed to be a consent and/or waiver of Article 8 of the Stock
Purchase Agreement for any sale and purchase of any other New Securities.
4. The Stock Purchase Agreement is hereby amended by amending and
restating Section 8.2 thereof as follows:
8.2 Definition of 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; (iv)
shares of the Company's capital stock issued in connection with any
existing option or right listed on the Disclosure Schedule, stock
split or stock dividend by the Company; (v) Common Stock issued by the
Company upon the exercise of the Unit Warrants (as defined in
Amendment No. 2 to Stock Purchase Agreement and Consent and Waiver of
Right to Purchase Additional Securities).
5. Except as expressly amended hereby, the Stock Purchase
Agreement is hereby ratified and confirmed in every respect and shall remain in
full force and effect in accordance with its terms.
2
<PAGE> 3
6. The amendment set forth herein shall be effective when
executed by the Company and Investors holding two-thirds of the Securities
issued under the Stock Purchase Agreement.
7. This Amendment, Consent and Waiver shall be construed and
enforced in accordance with the laws of the State of Texas.
8. This Amendment, Consent and Waiver may be executed in one or
more counterparts, all of which shall together constitute a single agreement.
A facsimile of an executed counterpart signature page shall be deemed to be an
original executed counterpart signature page.
Executed effective March 14, 1997:
PACKAGED ICE, INC.
By:
----------------------------------------
James F. Stuart, Chief Executive Officer
SIGNATURE PAGE FOLLOWS
3
<PAGE> 4
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
AND
CONSENT AND WAIVER
(ROSENBERG, JESSELSON, ET AL)
CONSENTING SHAREHOLDERS COUNTERPART SIGNATURE PAGE
Executed effective March 14, 1997:
-------------------------------------
Name of Investor if Entity/Signature
if Individual
By:
----------------------------------
Title:
-------------------------------
-------------------------------------
Please type or print name
4
<PAGE> 5
EXHIBIT A
<TABLE>
<CAPTION>
=============================================================================================
SHARES OF COMMON STOCK ISSUED
INVESTORS' NAMES AND ADDRESSES UNDER STOCK PURCHASE AGREEMENT
- ---------------------------------------------------------------------------------------------
<S> <C>
Erica Jesselson, Lucy Lang, Claire Strauss, 50,000
Michael G. Jesselson, Benjamin J. Jesselson
Trustees UID 12/18/80 FBO Michael G. Jesselson
1301 Avenue of the Americas
Suite 4101
New York, New York 10019
- ---------------------------------------------------------------------------------------------
Erica Jesselson, Lucy Lang, Claire Strauss, 50,000
Michael G. Jesselson, Benjamin J. Jesselson
Trustees
UID 12/18/80 FBO Grandchildren
1301 Avenue of the Americas
Suite 4101
New York, New York 10019
- ---------------------------------------------------------------------------------------------
Steven P. Rosenberg 100,000
12124 Madeleine Circle
Dallas, TX 75230
- ---------------------------------------------------------------------------------------------
J. Brad Fillmore 10,000
ABS Plaza
16855 Northchase Drive
Houston, TX 77060-6008
- ---------------------------------------------------------------------------------------------
Lancer Corporation 45,000
235 W. Turbo
San Antonio, TX 78216
- ---------------------------------------------------------------------------------------------
Southwest Texas Equipment 15,000
Distributors, Inc.
Attention: Jack Lewis, III, President
1120 E. Durango
San Antonio, TX 78210
- ---------------------------------------------------------------------------------------------
Jeff Hinson 5,000
Tichenor Media Systems
100 Crescent Court, Suite 1777
Dallas, Texas 75201
- ---------------------------------------------------------------------------------------------
Alexander Cunningham Lasater 5,000
Grupo Comercial Santa Fe
Diego de Almagro #105 Pte.
Col. Mirasierra
San Pedro Garza Garcia, N.L. C.P. 66240
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.17
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made and entered into as of the 20th
day of September, 1995, among PACKAGED ICE, INC., a Texas corporation (the
"Company"), and the Investors named in Schedule A attached hereto and
incorporated herein by reference (collectively "Investors" and individually
"Investor").
W I T N E S S E T H:
WHEREAS, to obtain additional equity financing, the Company desires to
issue and sell shares of its $.01 par value Common Stock ("Common Stock") and
its $.01 par value Series A Convertible Preferred Stock (the "Series A
Preferred Stock") to the Investors, and each Investor desires to purchase such
Common Stock and Series A Preferred Stock, at the prices, 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 Authorization of Securities. The Company will authorize the
issuance and sale of (i) 450,000 shares of its Series A Preferred Stock, which
shall have the powers, designations, preferences, rights, qualifications,
limitations and restrictions as set forth in the form of Certificate of
Designation of Resolutions Establishing Shares of Series A Preferred Stock
("Certificate of Designation") attached hereto as Exhibit 1.1 and incorporated
herein, and (ii) 420,000 shares of Common Stock. The Series A Preferred Stock
and the Common Stock are sometimes collectively hereinafter referred to as the
"Securities."
1.2 Issuance and Sale of Securities. At the Closing, 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 each
Investor, and each Investor severally agrees to purchase from the Company, the
number of shares of Series A Preferred Stock and Common Stock, at the
respective purchase prices, as set forth below the name of each Investor on
Schedule A hereto.
1.3 Delivery and Payment. At the Closing, the Company will execute
and deliver to each Investor certificates evidencing the number of shares of
Series A Preferred Stock and Common Stock purchased hereunder, as set forth
opposite the name of each Investor on Schedule A hereto, against payment, in
immediately available funds, by each Investor to the Company of the purchase
price for the shares of Series A Preferred Stock and Common Stock as set forth
below the name of each Investor on Schedule A hereto.
<PAGE> 2
1.4 Closing. The consummation of the issuance, sale and purchase of
the Common Stock to be purchased pursuant to this Agreement shall be effected
(the "Closing") at the offices of Vinson & Elkins, 2300 First City Tower, 1001
Fannin Street, Houston, Texas 77002-6760 commencing at 10:00 a.m., on
September 20, 1995 (the "Closing Date") or at such other time or place as the
Company and the Investors shall mutually agree.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors 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 of the Company and each of its subsidiaries delivered
to the Investors prior to the execution of this Agreement are true and complete
copies of the duly and legally adopted Articles of Incorporation and Bylaws 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 2,626,371 shares are issued and
outstanding and 5,000,000 shares of preferred stock, par value $.01 per share,
none of which are outstanding. 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 has
authorized the issuance of said 450,000 shares of Series A Preferred Stock.
Except as set forth on Section 2.2 of the Disclosure Schedule, attached hereto
as Schedule B 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 subsidiary, 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 stated in this Agreement
in Section 5.11. Except as set forth on Section 2.2 of the Disclosure
Schedule, no shareholders of the Company have any right to require the regis-
tration 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 and from the
registration and qualification requirements of all applicable state securities
laws.
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<PAGE> 3
2.3 Duly Issued. All of the issued and outstanding shares of Common
Stock have been duly authorized, are validly issued, fully paid and non-
assessable. Upon issuance and delivery to each of the Investors of the number
of shares of the Series A Preferred Stock and Common Stock set forth opposite
each Investor's name on Schedule A against payment of the purchase price
therefor pursuant to this Agreement, such shares will be validly issued, fully
paid and non-assessable. The shares of Series A Preferred Stock, upon issuance
pursuant to this Agreement, will have the rights and preferences set forth in
the Certificate of Designation. The shares of Common Stock issuable upon
conversion of the Series A Preferred Stock have been reserved for issuance
based upon the initial Conversion Price (as defined in the Certificate of
Designation), and when issued upon conversion, will be duly authorized, validly
issued and outstanding, fully paid and nonassessable.
2.4 Authorization. This Agreement has, 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) Attached hereto as Section 2.6 of the Disclosure Schedule
is the Company's unaudited, consolidated balance sheet as of December 31, 1994
(the "1994 Balance Sheet"), and the related unaudited, consolidated statements
of income and cash flow for the fiscal year then ended, together with the draft
report thereon of Deloitte & Touche, certified public accountants, and the
unaudited, consolidated balance sheet of the Company as at July 31, 1995 (the
"July 31 Balance Sheet"), and the related, unaudited consolidated statements of
income and cash flow for the seven month period ended on July 31, 1995 (such
balance sheets and related statements are collectively referred to herein as
the "Financial Statements"). Except as set forth in Section 2.6 of the
Disclosure Schedule, 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 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 Disclo-
sure Schedule, since the date of the July 31 Balance Sheet, no event or
condition has occurred, and no event or condition is to
3
<PAGE> 4
the knowledge of the Company's 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. Except as set forth in Section 2.6 of the Disclosure Schedule, the
Company has no material liabilities or financial obligations not disclosed in
the July 31 Balance Sheet. Except as disclosed in the Financial Statements,
the Company is not an indemnitor or guarantor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to
maintain its books and records in accordance with generally accepted accounting
principles consistently applied. Since the July 31 Balance Sheet, neither the
Company nor its subsidiaries has (i) incurred any debts, obligations or
liabilities, absolute, accrued or contingent and whether due or to become due,
except current liabilities incurred in the ordinary course of business, which
(individually or in the aggregate) will not materially and adversely affect the
business, properties or prospects of the Company or its subsidiaries; (ii) paid
any obligation or liability other than, or discharged or satisfied any liens or
encumbrances other than those securing current liabilities, in each case in the
ordinary course of business; (iii) declared or made any payment or distribution
to its shareholders as such or purchased or redeemed any of its shares of
capital stock or other securities, or obligated itself to do so; (iv) sold,
transferred or leased any of its assets except in the ordinary course of
business; (v) issued or sold any shares of capital stock or other securities or
granted any options, warrants or other purchase rights with respect thereto
other than as contemplated by this Agreement. There has been no material
adverse change in the condition, financial or otherwise, or operations, results
of operations or business of the Company or its subsidiaries since the July 31
Balance Sheet.
(c) The thirteen-month projected cash flow information from
October 1995 to October 1996 was prepared by the Company. To the Company's
best knowledge the projection is a reasonable estimate of future cash flow of
the Company for a thirteen-month period. THIS PROJECTION, WHICH THE COMPANY
BELIEVES TO BE REASONABLE, MERELY REPRESENTS A PREDICTION OF FUTURE EVENTS
BASED UPON ASSUMPTIONS WHICH MAY OR MAY NOT OCCUR. AMONG OTHER THINGS, ITS
ACCURACY DEPENDS UPON THE OCCURRENCE OF A COMPLEX SERIES OF FUTURE EVENTS OR
TRANSACTIONS, SOME OF WHICH ARE NOT WITHIN THE CONTROL OF THE COMPANY'S
MANAGEMENT. IN ADDITION, ACTUAL OPERATING RESULTS WILL LIKELY VARY FROM THOSE
WHICH HAVE BEEN PROJECTED. THE PROJECTION SHOULD NOT BE RELIED ON TO INDICATE
ACTUAL RESULTS WHICH MAY BE OBTAINED.
2.7 Tax Returns. Each of the Company and its subsidiaries has timely
filed all Tax Returns required by law and has paid all Taxes required to be
paid, together with any penalties and interest. These 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 subsidiaries' returns. There is
no tax audit of any 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 341(f) of the Code, nor has it made
other elections that would have a material adverse effect on the business,
properties,
4
<PAGE> 5
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 of all mortgages, liens, claims and encumbrances.
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
Internal Revenue Code as amended ("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 which 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 (l) 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.
5
<PAGE> 6
(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 ("PBGC") (other than
for the payment of current premiums which 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 which 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 which
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 which 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(1) 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. Except as set forth on Section 2.10 of the Disclosure
Schedule, 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,
6
<PAGE> 7
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.
2.11 Litigation. Except as set forth on Section 2.11 of the
Disclosure Schedule, 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.
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 in force, and
have paid all premiums due on, liability, casualty and other insurance policies
in the amounts and of the types set forth on Section 2.14 of the Disclosure
Schedule. The Company believes, after advice from its insurance broker, that
such insurance is in amounts acceptable for the nature and extent of the
Company's and its subsidiaries' business and resources.
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 of 1933, as amended (the "Securities Act"), or applicable
state securities laws.
7
<PAGE> 8
2.16 Finders' Fees. Except as set forth on Section 2.16 of the
Disclosure Schedule, 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.
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 medium) (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 subsidiary 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 which 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 which 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 which 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;
8
<PAGE> 9
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 which 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 Investors 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 which 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) which 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
9
<PAGE> 10
any of them alleging any failure so to 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 which 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 which does business with the Company or its
subsidiaries, or (b) in any property, asset or right which 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 (the "Equipment") has received approval by
the National Sanitation Foundation. To the knowledge of the Company, the ice
making equipment manufactured by Hoshizaki America, Inc. has received approval
of the National Sanitation Foundation. The lists of equipment currently
installed, and of removals made from November, 1993 through the date hereof,
set forth in Section 2.21 of the Disclosure Schedule are true and correct as of
the date hereof. The Equipment functions in accordance with its intended
purpose, and has no design or manufacturing defects not covered by warranty,
and no material number of the Equipment currently has any manufacturing
defects.
2.22 Material Contracts. Set forth in Section 2.22 of the Disclosure
Schedule are the following:
(a) A list of all written and oral contracts, agreements,
subcontracts, purchase orders, commitments and arrangements involving payments
remaining to or from the Company or any of its subsidiaries in excess of
$10,000, and other agreements material to the Company's or its subsidiaries'
business to which the Company or any of its subsidiaries is a party or by which
it is bound under which full performance (including payment) has not been
rendered by any party thereto;
(b) A listing of all employment agreements, consulting
agreements, noncompetition agreements, all nondisclosure agreements which
restrict the Company from disclosing information obtained from third parties,
entered into or adopted by the Company or any of its subsidiaries;
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(c) A listing of all deeds of trusts, mortgages, security
agreements, pledge agreements and other agreements or arrangements whereby any
of the assets or properties of the Company or any of its subsidiaries are
subject to any lien, encumbrance, security interest or charge.
Prior to the Closing Date, the Company shall provide legal counsel for
the Investors with a true and complete copy of each document referred to above.
The Company and its subsidiaries have in all material respects substantially
performed all obligations required to be performed by them to date and are not
in default in any material respect under any of the contracts, agreements,
leases, documents, commitments or other arrangements to which any of them is a
party or by which any of them is otherwise bound. 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 which, with notice or lapse of time or both, would
constitute an event of default thereunder. 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.
2.23 Small Business Concern. The Company is a small business concern
within the meaning of such term as used in the Small Business Investment Act of
1958, as amended and the rules and regulations thereunder as now in effect.
The Company has heretofore furnished to each of the Investors which is a
licensed small business investment company or will furnish to such Investor on
or prior to the Closing Date a completed Size Status Declaration on SBA Form
480 and represents and warrants that it has been accurately completed and that
all objective facts are correctly stated.
2.24 Disclosure. The Company has not knowingly withheld from the
Investors 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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each of the Investors severally, and not jointly, represents and
warrants to the Company, the following:
3.1 Authorization. This Agreement has been duly executed and
delivered by such 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
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enforcement may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally. If the Investor is not a natural
person, it 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 his 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 LAW 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 each Investor been permitted to
have access to all information which he 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 is not acting on the basis of, or relying
upon, any promotional materials, business plans, financial projections,
representations or warranties other than those express representations and
warranties contained in this Agreement, and 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 his entire
investment in the Securities.
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3.6 Finders' 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
Investors in accordance with the provisions of Section 9.2 of this Agreement is
first obtained, from and after the Closing Date the Company will fully comply
with each of the following covenants 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 Securities and Exchange 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 Securities and Exchange 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 each Investor:
(a) as soon as practicable, but in any event within 30 days
after the close 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 for 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 165 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;
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(c) within 90 days after the end of each fiscal year, written
notice of the current Conversion Price for the Series A Preferred Stock,
including a brief statement indicating any adjustments reasonably anticipated;
(d) 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;
(e) promptly after transmission thereof, copies of all
reports, proxy statements, registration statements and notifications filed by
it with the Securities and Exchange Commission pursuant to any act administered
by the Securities and Exchange Commission or furnished to shareholders of the
Company or to any national securities exchange;
(f) 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
Investors may reasonably request;
(g) promptly following the issuance of any additional shares
of Common Stock or of 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
(h) 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, which 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 is 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 each Investor.
4.4 Inspection. The Company will permit the Investors, or any
designee 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,
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finances and accounts thereof with the appropriate officers, all at reasonable
times upon reasonable notice, and as often as reasonably may be requested.
4.5 Directors' and Shareholders' Meetings. The Investors shall have
the right to elect two directors of the Company as set forth in the Voting
Agreement (as defined in Section 5.17), one to be selected by The Food Fund II
Limited Partnership and the other by Norwest Equity Partners V, a Minnesota
Limited Partnership.
The Company shall reimburse the Investors for the reasonable out-of-
pocket expenses incurred by them or the directors elected by them in connection
with the attending of meetings by their director designees 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 Investors.
In addition, the Company shall notify the Investors 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.
The Company agrees, as a general practice, to hold a meeting of its
Board of Directors at least once every two months, and during each year to hold
its annual meeting of shareholders within 30 days of delivery of the audit.
4.6 Use of Proceeds. The Company will use the proceeds of the
investments made by the Investors to pay expenses incurred in connection with
this Agreement, repurchase Common Stock held by P-I Partners, L.P., lease or
purchase the components of systems which make, bag and merchandise packaged ice
and/or dispense purified water (collectively, "Systems"), install Systems in
retail and industrial locations, purchase inventories (including, without
limitation, replacement parts and plastic bags), market the Systems, maintain
the Systems, make acquisitions of other related businesses, pay the liabilities
on Schedule 4.6, and for general working capital purposes related to the
Company's business. The liabilities on Schedule 4.6 shall be paid within 30
days of closing.
4.7 Other Restrictions. 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, 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).
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(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; or
(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 which 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 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
Section 9.02 of the Company's loan agreement with Texas Commerce Bank dated
September 20, 1995, as such agreement is in effect on the date hereof.
(g) issue any securities (including without limitation
options, warrants, other rights to purchase capital stock or convertible
securities of the Company) at a price which would result in an adjustment of
the Conversion Price for the Series A Preferred Stock pursuant to the
Certificate of Designation; or
(h) mortgage, pledge, or create a security interest in all or
substantially all of the Company's assets as collateral.
(i) except that the Company may pledge substantially all of
its assets as security for its loan from Texas Commerce Bank
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ARTICLE 5
CONDITIONS TO INVESTORS' OBLIGATIONS
The obligation of each 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
that 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
Investors 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 Amended and Restated Shareholders Agreement. Each of the
Investors shall have entered into a counterpart of the Amended and Restated
Shareholders Agreement in the form attached hereto as Exhibit 5.3 ("Amended and
Restated Shareholders Agreement"), and the holders of at least eighty percent
(80%) of the outstanding Common Stock shall have executed a counterpart of the
Amended and Restated Shareholders Agreement.
5.4 Parallel Exit Agreement. James F. Stuart, Jack Stazo, the
Company and each Investor shall have entered into the Parallel Exit Agreement
in the form of Exhibit 5.4 attached hereto ("Parallel Exit Agreement").
5.5 Bank Facility Commitment. The Company shall have obtained a bank
credit facility in an amount not less than $4.5 million on terms deemed
reasonable to the Investors.
5.6 Stock Certificates. The Company shall have delivered to each of
the Investors stock certificates evidencing the number of shares of Common
Stock and Series A Preferred Stock purchased hereunder.
5.7 Registration Rights Agreement. The Company and the Investors
shall have duly authorized and executed a Registration Rights Agreement in the
form set forth as Exhibit 5.7 hereof.
5.8 [Intentionally omitted.]
5.9 Opinion of Counsel. The Company shall have delivered to the
Investors the opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. dated the
Closing Date, substantially in the form of Exhibit 5.9.
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5.10 P-I Partners. The Company shall have purchased the 420,000
shares owned by P-I Partners, L.P. for no more than $2,500,000 and settled all
disputes with P-I Partners, L.P.
5.11 Insider Stock. Certain founders of the Company shall have sold
to the Company 80,000 shares of the Company's Common Stock for the par value
thereof, and the Company shall have resold such shares for at least $400,000.
5.12 Investment by Other Investors. On the Closing Date, concurrently
with the purchase by such Investor, each other Investor shall have purchased
and paid for the Securities being purchased by it hereunder.
5.13 Rosenberg's Rights and Options. All stock options and other
rights to purchase securities of the Company held by Steven P. Rosenberg or
persons making up the Rosenberg Group (as defined in the Shareholders
Agreement), other than as set forth in Section 5.14 of this Agreement, shall
have been terminated; provided, however, that certain Stock Option Agreement
dated June 9, 1992 among the Company and Steven P. Rosenberg for 80,358 shares
of Common Stock shall remain in full force and effect.
5.14 Rosenberg Stock Purchase. Steven P. Rosenberg, and Michael
Jesselson shall have purchased at least 190,000 shares of Common Stock at a
price of no less than $5.00 per share.
5.15 Breco Release. The Investors shall have received written
evidence that American Breco Corporation Texas, Inc. and/or Alfredo Brener have
released or waived all of their rights to pursue investment in the Company.
5.16 Execution of SBA Forms. Each of the Investors that is a small
business investment company shall have received from the Company the Size
Status Declaration on SBA Form 480 and the Company's duly executed
certification, dated the Closing Date, on SBA Form 652-D that the Company will
not illegally discriminate in its operations, employment practices or
facilities.
5.17 Amended and Restated Voting Agreement. The holders of at least
80% of the outstanding Common Stock shall have entered into the Amended and
Restated Voting Agreement in the form of Exhibit 5.17 attached hereto (the
"Voting Agreement").
ARTICLE 6
CONDITIONS TO COMPANY'S OBLIGATIONS
The obligation of the Company to issue and sell the Securities to the
Investors hereunder is subject to the fulfillment by each Investor, at or
before the Closing, of the following conditions:
6.1 Compliance with Representations and Warranties. The
representations and warranties of each of the Investors contained in Article 3
hereof shall be true on and as of the Closing Date with the same effect as
though made on that date (except to the extent that any
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representations and warranties of the Company specifically apply to conditions
existing at a particular date).
6.2 Other Agreements. Each of the Investors shall have entered into
the Amended and Restated Shareholders Agreement, the Amended and Restated
Voting Agreement, the Parallel Exit Agreement, and the Registration Rights
Agreement.
ARTICLE 7
INDEMNIFICATION
The Company shall indemnify and hold harmless the Investors, and the
Investors, severally and not jointly and severally, 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 each Investor (referred to
hereinafter in this Article 8 as the "Offeree") a right of first refusal to
purchase all or any part of any issue of New Securities (as defined
hereinbelow) 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 Definition of 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;
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; and (iv) shares of the
Company's capital stock issued in connection with any option or right listed on
the Disclosure Schedule, stock split or stock dividend by the Company.
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8.3 Notice and Allocation Periods. If the Company or, when
applicable, its subsidiary, proposes to undertake a bona fide issuance of New
Securities, then it shall give each 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. Each Offeree shall be given at least twenty (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 each Offeree,
that portion of the number of shares of New Securities proposed to be issued
which 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 which 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
one hundred twenty (120) days thereafter to sell the New Securities respecting
which 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 Offerees. 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
$7.5 million.
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 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 re-
ceived, or when mailed, first class postage prepaid, certified mail, return
receipt requested, to
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an Investor at the address set forth below his name on Schedule A hereto, to
the Company at the address set forth below, or to such other address as may be
designated hereafter by prior written notice from the recipient to the sender:
If by mail, to: Packaged Ice, Inc.
P.O. Box 79233
Houston, Texas 77279-9233
If by hand delivery or
overnight mail, to: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
If by FAX, to: Packaged Ice, Inc.
Fax: (713) 464-4681
9.2 Modification and Waiver.
(a) No amendment or modification to this Agreement shall be
made without the approval of the Company and the affirmative vote of two-thirds
of the shares of Common Stock and the Series A Preferred Stock held by the
Investors with the Series A Preferred Stock voting on an as-converted basis.
(b) Approval, waiver and consent by the Investors hereunder
shall require the affirmative vote of the holders of two-thirds of the shares
of Common Stock and the Series A Preferred Stock held by the Investors with the
Series A Preferred Stock voting on an as-converted basis.
(c) Notwithstanding anything to the contrary herein contained,
the fulfillment by the Company of a condition precedent to an Investor's
obligation to purchase Securities hereunder may be waived from time to time by
any such Investor by written consent to, or waiver of, any such condition.
9.3 Termination. This Agreement shall continue in effect from the
date of execution until the Company has completed an initial Public Offering.
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. Wherever 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.
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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 letters 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
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 Houston, Texas, and judgment upon the award rendered 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 shall pay all
reasonable costs and expenses that are incurred 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 including without limitation those reasonable
legal, accounting and travel costs and expenses incurred by the Investors. The
Company's obligation to pay the Investors expenses shall not be incurred by the
Company until the Closing.
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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 provisions 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
Investors, their successors and assigns, any legal or equitable right, remedy
or claim under or with respect to this Agreement.
(SIGNATURE PAGE FOLLOWS)
23
<PAGE> 24
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:
--------------------------------
James F. Stuart, President
THE INVESTORS: NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners V, L.L.P., its
General Partner
- -------- By:
--------------------------------
- -------- Name:
------------------------------
- -------- Title:
-----------------------------
THE FOOD FUND II LIMITED PARTNERSHIP
- -------- By:
--------------------------------
- -------- Name:
------------------------------
- -------- Title:
-----------------------------
Attachments:
Schedule A - Investors
Schedule B - Disclosure Schedule
Exhibit 1.1 - Certificate of Designation of Resolutions Establishing Shares of
Series A Preferred Stock
Exhibit 5.3 - Amended and Restated Shareholders Agreement
Exhibit 5.4 - Parallel Exit Agreement
Exhibit 5.7 - Registration Rights Agreement
Exhibit 5.8 - Amendment to By-Laws
Exhibit 5.9 - Opinion of Counsel
Exhibit 5.17 - Amended and Restated Voting Agreement
24
<PAGE> 25
SCHEDULE A
Food Fund II Limited Partnership
5720 Smetana Drive, Suite 300
Minnetonka, MN 55343
<TABLE>
<CAPTION>
Shares Price Total
------ ----- -----
<S> <C> <C> <C>
Common Stock 42,000 shares $5.00 $210,000
Series A Preferred Stock 45,000 shares $5.56 $250,200
</TABLE>
Norwest Equity Partners V,
a Minnesota Limited Partnership
2800 Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402-3388
<TABLE>
<CAPTION>
Shares Price Total
------ ----- -----
<S> <C> <C> <C>
Common Stock 378,000 shares $5.00 $1,890,000
Series A Preferred Stock 405,000 shares $5.56 $2,251,800
</TABLE>
25
<PAGE> 1
EXHIBIT 10.18
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
This Amendment is dated as of January 17, 1997 by and among Packaged Ice,
Inc., a Texas corporation (the "Corporation"), Norwest Equity Partners V, a
Minnesota Limited Partnership, and The Food Fund II Limited Partnership
(collectively, the "Investors.")
W I T N E S S E T H
WHEREAS, the Investors purchased shares of the Corporation's $.01 par
value common stock, (the "Common Stock") and Series A Convertible Preferred
Stock ("Series A Preferred Stock") pursuant to a Stock Purchase Agreement dated
as of September 20, 1995 (the "Stock Purchase Agreement"), which Stock Purchase
Agreement is incorporated herein by reference; and
WHEREAS, defined terms used herein shall have the meaning given to such
terms in the Stock Purchase Agreement unless otherwise defined herein; and
WHEREAS, Article 8 of the Stock Purchase Agreement grants the Investors
the right of first refusal to purchase additional securities; and
WHEREAS, on December 11, 1996 the Corporation issued promissory notes,
bearing interest at a rate of 10% compounded monthly, convertible into Series B
Convertible Preferred Stock of the Corporation to Norwest Equity Partners V, a
Minnesota Limited Partnership, The Food Fund II Limited Partnership and Steven
P. Rosenberg in the aggregate amount of $750,000 (the "Notes"); and
WHEREAS, the Corporation is desirous of issuing on or before May 31, 1997
at a price of not less than $6.07 per share an aggregate of up to 200,000
shares of Series B Convertible Preferred Stock with the powers, rights and
preferences as are set forth in the Certificate of Resolution attached hereto
as Exhibit A and incorporated herein by reference ("Series B Preferred Stock")
to Norwest Equity Partners V, a Minnesota Limited Partnership, The Food Fund II
Limited Partnership, and Steven P. Rosenberg, in exchange for cancellation of
the Notes and forgiveness of accrued interest thereon and to other purchasers
for cash (such issuance of the Notes, the shares of Series B Preferred Stock,
and the subsequent issuance of shares of the Corporation's $.01 par value
common stock upon conversion of the Series B Preferred Stock, shall hereinafter
be referred to as the "Issuances"); and
WHEREAS, the Company and the Investors are desirous of amending the Stock
Purchase Agreement to modify the definition of New Securities to take into
account the Issuances.
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto and of the mutual benefits to be gained by the performance thereof, the
parties hereto hereby agree as follows:
1. The Stock Purchase Agreement is hereby amended by amending and
restating Section 8.2 thereof as follows:
"8.2 Definition of 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; provided, however, that "New Securities" shall not include
(i) securities offered and sold by the Company pursuant to a Public
Offering (as
1
<PAGE> 2
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 option or right listed on the Disclosure Schedule, stock split
or stock dividend by the Company."
2. Except as expressly amended hereby, the Stock Purchase Agreement is
hereby ratified and confirmed in every respect and shall remain in full force
and effect in accordance with its terms.
3. This Amendment shall be effective when executed by the Company and all
the Investors holding the Securities issued under the Stock Purchase Agreement.
4. This Amendment shall be construed and enforced in accordance with the
laws of the State of Texas.
5. This Amendment may be executed in one or more counterparts, all of
which shall together constitute a single agreement. A facsimile of this
Amendment shall be deemed to be an original executed counterpart.
Executed effective the day herein first written above.
PACKAGED ICE, INC.
By:
--------------------------------
Signature Page Follows
2
<PAGE> 3
INVESTORS:
THE INVESTORS: NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners V, L.L.P.,
its General Partner
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
THE FOOD FUND II LIMITED PARTNERSHIP
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
3
<PAGE> 1
EXHIBIT 10.19
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
AND
CONSENT AND WAIVER
(NORWEST AND FOOD FUND)
This Amendment No. 2 to Stock Purchase Agreement and Consent and Waiver
of Right ("Amendment, Consent and Waiver") is dated as of March 14, 1997 by and
among Packaged Ice, Inc., a Texas corporation (the "Company"), and the persons
named on Exhibit A attached hereto and incorporated herein by reference (the
"Consenting Shareholders").
W I T N E S S E T H
WHEREAS, the Consenting Shareholders purchased shares of the Company's
common stock, $.01 par value (the "Common Stock") and Series A Convertible
Preferred Stock, $.01 par value (the "Series A Preferred Stock"), pursuant to a
Stock Purchase Agreement dated as of September 20, 1995 (the "Stock Purchase
Agreement"), which Stock Purchase Agreement is incorporated herein by
reference; and
WHEREAS, defined terms used herein shall have the meanings given to such
terms in the Stock Purchase Agreement unless otherwise defined herein; and
WHEREAS, Article 4 of the Stock Purchase Agreement contains certain
continuing covenants of the Company; and
WHEREAS, the Company is desirous of obtaining a waiver and estoppel from
the Consenting Shareholders that all of the covenants have been met to their
satisfaction; and
WHEREAS, Article 8 of the Stock Purchase Agreement grants the Consenting
Shareholders the right of first refusal to purchase additional securities; and
WHEREAS, the Preferred Stock Series Designation providing for the
issuance of the Series A Preferred Stock (the "Certificate of Designation")
contains anti-dilution rights relative to issuances of capital stock at a price
of less than $5.56 per share; and
WHEREAS, the Company is desirous of issuing, on or before May 31, 1997,
up to 1,000,000 shares of Common Stock in connection with the acquisitions of
Mission Party Ice, Inc., South Texas Packaged Ice, Inc., and Southwestern Ice,
Inc. at an agreed price of $10.00 per share, to A.J. Lewis, III, Liza B. Lewis,
Robert G. Miller, Dale M. Johnson and Alan Bernstein, et al (such issuances of
Common Stock shall hereinafter collectively be referred to as the "Acquisitions
Issuance"); and
WHEREAS, the Company is desirous of issuing a minimum of $50 million in
investment units (the "Units") to institutional investors pursuant to a private
offering managed by Jefferies & Company, Inc., with Units to consist of senior
notes due 2004 ("Notes") and warrants (the "Unit
<PAGE> 2
Warrants") granting the institutional investors the right to purchase shares of
Common Stock at an exercise price of $.01 per share (such issuance of Unit
Warrants shall hereinafter be referred to as the "Units Issuance "); and
WHEREAS, the Consenting Shareholders are desirous of consenting to the
Acquisitions Issuances and the Units Issuance, waiving their rights to purchase
their Pro Rata Share of each of the Acquisitions Issuance and the Units
Issuance, and amending the definition of "New Securities";
WHEREAS, the Consenting Shareholders are desirous of waiving their
rights to an adjustment of the conversion price of the Series A Preferred Stock
as a result of the issuance of the Unit Warrants; and
WHEREAS, the Consenting Shareholders are desirous of providing their
consent to the granting of demand registration rights in connection with the
Acquisitions Issuance and the Units Issuance and the Notes.
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto and of the mutual benefits to be gained by the performance thereof, the
parties hereto hereby agree as follows:
1. Each of the undersigned Consenting Shareholders hereby (i)
confirms that all of the covenants set forth in Article 4 of the Stock Purchase
Agreement have been met to their satisfaction, and (ii) hereby waives any and
all noncompliances by the Company with respect to said covenants.
2. Each of the undersigned Consenting Shareholders hereby consents
to the issuance of the Notes, the Acquisitions Issuance and the Units Issuance,
and hereby waives his or her right to purchase his or her Pro Rata Share of
each of the Acquisitions Issuance and the Units Issuance and any and all Common
Stock issued as a result of the exercise of the Unit Warrants.
3. Other than with respect to the Acquisitions Issuance and the
Units Issuance, the parties agree that this Amendment, Consent and Waiver shall
not be construed to be a consent and/or waiver of Article 8 of the Stock
Purchase Agreement for any sale and purchase of any other New Securities.
4. The Stock Purchase Agreement is hereby amended by amending and
restating Section 8.2 thereof as follows:
8.2 Definition of 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)
2
<PAGE> 3
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; (iv) shares of the Company's capital
stock issued in connection with any existing option or right listed on
the Disclosure Schedule, stock split or stock dividend by the Company;
and (v) Common Stock issued by the Company upon the exercise of the Unit
Warrants (as defined in Amendment No. 2 to Stock Purchase Agreement and
Consent and Waiver of Right to Purchase Additional Securities).
5. Each of the Consenting Shareholders agrees that the issuance of
the Unit Warrants and the issuance of Common Stock upon the exercise thereof
shall not constitute an issuance of "Additional Shares of Common Stock" for
the purposes of Sections 4(e) and (f) of the Certificate of Designation, and
that the Conversion Price (as therein defined) shall not be adjusted as a
result of the issuance of the Unit Warrants or the exercise thereof.
6. Each of the Consenting Shareholders consents to the execution and
delivery by the Company of registration rights agreements with respect to the
Notes, and with respect to Common Stock issued pursuant to the Acquisitions
Issuance and/or the Units Issuance, with such registration rights agreements to
be in such forms as the Company's Board of Directors determines to be
reasonable and appropriate. This consent is made pursuant to Section 15 of
that certain Registration Rights Agreement dated September 20, 1995 as amended
as of January 17, 1997 by and among the Company and the Consenting
Shareholders.
7. Except as expressly amended hereby, the Stock Purchase Agreement
is hereby ratified and confirmed in every respect and shall remain in full
force and effect in accordance with its terms.
8. The amendment set forth herein shall be effective when executed
by the Company and all of the Consenting Shareholders.
9. This Amendment, Consent and Waiver shall be construed and
enforced in accordance with the laws of the State of Texas.
10. This Amendment, Consent and Waiver may be executed in one or more
counterparts, all of which shall together constitute a single agreement. A
facsimile of an executed counterpart signature page shall be deemed to be an
original executed counterpart signature page.
Executed effective March 14, 1997:
PACKAGED ICE, INC.
By:
--------------------------------------------
James F. Stuart, Chief Executive Officer
SIGNATURE PAGE FOLLOWS
3
<PAGE> 4
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
AND
CONSENT AND WAIVER
(NORWEST AND FOOD FUND)
CONSENTING SHAREHOLDERS COUNTERPART SIGNATURE PAGE
Executed effective March 14, 1997:
--------------------------------------------------
Name of Investor if Entity/Signature if Individual
By:
-----------------------------------------------
Title:
--------------------------------------------
--------------------------------------------------
Please type or print name
4
<PAGE> 5
EXHIBIT A
<TABLE>
<CAPTION>
=============================================================================
CONSENTING SHAREHOLDERS' NAMES AND SHARES OF COMMON STOCK
ADDRESSES AND SERIES A PREFERRED
STOCK ISSUED UNDER STOCK
PURCHASE AGREEMENT
- -----------------------------------------------------------------------------
<S> <C>
Norwest Equity Partners V, 378,000 Shares Common Stock
a Minnesota Limited Partnership 405,000 Shares Series A Preferred
2800 Piper Jaffray Tower Stock
222 South Ninth St.
Minneapolis, MN 55402-3388
- -----------------------------------------------------------------------------
Food Fund II Limited Partnership 42,000 Shares Common Stock
5720 Smetana Drive, Suite 300 45,000 Shares Series A Preferred
Minnetonka, MN 55343 Stock
=============================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.20
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made and entered into as of the 17th
day of January, 1997, among PACKAGED ICE, INC., a Texas corporation (the
"Company"), and the Investors named in Schedule A attached hereto and
incorporated herein by reference (collectively "Investors" and individually
"Investor").
W I T N E S S E T H:
WHEREAS, to obtain additional equity financing, the Company desires to
issue and sell shares of its $.01 par value Series B Convertible Preferred
Stock (the "Series B Preferred Stock") to the Investors, and each Investor
desires to purchase such Series B Preferred Stock, at the prices, 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 Authorization of Securities. The Company will authorize the
issuance and sale of up to 200,000 shares of its Series B Preferred Stock,
which shall have the powers, designations, preferences, rights, qualifications,
limitations and restrictions as set forth in the form of Certificate of
Designation of Resolutions Establishing Shares of Series B Preferred Stock
("Certificate of Designation") attached hereto as Exhibit 1.1 and incorporated
herein. The Series B Preferred Stock shall sometimes hereinafter be referred to
as the "Securities."
1.2 Issuance and Sale of Securities. At the Closing, 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 each Investor, and each Investor severally agrees to purchase from
the Company, the number of shares of Series B Preferred Stock, at the
respective purchase prices, as set forth below the name of each Investor on
Schedule A hereto.
1.3 Delivery and Payment. At the Closing, the Company will execute
and deliver to each Investor certificates evidencing the number of shares of
Series B Preferred Stock purchased hereunder, as set forth opposite the name of
each Investor on Schedule A hereto, against payment, by each Investor to the
Company of the purchase price for the shares of Series B Preferred Stock as set
forth below the name of each Investor on Schedule A hereto. Payment for the
Securities shall be made by cancellation by the Investors of the principal and
accrued interest payable under their respective 10% convertible demand
promissory notes dated December 11, 1996.
<PAGE> 2
1.4 Closing. The consummation of the issuance, sale and purchase
of the Securities to be purchased pursuant to this Agreement shall be effected
(the "Closing") at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
300 Convent, Suite 1500, San Antonio, Texas 78205 commencing at 10:00 a.m., on
January 17, 1996 (the "Closing Date") or at such other time or place as the
Company and the Investors shall mutually agree.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors 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 of the Company and each of its subsidiaries delivered
to the Investors prior to the execution of this Agreement are true and complete
copies of the duly and legally adopted Articles of Incorporation and Bylaws 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 2,826,371 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"), of which 450,000 shares 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") and has authorized the issuance pursuant
to this Agreement of 124,831 shares of Series B Preferred Stock. Except as set
forth on Section 2.2 of the Disclosure Schedule, attached hereto as Schedule B
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 subsidiary, 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
2
<PAGE> 3
an exemption or exemptions from the registration and prospectus delivery
requirements of 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
Common Stock and Series A Preferred Stock have been duly authorized, are
validly issued, fully paid and non-assessable. Upon issuance and delivery to
each of the Investors of the number of shares of the Series B Preferred Stock
set forth opposite each Investor's name on Schedule A against payment of the
purchase price therefor pursuant to this Agreement, such shares will be validly
issued, fully paid and non-assessable. The shares of Series B Preferred Stock,
upon issuance pursuant to this Agreement, will have the rights and preferences
set forth in the Certificate of Designation. The shares of Common Stock
issuable upon conversion of the Series B Preferred Stock have been reserved for
issuance based upon the initial Conversion Price (as defined in the Certificate
of Designation), and when issued upon conversion, will be duly authorized,
validly issued and outstand- ing, fully paid and nonassessable.
2.4 Authorization. This Agreement has, 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 each other agreement required to be entered
into by the Company pursuant to the terms and conditions hereof, and to perform
its obligations hereunder and thereunder.
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 previously provided to the Investors
the Company's audited, consolidated balance sheet as of December 31, 1995 (the
"1995 Balance Sheet"), and the related consolidated statements of income and
cash flow for the fiscal year then ended, together with the report thereon of
Deloitte & Touche, LLP, certified public accountants, and the unaudited,
consolidated balance sheet of the Company as at November 30, 1996 (the
"November 30 Balance Sheet"), and the related, unaudited consolidated
statements of income and cash flow for the eleven month period ended on
November 30, 1996 (such balance sheets and related
3
<PAGE> 4
statements are collectively referred to herein as the "Financial Statements").
Except as set forth in Section 2.6 of the Disclosure Schedule, 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 interim financial statements the Company's normal internal accounting
practices and subject to year end adjustments and the absence of notes.
(b) Except as set forth on Section 2.6 of the Disclosure
Schedule, since the date of the November 30 Balance Sheet, no event or
condition has occurred, and no event or condition is to the knowledge of the
Company's 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. Except
as set forth in Section 2.6 of the Disclosure Schedule, the Company has no
material liabilities or financial obligations not disclosed in the November 30
Balance Sheet. Except as disclosed in the Financial Statements, the Company is
not an indemnitor or guarantor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain its books and
records in accordance with generally accepted accounting principles
consistently applied. Since the November 30 Balance Sheet, neither the Company
nor its subsidiaries has (i) incurred any debts, obligations or liabilities,
absolute, accrued or contingent and whether due or to become due, except
current liabilities incurred in the ordinary course of business, which
(individually or in the aggregate) will not materially and adversely affect the
business, properties or prospects of the Company or its subsidiaries; (ii) paid
any obligation or liability other than, or discharged or satisfied any liens or
encumbrances other than those securing current liabilities, in each case in the
ordinary course of business; (iii) declared or made any payment or distribution
to its shareholders as such or purchased or redeemed any of its shares of
capital stock or other securities, or obligated itself to do so; (iv) sold,
transferred or leased any of its assets except in the ordinary course of
business; (v) issued or sold any shares of capital stock or other securities or
granted any options, warrants or other purchase rights with respect thereto
other than as contemplated by this Agreement. There has been no material
adverse change in the condition, financial or otherwise, or operations, results
of operations or business of the Company or its subsidiaries since the November
30 Balance Sheet.
2.7 Tax Returns. Each of the Company and its subsidiaries has
timely filed all Tax Returns required by law and has paid all Taxes required to
be paid, together with any penalties and interest. These 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 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 341(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
4
<PAGE> 5
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.
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 which
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 (l) of ERISA or a tax imposed
5
<PAGE> 6
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 ("PBGC") (other
than for the payment of current premiums which 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
which 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
which 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 which 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(1) 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 Company, 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.
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(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. Except as set forth on Section 2.10 of the
Disclosure Schedule, 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 hereby or 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.
2.11 Litigation. Except as set forth on Section 2.11 of the
Disclosure Schedule, 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.
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 in force, and
have paid all premiums due on, liability, casualty and other insurance policies
in the amounts and of the types set forth on Section 2.14 of the Disclosure
Schedule. The Company believes, after advice from its insurance broker, that
such insurance is in amounts acceptable for the nature and extent of the
Company's and its subsidiaries' business and resources.
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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 of 1933, as amended (the "Securities Act"), or applicable
state securities laws.
2.16 Finders' Fees. Except as set forth on Section 2.16 of the
Disclosure Schedule, 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.
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 there- with, (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 medium) (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 subsidiary 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.
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(c) The Disclosure Schedule identifies each patent or
registration which 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 which 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 which 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; and
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 which challenges
the legality, validity, enforceability, use, or ownership of the item.
(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 Investors 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
which 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; and
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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) which 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, industri- al, 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 so to 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 which 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 which does business with the Company or its
subsidiaries, or (b) in any property, asset or right which 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 (the "Equipment") has received approval by
the National Sanitation Foundation. To the knowledge of the Company, the ice
making equipment manufactured by Hoshizaki America, Inc. has received approval
of the National Sanitation Foundation.
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2.22 Material Contracts. Set forth in Section 2.22 of the
Disclosure Schedule are the following:
(a) A list of all written and oral contracts, agreements,
subcontracts, purchase orders, commitments and arrangements involving payments
remaining to or from the Company or any of its subsidiaries in excess of
$10,000, and other agreements material to the Company's or its subsidiaries'
business to which the Company or any of its subsidiaries is a party or by which
it is bound under which full performance (including payment) has not been
rendered by any party thereto;
(b) A listing of all employment agreements, consulting
agreements, noncompetition agreements, all nondisclosure agreements which
restrict the Company from disclosing information obtained from third parties,
entered into or adopted by the Company or any of its subsidiaries;
(c) A listing of all deeds of trusts, mortgages, security
agreements, pledge agreements and other agreements or arrangements whereby any
of the assets or properties of the Company or any of its subsidiaries are
subject to any lien, encumbrance, security interest or charge.
Prior to the Closing Date, the Company shall, upon request, provide
legal counsel for the Investors with a true and complete copy of each document
referred to above. The Company and its subsidiaries have in all material
respects substantially performed all obligations required to be performed by
them to date and are not in default in any material respect under any of the
contracts, agreements, leases, documents, commitments or other arrangements to
which any of them is a party or by which any of them is otherwise bound. 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 which, with notice or lapse of
time or both, would constitute an event of default thereunder. 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.
2.23 Small Business Concern. The Company (as that term is defined
in Title 13, Code of Federal Regulations, Section 121.401) is a "small business
concern" within the meaning of the Small Business Investment Act of 1958 and
the regulations thereunder, including Title 13, Code of Federal Regulations,
Section 121.802 (the "SBIA"). The information set forth in the Small Business
Administration Forms 480, 652 and Section A of Form 1031 regarding the Company
is accurate and complete. Copies of such forms shall have been completed and
executed by the Company and delivered to each Investor that is a licensed small
business investment company (an "SBIC") at the Closing Date. The Company does
not presently engage in, and it shall not hereafter engage in, any activities,
and shall not use directly or indirectly the proceeds from the sale of the
Securities for any purpose for which an SBIC is prohibited from providing funds
by the SBIA.
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2.24 Application of Proceeds. The proceeds from the issuance and
sale of Securities pursuant to this Agreement will be used to fund working
capital and other general corporate purposes. No portion of such proceeds (i)
will be used to provide capital to a corporation licensed under the SBIA, (ii)
will be used outside the United States (except (x) to acquire abroad materials
and industrial property rights for a domestic operation or (y) for transfer to
a controlled foreign subsidiary, so long as at least 51% of the assets and
activities of the Company will remain within the United States), or (iii) will
be used for any purpose contrary to the public interest (including but not
limited to activities which are in violation of law) or inconsistent with free
competitive enterprise, in each case, within the meaning of 13 CFR Section
107.901. The Company's primary business activity does not involve, directly or
indirectly, providing funds to others, the purchase or discounting of debt
obligations, factoring or long-term leasing of equipment with no provision for
maintenance or repair, and the Company is not classified under Major Group 65
(Real Estate) of the SIC Manual.
2.25 Disclosure. The Company has not knowingly withheld from the
Investors 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 or
therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each of the Investors severally, and not jointly, represents and
warrants to the Company, the following:
3.1 Authorization. This Agreement has been duly executed and
delivered by such 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' rights generally. If the
Investor is not a natural person, it 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 his 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
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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 LAW 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 each Investor been permitted to
have access to all information which he 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 is not acting on the basis of, or
relying upon, any promotional materials, business plans, financial projections,
representations or warranties other than those express representations and
warranties contained in this Agreement, and 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 his entire
investment in the Securities.
3.6 Finders' 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.
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ARTICLE 4
COVENANTS OF THE COMPANY
The Company covenants and agrees that, unless a written waiver from
the Investors in accordance with the provisions of Section 9.2 of this
Agreement is first obtained, from and after the Closing Date the Company will
fully comply with each of the following covenants 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 Securities and Exchange 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 Securities and Exchange 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 each Investor:
(a) as soon as practicable, but in any event within 30
days after the close 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 for 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 165
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;
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(c) within 90 days after the end of each fiscal year,
written notice of the current Conversion Price for the Series B Preferred
Stock, including a brief statement indicating any adjustments reasonably
anticipated;
(d) 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;
(e) promptly after transmission thereof, copies of all
reports, proxy statements, registration statements and notifications filed by
it with the Securities and Exchange Commission pursuant to any act administered
by the Securities and Exchange Commission or furnished to shareholders of the
Company or to any national securities exchange;
(f) 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
Investors may reasonably request;
(g) promptly following the issuance of any additional
shares of Common Stock or of 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
(h) 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, which 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 is 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 each Investor.
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4.4 Inspection. The Company will permit the Investors, or any
designee 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.
4.5 Directors' and Shareholders' Meetings. The Investors shall
have the right to elect three directors of the Company in accordance with the
Amended and Restated Voting Agreement dated September 20, 1995, as amended, one
to be designated by Steven P. Rosenberg, one to be designated by The Food Fund
II Limited Partnership, and one to be designated by Norwest Equity Partners V,
a Minnesota Limited Partnership.
The Company shall reimburse the Investors for the reasonable
out-of-pocket expenses incurred by them or the directors designated by them in
connection with the attending of meetings by their director designees 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 Investors.
In addition, the Company shall notify the Investors 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.
The Company agrees, as a general practice, to hold a meeting of its
Board of Directors at least once every two months, and during each year to hold
its annual meeting of shareholders within 30 days of delivery of the audited
financial statements.
4.6 Furnishing of Information. The Company will deliver to each
Investor that is an SBIC:
(a) all information necessary in order for such Investor
to prepare and file SBA Form 468 and other information requested or
required by any governmental authority asserting jurisdiction over
such Investor, such information to be provided within 20 days of such
Investor's request;
(b) as soon as reasonably practical after the written
request of any Investor that is an SBIC, confirm the use of the
proceeds as described in Section 2.24 hereof; and
(c) with reasonable promptness, such information as from
time to time the Investors may request to enable the Investors to
comply with SBA regulations.
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4.7 Other Restrictions. 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, 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 in the case of an
Investment which 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 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;
(g) issue any securities (including without limitation
options, warrants, other rights to purchase capital stock or convertible
securities of the Company) at a price which would result in an adjustment of
the Conversion Price for the Series A Preferred Stock or the Series B Preferred
Stock; or
17
<PAGE> 18
(h) mortgage, pledge, or create a security interest in
all or substantially all of the Company's assets as collateral, provided that
the Company may pledge substantially all of its assets as security for its loan
from Bank One Texas, N.A.
4.8 Application of Proceeds. Unless otherwise approved by the
Investors, the net proceeds received by the Company from the sale of the
Securities shall be used substantially for working capital purposes. Pending
use of the proceeds in the business, they shall be deposited in a bank or banks
having deposits of $150,000,000 or more, invested in money market mutual funds
having assets of $500,000,000 or more, or invested in securities issued or
guaranteed by the United States Government.
4.9 Compliance. So long as any Investor that is an SBIC holds any
Securities (i) without the prior written consent of such Investor, the Company
shall not use the proceeds from the sale of the Securities issued and sold
pursuant to this Agreement for any purpose other than as set forth in Section
4.8 above, (ii) the Company shall not use the proceeds from the sale of the
Securities issued and sold pursuant to this Agreement for any prohibited
purposes outlined in the second sentence of Section 2.24, (iii) the Company
shall not change its business activity in any manner which, by reason of such
change in business activity, would cause the Company to fall within a different
SIC Code and thereby render the Company ineligible as a "small business
concern" under the SBIA and (iv) the Company shall at all times comply with the
non-discrimination requirements of 13 CFR Parts 112, 113 and 117. The Company
shall at all times permit any Investor that is an SBIC and, if necessary, a
representative of the Small Business Administration, access to the Company's
records and the Company shall provide such information as such Investor that is
an SBIC may request in order to verify compliance with this Section 4.9
including, without limitation, an officer's certificate indicating such
compliance. The Company hereby acknowledges that (A) any diversion of the
proceeds from their intended use as specified in Section 4.8 and this Section
4.9, (B) the Company's becoming ineligible as a "small business concern" by
reason of a change in the Company's business activity within one year from the
Closing Date or (C) failure to provide the information specified in Section
4.6, shall entitle any Investor that is an SBIC, upon demand, and in addition
to any other remedies that may exist, to immediate rescission of this Agreement
and repayment in full of the funds invested hereunder as contemplated by 13 CFR
Section 107.305 and 13 CFR Section 107.706.
4.10 No Issuance of Series B Preferred Stock. After the Closing,
the Company shall not issue additional shares of the Series B Preferred Stock
without the approval of the holders of 80% of the then outstanding shares of
Series B Preferred Stock.
18
<PAGE> 19
ARTICLE 5
CONDITIONS TO INVESTORS' OBLIGATIONS
The obligation of each 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
that 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 Investors 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 Amendment No. 1 to Amended and Restated Shareholders
Agreement. The Company and the holders of 80% or more of the outstanding shares
of Common Stock and Series A Preferred Stock voting on an as-converted basis
shall have entered into a counterpart of the Amendment No. 1 to Amended and
Restated Shareholders Agreement in the form attached hereto as Exhibit 5.3.
5.4 Amendment No. 1 to Amended and Restated Voting Agreement. The
Company and the holders of 80% or more of the outstanding shares of Common
Stock and Series A Preferred Stock voting on an as-converted basis shall have
entered into Amendment No. 1 to Amended and Restated Voting Agreement in the
form attached hereto as Exhibit 5.4.
5.5 Stock Certificates. The Company shall have delivered to each
of the Investors stock certificates evidencing the number of shares of Series B
Preferred Stock purchased hereunder.
5.6 Registration Rights Agreement. The Company and the Investors
shall have duly authorized and executed Amendment No. 1 to Registration Rights
Agreement in the form set forth as Exhibit 5.6 hereof.
5.7 Opinion of Counsel. The Company shall have delivered to the
Investors the opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. dated the
Closing Date, substantially in the form of Exhibit 5.7.
5.8 Investment by Other Investors. On the Closing Date,
concurrently with the purchase by such Investor, each other Investor shall have
purchased and paid for the Securities being purchased by it hereunder.
19
<PAGE> 20
5.9 Execution of SBA Forms. Each of the Investors that is a small
business investment company shall have received from the Company the Size
Status Declaration on SBA Form 480 and the Company's duly executed
certification, dated the Closing Date, on SBA Form 652 that the Company will
not illegally discriminate in its operations, employment practices or
facilities.
5.10 Waiver of Preferential Rights. All of the shareholders not a
party to this Agreement who are parties to that certain Stock Purchase
Agreement dated September 20, 1995 by and among the Company, the Trustees UID
12/18/80 FBO Michael G. Jesselson, the Trustees UID 12/18/80 Grandchildren, J.
Brad Fillmore, Lancer Corporation, Southwest Texas Distributors, Inc., Jeff
Hinson and Alexander Cunningham Lasater, shall have waived their respective
rights under Article 8 of said Stock Purchase Agreement to purchase the 10%
convertible demand promissory notes dated December 11, 1996, any Series B
Preferred Stock, and Common Stock issuable upon conversion of the Series B
Preferred Stock.
ARTICLE 6
CONDITIONS TO COMPANY'S OBLIGATIONS
The obligation of the Company to issue and sell the Securities to the
Investors hereunder is subject to the fulfillment by each Investor, at or
before the Closing, of the following conditions:
6.1 Compliance with Representations and Warranties. The
representations and warranties of each of the Investors contained in Article 3
hereof shall be 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 Investor specifically apply to conditions existing at a
particular date).
6.2 Other Agreements. The holders of 80% or more of the
outstanding shares of Common Stock and Series A Preferred Stock voting on an
as-converted basis shall have entered into the Amendment No. 1 to Amended and
Restated Shareholders Agreement and the Amendment No. 1 to Amended and Restated
Voting Agreement.
6.3 Waiver of Preferential Rights. All of the shareholders not a
party to this Agreement who are parties to that certain Stock Purchase
Agreement dated September 20, 1995 by and among the Company, the Trustees UID
12/18/80 FBO Michael G. Jesselson, the Trustees UID 12/18/80 Grandchildren, J.
Brad Fillmore, Lancer Corporation, Southwest Texas Distributors, Inc., Jeff
Hinson and Alexander Cunningham Lasater, shall have waived their respective
rights under Article 8 of said Stock Purchase Agreement to purchase the 10%
convertible demand promissory notes dated December 11, 1996, any Series B
Preferred Stock, and Common Stock issuable upon conversion of the Series B
Preferred Stock.
20
<PAGE> 21
ARTICLE 7
INDEMNIFICATION
The Company shall indemnify and hold harmless the Investors, and the
Investors, severally and not jointly, 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
OTHER MATTERS
8.1 Termination of Rosenberg Option. Effective as of the Closing,
that certain Stock Option Agreement dated June 9, 1992 among the Company and
Steven P. Rosenberg, as amended on April 1, 1996, granting Steven P. Rosenberg
the right to purchase 80,358 shares of Common Stock, shall be terminated and of
no further force or effect.
8.2 Waiver of Preemptive Rights. Each of Norwest Equity Partners
V, a Minnesota Limited Partnership ("NEP") and The Food Fund II Limited
Partnership ("FFLP") hereby waives its right under Article 8 of that certain
Stock Purchase Agreement dated September 20, 1995 by and among the Company, NEP
and FFLP (the "NEP/FFLP Stock Purchase Agreement") to purchase its Pro Rata
Share (as such term is defined in the NEP/FFLP Stock Purchase Agreement) of the
10% convertible demand promissory notes dated December 11, 1996, the Series B
Preferred Stock issued pursuant to this Agreement and Common Stock issuable
upon conversion of the Series B Preferred Stock.
8.3 Waiver of Preemptive Rights. Steven P. Rosenberg hereby waives
his right under Article 8 of that certain Stock Purchase Agreement dated
September 20, 1995 by and among the Company, Steven P. Rosenberg, and other
investors named therein (the "Rosenberg Stock Purchase Agreement") to purchase
his Pro Rata Share (as such term is defined in the Rosenberg Stock Purchase
Agreement) of the 10% convertible demand promissory notes dated December 11,
1996, the Series B Preferred Stock issued pursuant to this Agreement and Common
Stock issuable upon conversion of the Series B Preferred Stock.
21
<PAGE> 22
ARTICLE 9
MISCELLANEOUS
9.1 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 an Investor at the address set forth below his name on
Schedule A hereto, to the Company at the address set forth below, or to such
other address as may be designated hereafter by prior written notice from the
recipient to the sender:
If by mail, to: Packaged Ice, Inc.
P.O. Box 79233
Houston, Texas 77279-9233
If by hand delivery or
overnight mail, to: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
If by FAX, to: Packaged Ice, Inc.
Fax: (713) 464-4681
9.2 Modification and Waiver.
(a) No amendment or modification to this Agreement shall
be made without the approval of the Company and the affirmative vote of 80% of
the shares of Series B Preferred Stock.
(b) Approval, waiver and consent by the Investors
hereunder shall require the affirmative vote of the holders of 80% of the
shares of Series B Preferred Stock.
(c) Notwithstanding anything to the contrary herein
contained, the fulfillment by the Company of a condition precedent to an
Investor's obligation to purchase Securities hereunder may be waived from time
to time by any such Investor by written consent to, or waiver of, any such
condition.
9.3 Termination. This Agreement shall continue in effect from the
date of execution until the Company has completed an initial public offering,
defined as a bona-fide firm commitment underwritten public offering of shares
of the Company's Common Stock made
22
<PAGE> 23
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 $7.5 million.
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. Wherever 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 hereof, and
thereof and the consummation of the transactions contemplated hereby and
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 letters 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
23
<PAGE> 24
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 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 Houston, Texas, and judgment upon the
award rendered 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 shall pay all
reasonable costs and expenses that are incurred 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 including without limitation those reasonable
legal, accounting and travel costs and expenses incurred by the Investors. The
Company's obligation to pay the Investors expenses shall not be incurred by the
Company until the Closing.
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 provisions 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
Investors, their successors and assigns, any legal or equitable right, remedy
or claim under or with respect to this Agreement.
(SIGNATURE PAGE FOLLOWS)
24
<PAGE> 25
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:
--------------------------------
James F. Stuart, President
THE INVESTORS: NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners V, L.L.P.,
its General Partner
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
THE FOOD FUND II LIMITED PARTNERSHIP
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-----------------------------------
Steven P. Rosenberg
Attachments:
Schedule A - Investors
Schedule B - Disclosure Schedule
Exhibit 1.1 - Certificate of Designation of Resolutions Establishing Shares of
Series B Preferred Stock
Exhibit 5.3 - Amendment No. 1 to Amended and Restated Shareholders Agreement
Exhibit 5.4 - Amendment No. 1 to Amended and Restated Voting Agreement
Exhibit 5.6 - Amendment No. 1 to Registration Rights Agreement
Exhibit 5.7 - Opinion of Counsel
25
<PAGE> 26
SCHEDULE A
FOOD FUND II LIMITED PARTNERSHIP (1)
5720 SMETANA DRIVE, SUITE 300
MINNETONKA, MN 55343
<TABLE>
<CAPTION>
Shares Price Total
------ ----- -----
<S> <C> <C>
4,161 shares $6.07 $25,257.27
</TABLE>
NORWEST EQUITY PARTNERS V, (2)
A MINNESOTA LIMITED PARTNERSHIP
2800 PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3388
<TABLE>
<CAPTION>
Shares Price Total
------ ----- -----
<S> <C> <C>
37,449 shares $6.07 $227,315.43
</TABLE>
STEVEN P. ROSENBERG (3)
12124 MADELENE CIRCLE
DALLAS, TEXAS 75230
<TABLE>
<CAPTION>
Shares Price Total
------ ----- -----
<S> <C> <C>
83,221 shares $6.07 $505,151.47
</TABLE>
(1) The purchase price will be in the form of cancellation of a promissory note
dated December 11, 1996 in the principal amount of $25,000 and forgiveness
of accrued interest in the amount of $257.27.
(2) The purchase price will be in the form of cancellation of a promissory note
dated December 11, 1996 in the principal amount of $225,000 and forgiveness
of accrued interest in the amount of $2,315.43.
(3) The purchase price will be in the form of cancellation of a promissory note
dated December 11, 1996 in the principal amount of $500,000 and forgiveness
of accrued interest in the amount of $5,151.47.
26
<PAGE> 1
EXHIBIT 10.21
PACKAGED ICE, INC.
REGISTRATION RIGHTS AGREEMENT
* * * *
THIS AGREEMENT is made as of September 20, 1995, by and among PACKAGED
ICE, INC., a Texas corporation (the "Company"), and the persons and entities
listed on the signature pages hereof (the "Stockholders").
WHEREAS, in accordance with that certain Stock Purchase Agreement
among the Company and certain Investors, the parties are desirous of entering
into this Registration Rights Agreement.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the Company and the Holders agree as follows:
Section 1. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.
(b) "Common Stock" shall mean the Common Stock, $.01 par
value, of the Company, and any stock into which such common shares may
hereafter be changed, and shall also include stock of the Company of any other
class which is not preferred as to dividends or as to distributions of assets
on liquidation, dissolution or winding up of the Company over any other class
of stock of the Company, and which is not subject to redemption.
(c) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any similar federal statute and the rules and
regulations thereunder, all as the same shall be in effect at the time.
(d) "Fully-Diluted Shares" shall mean all shares of
issued and outstanding Common Stock of the Company, plus all outstanding
subscriptions, warrants, options, rights, calls, or other commitments entitling
any person to purchase or acquire any shares of Common Stock, plus any
obligations or securities convertible into or exchangeable or exercisable for
shares of Common Stock, to the extent not previously converted, exercised or
exchanged.
(e) "Holder" shall mean any holder of outstanding
Registrable Securities or anyone who holds outstanding Registrable Securities
to whom the registration rights conferred by this Agreement have been
transferred in compliance with this Agreement.
<PAGE> 2
(f) "Initiating Holder" shall mean only a Holder or
Holders of at least 51% of the Registrable Securities then outstanding.
(g) "Register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement, and compliance
with applicable state securities laws of such states in which Holders notify
the Company of their intention to offer Registrable Securities.
(h) "Registrable Securities" shall mean all of the
following to the extent the same have not been sold to the public (i) any and
all shares of Common Stock of the Company issued to or held by the
Stockholders, including without limitation the Common Stock of the Company sold
to the Stockholders on the date hereof and the Common Stock of the Company
issued or issuable upon conversion of shares of the Company's Series A
Convertible Preferred Stock; or (ii) stock issued in respect of stock referred
to in (i) above in any reorganization, merger, consolidation or sale of all or
substantially all of the Company's assets; or (iii) stock issued in respect of
the stock referred to in (i) or (ii) as a result of a stock split, stock
dividend, recapitalization or combination. Notwithstanding the foregoing,
Registrable Securities shall not include otherwise Registrable Securities (i)
following a sale by a person in a transaction in which his rights under this
Agreement are not properly assigned; or (ii) (A) following a sale to or through
a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) following a sale in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act
under Section 4(1) thereof so that all transfer restrictions, and restrictive
legends with respect thereto, if any, are removed upon the consummation of such
sale or (C) if the registration rights associated with such securities have
been terminated pursuant to Section 16 of this Agreement.
(i) "Rule 144" shall mean Rule 144 under the Securities
Act or any successor or similar rule as may be enacted by the Commission from
time to time, but shall not include Rule 144A.
(j) "Rule 144A" shall mean Rule 144A under the Securities
Act or any successor or similar rule as may be enacted by the Commission from
time to time, but shall not include Rule 144.
(k) "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
Section 2. Restrictions on Transferability. The Registrable
Securities (as defined herein) shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Agreement, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Each Holder will cause any proposed purchaser, assignee,
transferee, or pledgee of the Registrable Securities held by a Holder to agree
to take and hold such securities subject to the provisions and upon the
conditions specified in this Agreement.
2
<PAGE> 3
Section 3. Restrictive Legend. Each certificate representing
Registrable Securities shall be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws or otherwise):
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAW 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. COPIES OF THE
AGREEMENTS COVERING THE PURCHASE OF THESE SHARES AND RIGHTS TO
REGISTER THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS INSTRUMENT TO THE SECRETARY OF THE COMPANY AT
THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
Each Holder consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Registrable Securities in
order to implement the restrictions on transfer established in this Agreement.
Upon the written request of a Holder of the Registrable Securities,
the Company shall remove the foregoing legend from the certificates evidencing
such Registrable Securities and issue to such Holder new certificates therefor,
free of any transfer legend if, with such request, the Company shall have
received an opinion of counsel selected by the Holder, such opinion to be
reasonably satisfactory to the Company, to the effect that any transfers by
said Holder of such Registrable Securities may be made to the public without
compliance with either Section 5 of the Securities Act or Rule 144 thereunder
and applicable state securities laws. In no event will such legend be removed
if such opinion is based upon the "private offering" exemption of Section 4(2)
of the Securities Act.
Section 4. Restrictions. Notwithstanding the provisions of
Section 3, no registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is a partnership to a partner of such
partnership (or to a partner or shareholder of a partner of such partnership)
or a retired partner of such partnership who retires after the date hereof, or
to the estate of any such partner or retired partner or the transfer by gift,
will, or intestate succession of any partner to his spouse or siblings, lineal
descendants or ancestors of such partner or spouse, provided, that such
transferee agrees in writing to be subject to all of the terms hereof to the
same extent as if he were an original Holder hereunder.
Section 5. Requested Registration.
(a) If the Company shall receive from Initiating Holder a
written request that the Company effect any registration with respect to all or
at least one-half (1/2) of the issued and outstanding Registrable Securities
held by the Initiating Holder, the Company shall:
3
<PAGE> 4
i) promptly give written notice of the proposed
registration to all other Holders; and
ii) as soon as practicable use its best efforts
to register (including, without limitation, the execution of an
undertaking to file post-effective amendments and any other
governmental requirements) all Registrable Securities which the
Initiating Holder requests to be registered and all Registrable
Securities which any other Holder requests to be registered within
twenty (20) days after receipt of such written notice from the
Company; provided, that the Company shall not be obligated to file a
registration statement pursuant to this Section 5:
(A) prior to five (5) years or after
eight (8) years from the date hereof;
(B) in any particular state in which the
Company would be required to execute a general consent to
service of process in effecting such registration;
(C) within 120 days following the
effective date of any registered offering of the Company's
securities to the general public in which the Holders of
Registrable Securities shall have been able effectively to
register all Registrable Securities as to which registration
shall have been requested;
(D) in any registration having an
aggregate offering price (before deduction of underwriting
discounts and expenses of sale) of less than $4,500,000;
(E) after the Company has effected one
such registration pursuant to this Section 5 and such
registration has been declared or ordered effective;
(F) with the underwriter being other
than a nationally recognized investment banking firm.
Subject to the foregoing clauses (A) through (F), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practical, but in any event within ninety (90) days after
receipt of the request or requests of the Initiating Holders and shall use
reasonable best efforts to have such registration statement promptly declared
effective by the Commission whether or not all Registrable Securities requested
to be registered can be included; provided, however, that if the Company shall
furnish to such Holders a certificate signed by the President of the Company
stating that in the good-faith judgment of the Board of Directors it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed within such ninety-day (90-day) period and it is
therefore essential to defer the filing of such registration statement, the
Company shall have an additional period of not more than ninety (90) days after
the expiration of the initial ninety-day (90- day) period within which to file
such registration statement; provided, that during such time the Company may
not file a registration statement for securities to be issued and sold for its
own account or the account of any other of its shareholders.
4
<PAGE> 5
(b) If the Initiating Holder intends to distribute the
Registrable Securities covered by its request by means of an underwriting, it
shall so advise the Company as a part of its request. In such event or if an
underwriting is required by subsection 5(c), the Company shall include such
information in the written notice referred to in subsection 5(a)(i). In either
such event, if so requested in writing by the Company, the Initiating Holders
shall negotiate with an underwriter selected by the Company with regard to the
underwriting of such requested registration; provided, however, that if a
majority in interest of the Initiating Holders have not agreed with such
underwriter as to the terms and conditions of such underwriting within twenty
(20) days following commencement of such negotiations, a majority in interest
of the Initiating Holders may select an underwriter of their choice. The right
of any Holder to registration pursuant to Section 5 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. The Company shall (together with all Holders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other
provision of this Section 5, if the managing underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, the Company shall so advise all Holders, and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities requested to be registered by such Holders; provided, however, that
securities to be included in such registration statement as a result of
piggyback registration rights as well as any securities to be offered by the
Company, its officers and employees shall be excluded from the registration
statement prior to the exclusion of any Registrable Securities requested to be
registered by the Holders. If any Holder disapproves of the terms of the
underwriting, he may elect to withdraw therefrom by written notice to the
Company, the managing underwriter and the Initiating Holders. If, by the
withdrawal of such Registrable Securities, a greater number of Registrable
Securities held by other Holders may be included in such registration (up to
the limit imposed by the underwriters) the Company shall offer to all Holders
who have included Registrable Securities in the registration the right to
include additional Registrable Securities in proportion to the respective
amounts of Registrable Securities held by such Holders used in determining the
limitation as set forth above. Any Registrable Securities which are excluded
from the underwriting by reason of the underwriter's marketing limitation or
withdrawn from such underwriting shall be withdrawn from such registration.
(c) If the Company is subject to the reporting
requirements of Section 13 or 15 of the Exchange Act as a result of the
registration of shares of its Common Stock under the Exchange Act, any
registration pursuant to this Section 5 must be firmly underwritten if the
registration exceeds two percent (2%) of the Company's outstanding fully
diluted shares.
(d) If, at the time any written request for registration
is received by the Company pursuant to this Section 5, the Company has
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its securityholders, or
in the event that Section 7 hereof is applicable, then such written request
shall be deemed to have been given pursuant to
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Section 6 hereof or 7 hereof, as the case may be, rather than this Section 5,
and the rights of the Holders covered by such written request shall be governed
by such Section 6 or 7.
Section 6. Piggyback Registration.
(a) If at any time or from time to time, the Company
shall determine to register any of its securities, for its own account or the
account of any of its shareholders, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
under Rule 145 of the Securities Act, a transaction relating solely to the sale
of debt or convertible debt instruments or a registration on any form (other
than Form S-1, S-2 or S-3, or their successor forms) which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
i) give to each Holder written notice thereof as
soon as practicable prior to filing the registration statement; and
ii) include in such registration and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made within ten (10) days
after receipt of such written notice from the Company, by any Holder
or Holders, except as set forth in subsection (b) below.
(b) If the registration is for a registered public
offering involving an underwriting, the Company shall so advise the Holders as
a part of the written notice given pursuant to subsection 6(a)(i). In such
event, the right of any Holder to registration pursuant to Section 6 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other
holders distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting, or may exclude
Registrable Securities entirely from such registration if the registration is
the first registered offering for the sale of the Company's securities to the
general public (provided that no shares held by officers and directors of the
Company, other than Registrable Securities that may be owned by officers and
directors, are included in the registration and underwriting). The Company
shall so advise all Holders and the other shareholders of the Company
distributing their securities through such underwriting pursuant to piggyback
registration rights similar to this Section 6, and the number of shares of
Registrable Securities and other securities that may be included in the
registration and underwriting shall be allocated among all Holders and other
holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders and other securities held by other
holders at the time of filing the registration statement. If any Holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. If,
by the withdrawal of such Registrable Securities, a greater number of
Registrable Securities held by other
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<PAGE> 7
Holders may be included in such registration (up to the limit imposed by the
underwriters), the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities. Any Registrable Securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration.
(c) In the event that the Company grants to any person
piggyback registration rights which are more favorable than the piggyback
registration rights granted to the Holders hereunder, the provisions of this
Section 6 shall automatically be amended to incorporate the more favorable
piggyback registration rights granted to such person.
Section 7. Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3 or its successor form. After the Company
has qualified for the use of Form S-3, the Initiating Holder shall have the
right at any time after five years after the date hereof to request a
registration on Form S-3 (such request shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of shares by such Holder), subject only to the following:
(a) The Company shall not be required to file a
registration statement pursuant to this Section 7 within ninety (90) days of
the effective date of any registration referred to in Sections 5 and 6 above.
(b) The Company shall not be required to file a
registration statement pursuant to this Section 7 unless the Holder requesting
registration proposes to dispose of shares of Registrable Securities having an
aggregate disposition price (before deduction of underwriting discounts and
expenses of sale) of at least $1,000,000.
(c) The Company shall not be required to file more than
one registration statement pursuant to this Section 7 in any 12-month period.
The Company shall give written notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this
Section 7 and shall provide a reasonable opportunity for other Holders to
participate in the registration; provided, that if the registration is for an
underwritten offering, the following terms shall apply to all participants in
such offering: The right of any Holder to registration pursuant to Section 7
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company and the
other Holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding
any other provision of this Section 7, if the managing underwriter determines
that marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting. The Company
shall so advise all Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the registration and
underwriting shall be allocated among the Holders in proportion, as
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<PAGE> 8
nearly as practicable, to the respective amounts of securities requested by
such Holders to be included in such registration. If any Holder disapproves of
the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. If, by the withdrawal of
such Registrable Securities, a greater number of Registrable Securities held by
other Holders may be included in such registration (up to the limit imposed by
the underwriters), the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the proportion held by such Holders. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration. Subject to the foregoing, the Company will use its best
efforts to effect promptly the registration of all shares of Registrable
Securities on Form S-3 to the extent requested by the Holder or Holders thereof
for purposes of disposition.
Section 8. Expenses of Registration. In addition to the fees
and expenses contemplated by Section 9 hereof, all expenses incurred in
connection with one registration pursuant to Section 5 hereof and all
registrations pursuant to Sections 6 and 7 hereof, including without limitation
all registration, federal and state filing and qualification fees, printing
expenses, fees and disbursements of counsel for the Company and underwriters
(if the Company or the Holders are required to bear such fees and disbursements
of counsel for the underwriters) and expenses of any special audits of the
Company's financial statements incidental to or required by such registration,
shall be borne by the Company, except that the Company shall not be required to
pay underwriters' fees, discounts or commissions relating to Registrable
Securities or fees of a separate legal counsel of a Holder.
Section 9. Registration Procedures. In the case of each
registration effected by the Company pursuant to this Agreement, the Company
will keep each Holder participating therein advised in writing as to the
initiation of each registration and as to the completion thereof. At its
expense the Company will:
(a) prepare and file the appropriate registration
statement and keep such registration pursuant to Sections 5, 6 and 7
continuously effective for a period of nine (9) months, or, in each case, such
reasonable period necessary to permit the Holder or Holders to complete the
distribution described in the registration statement relating thereto,
whichever first occurs;
(b) promptly prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act, and to keep such registration statement effective for
that period of time specified in Section 9(a) above;
(c) furnish such number of prospectuses and other
documents incident thereto as a Holder or the underwriters of such offering
from time to time may reasonably request;
(d) use reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of a registration statement, or the
lifting of any suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction, at the earliest possible moment;
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<PAGE> 9
(e) subject to Section 5(a)(ii)(B), register or qualify
such Registrable Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions as any Holder or underwriter reasonably requires,
and keep such registration or qualification effective during the period set
forth in Section 9(a) above;
(f) cause all Registrable Securities covered by such
registrations to be listed on each securities exchange, including NASDAQ, on
which similar securities issued by the Company are then listed or, if no such
listing exists, use reasonable best efforts to list all Registrable Securities
on one of the New York Stock Exchanges, the American Stock Exchange or NASDAQ;
and
(g) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including, without limitation,
effecting a stock split or a combination of shares);
(h) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;
and
(i) at the request of any Holder of Registrable
Securities, furnish on the date that Registrable Securities are delivered to
the underwriters for sale or otherwise made available for sale pursuant to such
registration: (i) an opinion dated such date of counsel representing the
Company for the purposes of such registration, addressed to the underwriters
and to such Holder, stating that such registration statement has become
effective under the Securities Act and that (A) to the best knowledge of such
counsel, no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the registration statement, the
related prospectus and each amendment or supplement thereof comply as to form
in all material respects with the requirements of the Securities Act (except
that such counsel need not express any opinion as to financial statements or
other financial data contained therein) and (C) to such other effects as
reasonably may be requested by counsel for the underwriters or by such Holder
or its counsel and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act, and such letter shall additionally cover such other financial
matters (including information as to the period ending no more than five
business days prior to the date of such letter) with respect to such
registration as such underwriters reasonably may request; and
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<PAGE> 10
(j) notify each Holder, at any time a prospectus covered
by such registration statement is required to be delivered under the Securities
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and
prepare and file any amendment or supplement to such registration statement as
may be necessary to correct any such statement or omission; and
(l) take such other actions as shall be reasonably
requested by any Holder.
Section 10. Indemnification.
(a) In the event of a registration of any of the
Registrable Securities under the Securities Act pursuant to Sections 5, 6 or 7,
the Company will indemnify and hold harmless each Holder of such Registrable
Securities thereunder and its officers, directors and partners, each
underwriter of such Registrable Securities thereunder and each other person, if
any, who controls such Holder or underwriter within the meaning of the
Securities Act, against any losses, claims, expenses, damages or liabilities,
joint or several, to which such Holder or its officers, directors or partners,
underwriter or controlling person may become subject under the Securities Act
or otherwise, insofar as such losses, expenses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the 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 any violation by the Company of any rule or regulation
promulgated under the Securities Act or any state securities law applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, and will reimburse each such Holder,
each of its officers, directors and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such
underwriter, for any reasonable legal and any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any such case to the extent that any such claim, expense, loss, damage or
liability arises out of or is based on any untrue statement or alleged untrue
statement or omission or alleged omission in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder or underwriter specifically for use therein.
(b) Each Holder will, if Registrable Securities held by
or issuable to such Holder are included in the securities as to which such
registration is being effected, indemnify and hold harmless the Company, each
of its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company and each underwriter within the meaning of the Securities Act, and
each other such Holder, each of its officers, directors and partners and each
person controlling such Holder, against all claims, losses, expenses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration
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<PAGE> 11
statement, prospectus, or amendment or supplement thereof or 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, and will
reimburse the Company, such Holders, such directors, officers, partners,
persons or underwriters for any reasonable legal or any other expenses incurred
in connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus, or
amendment or supplement thereof in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder specifically for use therein; provided, however, the total amount for
which any Holder, its officers, directors and partners, and any person
controlling such Holder, shall be liable under this Section 10(b) shall not in
any event exceed the aggregate proceeds received by such Holder from the sale
of Registrable Securities sold by such Holder in such registration.
(c) Each party entitled to indemnification under this
Section 10 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claims as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, (provided that if there shall exist a conflict
of interest between the Indemnified Party and the Indemnifying Party, then
Indemnified Party's counsel shall be paid for by the Indemnifying Party) and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
hereunder, unless such failure resulted in actual detriment to the Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
(d) Notwithstanding the foregoing, to the extent that the
provisions on indemnification contained in the underwriting agreements entered
into among the selling Holders, the Company and the underwriters in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall be controlling
as to the Registrable Securities included in the public offering; provided,
however, that if, as a result of this Section 10(d), any Holder, its officers,
directors, and partners and any person controlling such Holder is held liable
for an amount which exceeds the aggregate proceeds received by such Holder from
the sale of Registrable Securities included in a registration, as provided in
Section 10(b) above, pursuant to such underwriting agreement (the "Excess
Liability"), the Company shall reimburse any such Holder for such Excess
Liability.
(e) If the indemnification provided for in this Section
10 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying
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<PAGE> 12
such indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such loss, liability, claim,
damage or expense in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and of the indemnified party on
the other hand in connection with the statements or omissions which resulted in
such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relevant fault of the indemnifying party and the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing, the amount any
Holder shall be obligated to contribute pursuant to this Section 10(e) shall be
limited to an amount equal to the proceeds to such Holder of the Registrable
Securities sold pursuant to the registration statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages which the
Holder has otherwise been required to pay in respect of such loss, claim,
damage, liability or action or any substantially similar loss, claim, damage,
liability or action arising from the sale of such Registrable Securities).
(f) The indemnification provided by this Section 10 shall
be a continuing right to indemnification and shall survive the registration and
sale of any securities by any Person entitled to indemnification hereunder and
the expiration or termination of this Agreement.
Section 11. Lockup Agreement. In consideration for the Company
agreeing to its obligations under this Agreement, each Holder agrees in
connection with any registration of the Company's securities (whether or not
such Holder is participating in such registration) upon the request of the
Company and the underwriters managing any underwritten offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such
period of time (not to exceed one hundred twenty (120) days) from the effective
date of such registration as the Company and the underwriters may specify, so
long as all Holders or stockholders holding more than one percent (1%) of the
outstanding Common Stock and all officers and directors of the Company are
bound by a comparable obligation provided, however, that nothing herein shall
prevent any Holder that is a partnership or corporation from making a
distribution of Registrable Securities to the partners or shareholders thereof
that is otherwise in compliance with applicable securities laws, so long as
such distributees agree to be so bound.
Section 12. Information by Holder. The Holder or Holders of
Registrable Securities included in any registration shall promptly furnish to
the Company such information regarding such Holder or Holders and the
distribution proposed by such Holder or Holders as the Company may request in
writing and as shall be required in connection with any registration referred
to herein.
Section 13. Rule 144 and 144A Reporting. With a view to making
available to Holders of Registrable Securities the benefits of certain rules
and regulations of the SEC which may permit the sale of the Registrable
Securities to the public without registration, the Company agrees at all
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<PAGE> 13
times after ninety (90) days after the effective date of the first registration
filed by the Company for an offering of its securities to the general public
to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144 and Rule 144A;
(b) file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act.
For purposes of facilitating sales pursuant to Rule 144A, so long as
the Company is not subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, each Holder and any prospective purchaser of such Holder's
securities shall have the right to obtain from the Company, upon request of the
Holder prior to the time of sale, a brief statement of the nature of the
business of the Company and the products and services it offers; and the
Company's most recent balance sheet and profit and loss and retained earnings
statements, and similar financial statements for the two preceding fiscal years
(the financial statements should be audited to the extent reasonably
available).
Section 14. Transfer of Registration Rights. The rights to cause
the Company to register Registrable Securities of a Holder and keep information
available granted to a Holder by the Company under Sections 5, 6 and 7 may be
assigned by a Holder to any partner or shareholder of such Holder, to any other
Holder, or to a transferee or assignee who receives at least the lesser of such
Holder's entire holding of Registrable Securities or 100,000 shares of
Registrable Securities (as adjusted for stock splits and the like; it being
understood that for purposes of this Section the Company's Series A Preferred
Stock shall constitute Registrable Securities on an as-converted basis);
provided, that the Company is given written notice by the Holder at the time of
or within a reasonable time after said transfer, stating the name and address
of said transferee or assignee and identifying the securities with respect to
which such registration rights are being assigned.
Section 15. Limitations on Subsequent Registration Rights. From
and after the date these registration rights are granted, the Company shall
not, without the prior written consent of the Holders of not less than fifty
percent (50%) of the Registrable Securities then held by Holders, enter into
any agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder to include such
securities in any registration filed under Sections 5, 6 or 7 hereof other than
rights identical or subordinate to the rights of any Holder hereunder.
Section 16. Termination of Rights.
(a) The rights of any particular Holder to cause the
Company to register securities under Sections 5, 6 and 7 shall terminate with
respect to such Holder at such time, following a bona fide, firmly underwritten
public offering of shares of the Company's Common Stock registered under the
Securities Act (provided that the aggregate gross offering price equals or
exceeds $7,500,000), as such Holder is able to dispose of all of his
Registrable Securities in one three-month period
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pursuant to the provisions of Rule 144, provided that such Holder holds not
more than one percent (1%) of the outstanding voting stock of the Company.
(b) Notwithstanding the provisions of paragraph (a) of
this section 16, the rights of any particular Holder to cause the Company to
register securities under Section 5 shall terminate eight (8) years after the
date of this Agreement.
Section 17. Put Option. In the event that a majority in
interest of the Holders have not effected a registration of Registrable
Securities under Section 5 of this Agreement by the time their registration
rights hereunder have terminated pursuant to Section 16(b), each of the Holders
shall have a "put" option to sell to the Company all or part of their
Registrable Securities for the Fair Market Value thereof (as defined below).
This option must be exercised by written notice to the Company within two (2)
years after the eight year anniversary of this Agreement. This option shall be
contingent upon the Company's ability to finance the purchase of such
Registrable Securities with senior bank indebtedness on terms and conditions
which are reasonable to the Company as determined by the Board of Directors in
its discretion; provided that the Company will be required to use its best
efforts to obtain such financing. If the Company is a reporting company under
the Exchange Act and the Common Stock is publicly traded, "Fair Market Value"
shall be defined as the average of the daily closing prices per share of Common
Stock for thirty (30) consecutive trading days ending no more than one (1)
business day before the date that the Company received the option notice (as
adjusted for any stock dividend, split, combination or reclassification that
took effect during such 30 consecutive trading day period). The closing price
for each day shall be the last reported sale price regular way or, in case no
such reported sale takes place on such day, the average of the last closing bid
and asked prices regular way, in either case as reported by NASDAQ or any
comparable system or, if the Common Stock is not listed on NASDAQ or any
comparable system, the average of the closing bid and asked prices as furnished
by two members of the National Association of Securities Dealers, Inc. selected
from time to time by the Seller for that purpose. If the Common Stock is not
publicly traded, Fair Market Value shall be determined by agreement among the
Holders and the Company, or if the parties are unable to agree within thirty
days after the date of the option notice, by a nationally recognized investment
banking, accounting or appraisal firm selected by the Company and a majority in
interest of the Holders. This Section 17 shall be of no force or effect (i)
upon a termination of registration rights as provided in Section 16 (a) of this
Agreement, (ii) in the event that the Holders shall have effected a
registration of at least 75% of the Registrable Securities under Sections 5, 6
or 7 of this Agreement, or (iii) in the event of a firmly underwritten public
offering of Common Stock (provided that the aggregate gross offering price
equals or exceeds $7,500,000.)
Section 18. Representations and Warranties of the Company. The
Company represents and warrants to the Holders as follows:
(a) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Articles of Incorporation or Bylaws of the
Company or any provision of any indenture, agreement or other instrument to
which it or any or its properties or assets is bound, conflict with, result in
a breach of or constitute (with due notice or
14
<PAGE> 15
lapse of time or both) a default under any such indenture, agreement or other
instrument or result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and moratorium
laws and other laws of general application affecting enforcement of creditors'
rights generally and (ii) the availability of equitable remedies as such
remedies may be limited by equitable principles of general applicability
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
Section 19. Miscellaneous.
(a) Amendments. This Agreement may be amended only by a
writing signed by the Company and by the Holders of more than fifty percent
(50%) of the Registrable Securities, as constituted from time to time. The
Holders hereby consent to future amendments to this Agreement that permit
future investors, other than employees, officers or directors of the Company,
to be made parties hereto and to become Holders of Registrable Securities;
provided, however, that no such future amendment may materially impair the
rights of the Holders hereunder without obtaining the requisite consent of the
Holders, as set forth above. For purposes of this Section, Registrable
Securities held by the Company or beneficially owned by any officer or employee
of the Company shall be disregarded and deemed not to be outstanding.
(b) Counterparts. This Agreement may be executed in any
number of counterparts, all of which shall constitute a single instrument.
(c) Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and may be sent initially
by facsimile transmission and shall be mailed by registered or certified mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a)
if to a Holder, at such Holder's address set forth on the books of the Company,
or at such other address as such Holder shall have furnished to the Company in
writing, or (b) if to any other holder of any Registrable Securities, at such
address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such securities who has so furnished an address
to the Company, or (c) if to the Company, to the Company's current address at
8572 Katy Freeway, Suite 101, Houston, Texas 77024, or at such other address as
the Company shall have furnished to the Holders. Each such notice or other
communication shall for all purposes of this Agreement be treated as effective
or having been given when delivered if delivered personally, or, if sent by
first class, postage prepaid mail, at the earlier of its receipt or seventy-two
(72) hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
(d) Nonpublic Information. Any other provisions of this
agreement to the contrary notwithstanding, the Company's obligation to file a
registration statement, or cause such
15
<PAGE> 16
registration statement to become and remain effective, shall be suspended for a
period not to exceed 30 days (and for periods not exceeding, in the aggregate,
60 days in any 24-month period) if there exists at the time material non-public
information relating to the Company which, in the reasonable opinion of the
Company, should not be disclosed.
(e) Severability. If any provision of this Agreement
shall be held to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall attach only to such provision and shall
not in any manner affect or render illegal, invalid or unenforceable any other
provision of this Agreement, and this Agreement shall be carried out as if any
such illegal, invalid or unenforceable provision were not contained herein.
(f) Dilution. If, and as often as, there is any change
in the Common Stock or the Convertible Preferred Stock by way of a stock split,
stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock or the Convertible Preferred Stock as so changed.
(g) Governing Law. This Agreement shall be governed by
and construed under the laws of the State of Texas without regard to principles
of conflict of law.
(SIGNATURE PAGE FOLLOWS)
16
<PAGE> 17
COMPANY: PACKAGED ICE, INC.
By:
---------------------------------
JAMES F. STUART, PRESIDENT
STOCKHOLDERS: THE FOOD FUND II LIMITED PARTNERSHIP
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
NORWEST EQUITY PARTNERS V, A
MINNESOTA LIMITED PARTNERSHIP
By: ITASCA PARTNERS V, L.L.P.,
ITS GENERAL PARTNER
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
17
<PAGE> 1
EXHIBIT 10.22
AMENDMENT NO. 1
TO
REGISTRATION RIGHTS AGREEMENT
This Amendment No 1. dated as of January 17, 1997 (this
"Amendment") to that certain Registration Rights Agreement made as of the 20th
day of September, 1995 (the "Registration Rights Agreement") by and among
Packaged Ice, Inc., a Texas corporation (the "Company"), Norwest Equity
Partners V, a Minnesota Limited Partnership ("NEP"), and The Food Fund II
Limited Partnership (the "Food Fund"). All capitalized terms used herein and
not defined herein shall have the meanings set forth in the Registration Rights
Agreement.
WHEREAS, Steven P. Rosenberg ("Rosenberg"), NEP and the Food Fund
(collectively, the "Purchasers") are desirous of purchasing shares of Series B
Convertible Preferred Stock of the Company ("Series B Preferred Stock")
pursuant to a Stock Purchase Agreement among the Purchasers and the Company
(the "Stock Purchase Agreement"); and
WHEREAS, as partial inducement for the Purchasers to enter into
the Stock Purchase Agreement and to purchase the Series B Preferred Stock
pursuant thereto, the Company in the Stock Purchase Agreement has agreed that
the obligation of the Purchasers to purchase the Series B Preferred Stock shall
be conditioned upon the execution and delivery of an amendment to the
Registration Rights Agreement such that the shares of Common Stock of the
Company issued or issuable upon conversion of the Series B Preferred Stock are
considered Registrable Securities under the Registration Rights Agreement and
certain other modifications are made to the Registration Rights Agreement; and
WHEREAS, the parties hereto wish to enter into this Amendment to
implement the aforesaid condition of the Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
obligations of the parties hereto, the parties do hereby agree as follows:
1. Amendments. The Registration Rights Agreement is amended
as set forth below.
(a) Section l(h) of the Registration Rights Agreement is
hereby amended by amending and restating the first sentence thereof in its
entirety as follows:
"(h) 'Registrable Securities' shall mean all of the following
to the extent the same have not been sold to the public (i) any and all
shares of Common Stock of the Company issued to or held by Norwest
Equity Partners V, a Minnesota Limited Partnership ("NEP"), and The Food
Fund II Limited Partnership (the "Food Fund"), including without
limitation the Common Stock of the Company sold to NEP and the
1
<PAGE> 2
Food Fund on the date hereof and the Common Stock of the Company issued
or issuable upon conversion of shares of the Company's Series A
Convertible Preferred Stock or the Company's Series B Convertible
Preferred Stock; (ii) any and all shares of Common Stock of the Company
issued or issuable upon conversion of the Company's Series B Convertible
Preferred Stock issued to Steven P. Rosenberg ("Rosenberg") (it being
understood that any Common Stock now or hereafter owned by Rosenberg
other than the Common Stock issued or issuable upon conversion of the
Series B Convertible Preferred Stock shall not be considered Registrable
Securities and shall have no rights under this Agreement nor shall be
subject to any of the restrictions contained in this Agreement); (iii)
stock issued in respect of stock referred to in (i) or (ii) above in any
reorganization, merger, consolidation or sale of all or substantially
all of the Company's assets, or (iv) stock issued in respect of the
stock referred to in (i), (ii) or (iii) as a result of a stock split,
stock dividend, recapitalization or combination."
(b) Section 5(a)(ii) of the Registration Rights Agreement
shall be amended by amending and restating subparagraphs (A) and (E) thereof in
their entirety as follows:
"(A) prior to five (5) years or after nine (9) years from
September 20, 1995;
*********
(E) after the Company has effected two such registrations
pursuant to this Section 5 and such registrations have been
declared or ordered effective;"
(c) Section 8 of the Registration Rights Agreement shall be
amended and restated in its entirety as follows:
"Section 8. Expenses of Registration. In addition to the fees
and expenses contemplated by Section 9 hereof, all expenses incurred in
connection with two registrations pursuant to Section 5 hereof and all
registrations pursuant to Sections 6 and 7 hereof, including, without
limitation all registration, federal and state filing and qualification
fees, printing expenses, fees and disbursements of counsel for the
Company and underwriters (if the Company or the Holders are required to
bear such fees and disbursements of counsel for the underwriters) and
expenses of any special audits of the Company's financial statements
incidental to or required by such registration, shall be borne by the
Company, except that the Company shall not be required to pay
underwriters' fees, discounts or commissions relating to Registrable
Securities or fees of a separate legal counsel of a Holder."
(d) Section 14 of the Registration Rights Agreement shall be
amended and restated in its entirety as follows:
"Section 14. Transfer of Registration Rights. The rights to
cause the Company to register Registrable Securities of a Holder and
keep information available granted to a Holder by the Company under
Sections 5, 6 and 7 may be assigned by a Holder to any
2
<PAGE> 3
partner or shareholder of such Holder, to any other Holder, to a member
of such Holder's Affiliate Group (as defined in the Amended and Restated
Shareholders Agreement dated September 20, 1995 by and among the Company
and the shareholders of the Company parties thereto, as amended from
time to time), or to a transferee or assignee who receives at least the
lesser of such Holder's entire holding of Registrable Securities or
100,000 shares of Registrable Securities (as adjusted for stock splits
and the like; it being understood that for purposes of this Section the
Company's Series A Convertible Preferred Stock and the Company's Series
B Convertible Preferred Stock shall constitute Registrable Securities on
an as-converted basis); provided, that the Company is given written
notice by the Holder at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such
registration rights are being assigned."
(e) Section 16(b) of the Registration Rights Agreement shall
be amended and restated in its entirety as follows:
"(b) Notwithstanding the provisions of paragraph (a) of this
Section 16, the rights of any particular Holder to cause the Company to
register securities under Section 5 shall terminate on September 20,
2004."
(f) Section 17 of the Registration Rights Agreement shall be
amended by amending and restating the second sentence thereof in its entirety
as follows:
"This option must be exercised by written notice to the Company
within two (2) years after September 20, 2004."
2. Agreement of Rosenberg. By executing the acknowledgment
set forth below, Rosenberg shall become a party to the Registration Rights
Agreement, as amended hereby.
3. Effect of Amendment. Except as expressly amended hereby,
the Registration Rights Agreement is hereby ratified and confirmed in every
respect and shall remain in full force and effect in accordance with its terms.
4. Counterparts. This Amendment may be executed in any
number of counterparts and by the different parties on separate counterparts,
all of which taken together
3
<PAGE> 4
shall constitute one and the same instrument. A facsimile of an executed
counterpart shall be deemed to be an original, executed counterpart.
5. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Texas.
6. 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.
7. 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.
SIGNATURE PAGES FOLLOW
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
PACKAGED ICE, INC.
By
----------------------------------
Its
-------------------------------
NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED PARTNERSHIP
By Itasca Partners V,
Its General Partner
By
-----------------------------------
Its
--------------------------------
THE FOOD FUND II LIMITED PARTNERSHIP
By
-----------------------------------
Its
--------------------------------
5
<PAGE> 6
The undersigned hereby agrees to
be bound by and will be entitled to
the terms and conditions of the
Registration Rights Agreement,
as amended hereby.
- --------------------------------
Steven P. Rosenberg
6
<PAGE> 1
EXHIBIT 10.23
SUPPLEMENTAL
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE 12, 1997
AMONG
PACKAGED ICE, INC.,
AND
NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED PARTNERSHIP,
THE FOOD FUND II LIMITED PARTNERSHIP,
AND STEVEN P. ROSENBERG
<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 . . . . . . . . . . . . . . . . . . . . . . . . . 5
(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 . . . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Successors and Assigns . . . . . . . . . . . . . . . . 18
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . 19
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . 19
(h) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . 19
(i) Severability . . . . . . . . . . . . . . . . . . . . . 19
(j) Third Party Beneficiary . . . . . . . . . . . . . . . . 19
(k) Entire Agreement . . . . . . . . . . . . . . . . . . . 19
(l) Securities Held by the Company or Its Affiliates . . . 19
</TABLE>
<PAGE> 3
SUPPLEMENTAL REGISTRATION RIGHTS AGREEMENT
THIS SUPPLEMENTAL REGISTRATION RIGHTS AGREEMENT (the "Agreement") is
made and entered into as of June 12, 1997, among PACKAGED ICE, INC., a Texas
corporation (the "Company"), NORWEST EQUITY PARTNERS V, a Minnesota Limited
Partnership, THE FOOD FUND II LIMITED PARTNERSHIP, and STEVEN P. ROSENBERG
(individually an "Investor" and collectively the "Investors").
WHEREAS, the Company and the Investors are parties to that certain
Registration Rights Agreement dated September 20, 1995, as amended by Amendment
No. 1 to Registration Rights Agreement dated January 17, 1997 (the "Norwest
Agreement") which is incorporated herein by reference; and
WHEREAS, the Company has granted more favorable demand registration
rights to certain other holders of securities, which grant required the consent
of the Investors; and
WHEREAS, in consideration for such consent, the Company is desirous of
entering into this Supplemental Registration Rights Agreement which contains
registration rights substantially as those granted to other holders of
securities, which shall be in addition to those rights granted under the
Norwest Agreement.
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.
<PAGE> 4
"Holder" means each individual Investor, for so long as he
or she owns any of the Registrable Securities, and each of his and her
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.
"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.
"Investor" 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.
"Merger Agreement" has the meaning ascribed to that term in the
preamble of this Agreement.
"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" has the same meaning given to such term
in the Norwest Agreement. As to any particular Registrable Securities
for the purposes of this Agreement, 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
2
<PAGE> 5
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 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 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.
3
<PAGE> 6
"Selling Holder" shall mean a Holder who is selling Registrable
Securities in accordance with the provisions of Section 2.1 or 2.2
hereof.
"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 two 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 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
4
<PAGE> 7
the Holders of all of the Registrable Securities covered thereby, then the
Company shall continue to be obligated to effect an additional 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, 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
5
<PAGE> 8
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) 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. 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 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
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<PAGE> 9
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 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.
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
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<PAGE> 10
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:
(i) 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 two Demand Registrations the Company is required to effect
pursuant to Section 2.1 hereof.
(ii) 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 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.
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<PAGE> 11
(iii) 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.
(iv) 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 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
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<PAGE> 12
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 provisions
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.
(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
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<PAGE> 13
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 underwriting 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, and of
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); 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
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<PAGE> 14
(A) qualify generally to do business in any jurisdiction where it is not
then so 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,
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<PAGE> 15
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 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 (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
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<PAGE> 16
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 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
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<PAGE> 17
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.
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 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, liability, claim, damage 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 mended 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.
15
<PAGE> 18
(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 "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 (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
16
<PAGE> 19
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 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. In the
event of a conflict of construction or a conflict in the grant of rights
between the Norwest Agreement and this Agreement, the more favorable
construction or grant of rights, as the case may be, shall prevail, as
determined by the Holders.
(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 departure
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 and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder at the most current address of such
Holder as set forth in stock register of the Company, which address initially
is, with respect to the Investors, the address set forth in the Merger
Agreement and (ii) if to the Company, initially at the Company's address set
forth in the Merger Agreement and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section (d).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
18
<PAGE> 21
(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 NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, 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 NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(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. The Norwest Agreement and this
Agreement, collectively are intended by the parties as a final expression of
their agreement, 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 and the Norwest Agreement
supersede 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.
19
<PAGE> 22
SUPPLEMENTAL REGISTRATION RIGHTS AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PACKAGED ICE, INC.
By:
-------------------------------
Name: James F. Stuart
Title: Chief Executive Officer
NORWEST EQUITY PARTNERS V,
a Minnesota Limited Partnership
By: ITASCA PARTNERS V,
Its General Partner
By:
-------------------------------
Its:
-------------------------------
THE FOOD FUND II LIMITED
PARTNERSHIP
By:
-------------------------------
Its:
-------------------------------
<PAGE> 1
EXHIBIT 10.24
PARALLEL EXIT AGREEMENT
THIS PARALLEL EXIT AGREEMENT is made and entered into effective the
20th day of September, 1995, by and among PACKAGED ICE, INC., a Texas
corporation (the "Company"), JAMES F. STUART ("Stuart"), JACK STAZO ("Stazo")
and the Investors who have executed a counterpart of this Agreement
(collectively "the Investors" and individually as the "Investor").
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 and Stazo.
"Investors" shall mean those persons and entities, excluding
the Company and the Insider Shareholders, who have executed this Agreement on
one of the signature pages set forth hereinbelow.
"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, 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
<PAGE> 2
Common Stock), if, immediately after giving effect to such 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 each of
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.
Each of the Investors who elect to participate in such Subject Sale shall be
entitled to sell his 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 each Investor at least
ten (10) days prior written notice of any Subject Sale. Each Investor should
provide the Company with the number of Fully-Diluted Shares which the Investor
desires 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 all 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 a person, as appropriate, who is 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 all parties have executed a counterpart
(but not necessarily the same counterpart) of this Agreement.
2
<PAGE> 3
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 two-thirds (2/3rds) of the Investors in interest and not in
number. Any amendment or waiver effected in accordance with the preceding
sentence shall be binding on all Investors, including those that did not
execute such amendment or waiver.
8. LEGENDS. The Company will cause each certificate that
evidences any securities or stock that are 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 September 20, 1995, 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
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
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Shareholders:
--------------------------------
(signature)
--------------------------------
(printed name)
--------------------------------
(title, if applicable)
4
<PAGE> 1
EXHIBIT 10.25
AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
This Amended and Restated Shareholders Agreement is made and entered
into effective September 20, 1995 by and among PACKAGED ICE, INC., a Texas
corporation (the "Company") and the Shareholders who have executed this
Agreement on one of the signature pages set forth below (collectively
"Shareholders" and individually "Shareholder").
W I T N E S S E T H:
WHEREAS, the Shareholders are the holders of all of the issued and
outstanding capital stock of the Company, which consists of common stock, with
each share having a par value of $.01 per share (the "Common Stock") and the
Series A Convertible Preferred Stock (the Series A Preferred Stock); and
WHEREAS, certain of the Shareholders and the Company are parties to a
Shareholders Agreement originally dated as of January 9, 1992 as amended by
that certain First Amendment to Shareholders Agreement dated January 4, 1994
(collectively, the "Original Shareholders Agreement"); and
WHEREAS, the Shareholders are desirous of making certain amendments
and modifications to the Original Shareholders Agreement by this Amended and
Restated Shareholders Agreement, which is being executed by the holders of not
less than eighty percent (80%) of the Common Stock of the Company, excluding
shares issued as of the date hereof, as required by Section 10 of the Original
Shareholders Agreement; and
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the parties hereby agree as follows:
1. Restriction on Transfer. Each Shareholder agrees not to
transfer, assign, hypothecate, pledge, or in any way alienate or dispose of any
of his or her Common Stock or Series A Preferred Stock (hereinafter the
"Stock"), or any right or interest therein, whether voluntary or by operation
of law, or by gift or otherwise, without the prior written consent of the
Company and the holders of not less than eighty percent (80%) of the Stock of
the Company except a transfer which meets the requirements of this Agreement.
Each Shareholder agrees that notwithstanding anything to the contrary contained
in this Agreement, all Stock now owned or hereafter acquired, including, but
not limited to, any Stock acquired pursuant to a stock option plan, stock
rights offering, or an employee benefit plan, or by purchase, gift, transfer,
inheritance or otherwise shall be subject to the terms and conditions hereof.
Any purported transfer in violation of any provision of this Agreement shall be
void and ineffectual, and shall not operate to transfer any interest or title
in the purported transferee.
2. Permitted Transfers. Subject to the conditions set forth
herein, the following transfers are permitted under the terms hereof:
<PAGE> 2
(A) The Company and the Shareholders do hereby consent to
all transfers by a Shareholder (or a deceased Shareholder's estate) to the
Company or to a Family Member, or to any corporation, partnership, or limited
liability company in which the Shareholder and the Shareholder's Family Members
own all of the outstanding equity securities. For the purposes of this
Agreement, a person's "Family Member" shall mean such person's spouse,
siblings, parents, children, or other lineal descendants (whether by adoption
or consanguinity), and shall also mean a trust, the primary beneficiary of
which is the person's spouse, siblings, parents, children, or other lineal
descendants (whether by adoption or consanguinity).
(B) Notwithstanding anything to the contrary contained in
this Agreement, it is expressly agreed that a Shareholder shall have the right
to transfer all or any part of his shares of Stock to any other member of that
Shareholder's Affiliate Group. For the purposes of this Agreement, "Affiliate
Group" shall mean those groups of Shareholders which are described on Exhibit
I, attached hereto and incorporated herein by reference.
In the event of a transfer pursuant to this Section 2 to any
person who is not a Shareholder, the transferee shall (by written supplement to
this Agreement) become a party to this Agreement and shall thereafter hold his
Stock subject to the terms, covenants and conditions contained in this
Agreement.
The Company covenants and agrees that it shall not issue
shares of Stock to any person who is not a party to this Agreement unless and
until such person shall (by written supplement to this Agreement) become a
party to this Agreement and shall thereafter hold his Stock subject to the
terms, covenants and conditions contained in this Agreement.
3. Right of First Refusal. Except for a sale or transfer
permitted under Section 2 of this Agreement, if a Shareholder desires to sell,
transfer (with or without consideration) or otherwise alienate or dispose of
all or any part of his Stock in a bona fide transaction, said Shareholder shall
first offer to sell to the Company said Stock. Such offer shall be made by an
irrevocable written offer to sell said Stock for the same price and on the same
terms as offered by any proposed transferee. The offer shall contain a true
and correct copy of any writing which contains a bona fide offer by which a
third party proposes to purchase the Stock and shall contain a complete
description of the transaction in which the Shareholder proposes to transfer
said Stock to any third party, including the name of the proposed transferee
and the consideration for and any other terms of the proposed transfer. The
Company shall have thirty (30) days after actual receipt of such offer within
which to advise the Shareholder whether or not the Company will purchase all of
the Stock so offered for the same price and on the same terms as those offered
to the proposed transferee. If the Company does not so elect to purchase all
of the offered Stock, the Company shall offer the right to purchase all such
Stock not being purchased by the Company to the other Shareholders as provided
in Section 5 of this Agreement. If the Company and all the other Shareholders
decline to purchase all of such Stock in accordance with this Section 3, the
Shareholder shall then have sixty (60) days within which to sell or transfer
the offered Stock to the third party named in the offer made by the Shareholder
to the Company, upon the exact terms described in such offer. As a condition
to the closing of any such transfer of Stock to a third party, the third party
shall (by written supplement to this Agreement) become a party to this
Agreement and shall thereafter hold his Stock
<PAGE> 3
subject to the terms, covenants and conditions contained in this Agreement. In
the event such a sale to a third party shall not be consummated as hereinabove
provided, the right of the Shareholder to effect such sale shall terminate and
the restrictions against sale or transfer contained in this Agreement shall
obtain with the same force and effect as if the actions set forth in this
Section 3 had not occurred.
4. Sale Price and Terms of Sale. The Closing of such sale shall
take place within ninety (90) days after the date on which the option to
purchase the Stock arose, at the principal offices of the Company, or such
other location as is mutually agreed to. At the Closing, the purchaser(s)
shall pay as a down payment ten percent (10%) of the purchase price, in cash,
and shall execute a promissory note for the balance due of such purchase price.
Such promissory note shall be payable in five (5) equal annual installments of
principal and interest, which interest shall accrue on the unpaid principal
balance of the note at the lesser of nine percent (9%) per annum or the prime
rate as announced by Texas Commerce Bank Houston, National Association on the
date of the note, with such rate of interest to be adjusted on each anniversary
date of the note, with such rate of interest never to exceed the maximum
interest rate permitted by law. Payments on the note shall commence on the
first of the month next following the expiration of twelve (12) months
following the date of the sale and shall continue annually thereafter until the
note is paid in full.
At the Closing of such sale, the seller shall assign
and deliver the certificates representing the Stock being sold (duly endorsed
for transfer and free of any liens or encumbrances whatsoever) to the
purchaser, and the purchaser shall deliver to the seller the consideration
therefor specified in accordance with this Agreement. In addition, the
purchaser shall pledge the purchased shares of Stock to the selling Shareholder
(or legal representative) as collateral, pursuant to a stock pledge agreement
reasonably acceptable to the parties thereto. Any stock transfer or similar
taxes involved in such sale shall be paid by the seller, and the seller shall
provide the purchaser with such evidence of the seller's authority to sell
hereunder and such tax lien waivers and similar instruments as the purchaser
may reasonably request.
5. Remaining Shareholders' Option. If the Company has an option
to purchase Stock under this Agreement and it does not elect to make the
purchase, or is legally unable to make the purchase, the President of the
Company shall notify the other Shareholders of the number of shares of Stock it
will not purchase and such other Shareholders shall have the option or
obligation (as the case may be) for a period of thirty (30) additional days, to
purchase all of such shares of Stock upon the same terms and conditions
described in this Agreement. Each such other Shareholder shall have the option
to purchase such portion of the Stock offered for sale under this Section 5 as
the number of shares of Stock owned by him or her at such time shall bear to
the total number of shares of Stock owned by all the other Shareholders,
excluding the selling Shareholder. If any Shareholder does not purchase his or
her full portion of such shares of Stock, the remaining shares of Stock may be
purchased by the other Shareholders pro rata in the same manner.
6. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns (including each transferee of any party's Stock); provided,
however, no transferee of Stock in a public offering registered under the
Securities Act of 1933 or in an unsolicited open market sale effected through a
securities broker
3
<PAGE> 4
shall be bound by or entitled to the benefits of this Agreement. As used in
this Agreement, the terms "Shareholder(s)" shall include any transferee of a
Shareholder, as appropriate, who is bound by and entitled to the benefits of
this Agreement under the preceding sentence.
7. Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
8. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall together constitute a single agreement. A
facsimile of an executed Agreement shall be deemed to be an original, executed
counterpart.
9. Amendments. This Agreement may be amended, and any provision
hereof may be waived, only by a written agreement executed by the holders of
not less than eighty percent (80%) of the Common Stock and Series A Preferred
Stock voting as a single class with the Series A Preferred Stock voting on an
as-converted basis. Notwithstanding the foregoing, the parties agree that the
Company is authorized to execute additional counterparts of this Agreement at
such times as new shareholders enter into this Agreement.
10. Legends. The Company will cause each certificate that
evidences any Stock that is subject to this Agreement to bear a legend
substantially as follows, which shall be typed, printed, or stamped thereon in
a conspicuous manner:
"The shares evidenced by this certificate are subject to an
Amended and Restated Shareholders Agreement dated September 20, 1995,
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.
11. Termination. This Agreement shall terminate only (i) if the
Company permanently ceases to do business; (ii) if there is consummated an
underwritten public offering of the Stock of the Company which results in net
proceeds to the Company and the Shareholders of at least $7,500,000; or (iii)
upon the written agreement of the holders of no less than eighty percent (80%)
of the outstanding Common Stock and Series A Preferred Stock voting as a single
class.
12. Construction. Whenever used herein, the singular number shall
include the plural, and the plural number shall include the singular, and the
masculine gender shall include the feminine and the neuter, and the feminine
shall include the masculine and the neuter, and the neuter shall include the
masculine and the feminine.
4
<PAGE> 5
13. Community Property. If a Shareholder is married on the date
of the execution of this Agreement, he or she shall be joined in the execution
hereof by his or her spouse to evidence the agreement of such spouse that the
provisions of this Shareholders Agreement shall bind any community property
interest he or she may now or hereafter own in the Stock; provided, however,
such spouse's execution and joinder herein shall not create any ownership
interest in any of the Stock.
14. Waiver. The failure of any party to insist in any one or more
cases upon the strict performance of any of the terms, covenants, conditions,
provisions or agreements of this Agreement, or to exercise any option herein
contained, shall not be construed as a waiver or relinquishment for the future
of any such term, covenant, condition, provision or agreement of this
Agreement.
15. Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties with respect to the subject matter
hereof. Any and all prior Shareholders Agreements (including the Original
Shareholders Agreement), discussions, representations, negotiations,
understandings and agreements are hereby merged into this Agreement and shall
not survive the execution hereof.
16. Headings; Gender. The captions and headings throughout this
Agreement are for convenience and reference only, and the words contained
herein shall in no way be deemed to define, limit, describe, explain, modify,
amplify or add to the interpretation, construction or meaning of any provisions
of or the scope or intent of this Agreement nor in anyway affect this
Agreement.
17. Corporate Authority. Each corporation which is a party to
this Agreement respectively represents and warrants to the other parties that
all necessary corporate action has been duly taken to authorize the execution
and delivery of this Agreement and the performance or observance of the
provisions of this Agreement.
18. Further Assurances. The parties agree that they will, at any
time and from time to time, upon request of the other, do, execute, acknowledge
and deliver, or will cause to be done, executed, acknowledged and delivered,
all such further acts, deeds, assignments, transfers, conveyances, powers of
attorney and assurances as may be reasonably necessary to carry out the purpose
or intent of the provisions of this Agreement.
19. 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
similar overnight service to the addresses of Shareholders as set forth on the
stock transfer records of the Company and to the Company at 8572 Katy Freeway,
Suite 101, Houston, Texas 77024 or to such other addresses as a party shall
provide to the other parties in accordance with this Section.
20. Severability. The provisions of this Agreement are severable
and the invalidity or unenforceability of any provision hereof shall not affect
the validity or enforceability of any other
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<PAGE> 6
provisions. In addition, in the event that any provision of this Agreement (or
portion thereof) is determined by a court to be unenforceable as drafted by
virtue of the scope, duration, extent or character of any obligation contained
therein, the parties acknowledge that it is their intention that such provision
(or portion thereof) shall be construed in a manner designed to effectuate the
purposes of such provision to the maximum extent enforceable under applicable
law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
The Company: PACKAGED ICE, INC.
By:
---------------------------------
JAMES F. STUART, President
SIGNATURE PAGE FOLLOWS
6
<PAGE> 7
Spouses Joinder as to
Community Interest: Shareholders:
- ---------------------------- ---------------------------------------
(signature)
---------------------------------------
(printed name)
---------------------------------------
(title, if applicable)
7
<PAGE> 8
EXHIBIT I
AFFILIATE GROUPS
1. The following persons shall be members of the Affiliate Group known as
the "Fleming Companies Group":
Fleming Companies, Inc. and any affiliate, subsidiary, parent
corporation of Fleming Companies, Inc.
2. The following persons shall be members of the Affiliate Group known as
the "Norwest/Food Fund Group":
The Food Fund Limited Partnership ("Food Fund") and Norwest
Equity Partners V, a Minnesota Limited Partnership ("Norwest"), and all general
and limited partners of either such entity, and any entities controlled by
Norwest Corporation.
3. The following persons shall be members of the Affiliate Group known as
the "Lewis Group":
Frances H. Billups Marcella L.H. Billups
A.J. Lewis, Jr. Peggy W. Lewis
A.J. Lewis, III Steve C. Lewis
James W. Gorman Hugh Halff, Jr.
4. The following persons shall be members of the Affiliate Group known as
the "Stuart Group":
Jack Stazo
James F. Stuart
5. The following persons shall be members of the Affiliate Group known as
the "Rosenberg Group":
Steven P. Rosenberg
Lia Nissel
William Nissel
Gary Siegel
Michael Jesselson
Any individual designated by Steven P. Rosenberg to serve on
the Board of Directors of the Company as his designee pursuant
to any voting agreement among the Company, Steven P. Rosenberg
and a majority or more of its shareholders
8
<PAGE> 1
EXHIBIT 10.26
AMENDMENT NO. 1
TO
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
This Amendment No 1. dated as of January 17, 1997 (this
"Amendment") to that certain Amended and Restated Shareholders Agreement
effective the 20th day of September, 1995 (the "Shareholders Agreement") by
and among Packaged Ice, Inc., a Texas corporation (the "Company"), and the
shareholders of the Company set forth on Exhibit A hereto (the "Shareholders").
All capitalized terms used herein and not defined herein shall have the
meanings set forth in the Shareholders Agreement.
WHEREAS, Steven P. Rosenberg, Norwest Equity Partners V, a
Minnesota Limited Partnership, and The Food Fund II, Limited Partnership
(collectively, the "Purchasers") are desirous of purchasing shares of Series B
Convertible Preferred Stock of the Company ("Series B Preferred Stock")
pursuant to a Stock Purchase Agreement among the Purchasers and the Company
(the "Stock Purchase Agreement"); and
WHEREAS, as partial inducement for the Purchasers to enter
into the Stock Purchase Agreement and to purchase the Series B Preferred Stock
pursuant thereto, the Company in the Stock Purchase Agreement has agreed that
the obligation of the Purchasers to purchase the Series B Preferred Stock shall
be conditioned upon the execution and delivery of an amendment to the
Shareholders Agreement such that the Series B Preferred Stock is entitled to
the same rights and preferences and is subject to the same obligations as the
Common Stock and the Series A Preferred Stock as set forth in the Shareholders
Agreement; and
WHEREAS, the parties hereto wish to enter into this Amendment
to implement the aforesaid condition of the Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual obligations of the parties hereto, the parties do hereby agree as
follows:
1. Amendments. The Shareholders Agreement is amended as
set forth below.
(a) The first sentence of Section 1 of the Shareholders
Agreement is hereby amended and restated in its entirety as follows:
"Each Shareholder agrees not to transfer, assign, hypothecate, pledge,
or in any way alienate or dispose of any of his or her Common Stock,
Series A Preferred Stock or Series B Convertible Preferred Stock of
the Company (the "Series B Preferred Stock") or any capital stock of
the Company convertible into Common Stock (hereinafter the "Stock"),
or any right or interest therein, whether voluntary or by operation of
law, or by gift or otherwise, without the prior written consent of the
Company and the holders of not less than eighty percent (80%) of the
Stock except a transfer which meets the requirements of this
Agreement."
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<PAGE> 2
(b) This first sentence of Section 9 of the Shareholders
Agreement shall be amended and restated in its entirety as follows:
"This Agreement may be amended, and any provision hereof may be
waived, only by a written agreement executed by the holders of not
less than eighty percent (80%) of the Stock voting as a single class
with the Series A Preferred Stock, Series B Preferred Stock and other
capital stock of the Company convertible into Common Stock voting on
an as-converted basis."
(c) Section 11 of the Shareholders Agreement shall be
amended and restated in its entirety as follows:
11. Termination. "This Agreement shall terminate only (i)
if the Company permanently ceases to do business; (ii) if there is
consummated an underwritten public offering of the Stock of the
Company which results in net proceeds to the Company and the
Shareholders of at least $7,500,000; or (iii) upon the written
agreement of the holders of no less than eighty percent (80%) of the
Stock voting as a single class with the Series A Preferred Stock,
Series B Preferred Stock and other capital stock of the Company
convertible into Common Stock voting on an as-converted basis."
(d) Exhibit 1 of the Shareholders Agreement is hereby
amended by adding James M. Raines as a member of the Affiliate Group known as
the "Lewis Group".
2. Effective Date. This Amendment shall be effective
when executed by the holders of not less than eighty percent (80%) of the
Common Stock and the Series A Preferred Stock voting as a single class with the
Series A Preferred Stock voting on an as converted basis
3. Effect of Amendment. Except as expressly amended
hereby, the Shareholders Agreement is hereby ratified and confirmed in every
respect and shall remain in full force and effect in accordance with its terms.
4. Community Property. If a Shareholder is married on
the date of the execution of this Amendment, he or she shall be joined in the
execution hereof by his or her spouse to evidence the agreement of such spouse
that the provisions of this Amendment shall bind any community property
interest he or she may now or hereafter own in the Stock; provided, however,
such spouse's execution and joinder herein shall not create any ownership
interest in any of the Stock.
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.
2
<PAGE> 3
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.
SIGNATURE PAGES FOLLOW
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
PACKAGED ICE, INC.
By
----------------------------
Its
-----------------------
4
<PAGE> 5
SHAREHOLDER:
Spouses Joinder as to If a Person
Community interest
- ---------------------------- -------------------------------
Print Name
---------------------
If an Entity:
-------------------------------
By
-----------------------------
Print Name
---------------------
5
<PAGE> 1
EXHIBIT 10.27
AMENDMENT NO. 2
TO AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
This Amendment No. 2 dated as of March 14, 1997 (this "Amendment") to
that certain Amended and Restated Shareholders Agreement effective the 20th day
of September, 1995 as amended by that certain Amendment No. 1 to Amended and
Restated Shareholders Agreement dated as of January 17, 1997 (the "Shareholders
Agreement") by and among Packaged Ice, Inc., a Texas corporation (the
"Company"), and the shareholders of the Company set forth on Exhibit A hereto
(the "Shareholders"). All capitalized terms used herein and not defined herein
shall have the meanings set forth in the Shareholders Agreement.
WHEREAS, the parties are desirous of amending the Shareholders
Agreement in order to accommodate the issuance of capital stock to investors.
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 2, subparagraph (B) of the Shareholders
Agreement is hereby amended and restated in its entirety as follows:
(B) Notwithstanding anything to the contrary contained in
this Agreement, it is expressly agreed that a Shareholder shall have
the right to transfer all or any part of his shares of Stock to any
other member of that Shareholder's Affiliate Group. For the purposes
of this Agreement, "Affiliate Group" shall mean those groups of
Shareholders which are described on Exhibit I, attached hereto and
incorporated herein by reference.
In the event of a transfer pursuant to this Section 2 to any
person who is not a Shareholder, the transferee shall (by written
supplement to this Agreement) become a party to this Agreement and
shall thereafter hold his Stock subject to the terms, covenants and
conditions contained in this Agreement.
The Company, in the sole discretion of the Board of Directors,
shall have the right to issue Stock or other securities which are
convertible into Stock which shall not be governed by or restricted by
this Agreement.
2. Effective Date. This Amendment shall be effective 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).
3. Effect of Amendment. Except as expressly amended hereby, the
Shareholders Agreement is hereby ratified and confirmed in every respect and
shall remain in full force and effect in accordance with its terms.
<PAGE> 2
4. 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.
5. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Texas.
6. 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.
7. 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.
8. 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:
----------------------------
James F. Stuart
Its Chief Executive Officer
SIGNATURE PAGE FOLLOWS
2
<PAGE> 3
AMENDMENT NO. 2 TO AMENDED AND RESTATED
SHAREHOLDERS 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 10.28
AMENDED AND RESTATED VOTING AGREEMENT
THIS AMENDED AND RESTATED VOTING AGREEMENT (the "Agreement") is made
and entered into effective the 20th day of September, 1995, by and among
shareholders of PACKAGED ICE, INC., A TEXAS CORPORATION (the "Company") who
execute a counterpart of this Agreement (individually, a "Shareholder," and
collectively, the "Shareholders") and the Company.
W I T N E S S E T H:
WHEREAS, Norwest Equity Partners V, A Minnesota Limited Partnership
("Norwest") and The Food Fund II, Limited Partnership ("Food Fund") have
purchased a total of 420,000 shares of Common Stock of the Company and 450,000
shares of the Company's Series A Convertible Preferred Stock; and
WHEREAS, there is a continuing desire on behalf of the Shareholders of
the Company to preserve and maintain competent management for the Company; and
WHEREAS, two Voting Agreements pursuant to Article 2.30B of the Texas
Business Corporation Act, as amended (the "TBCA"), were entered into on January
9, 1992, and January 4, 1994, respectively, to ensure competent management for
the Company; and
WHEREAS, the amendment and restatement of the Voting Agreements to
include Norwest and Food Fund and to make other amendments and modifications
thereto is in the best interests 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 hereby amend and restate all prior Voting Agreements between the
Company and its Shareholders as follows:
1. OWNERSHIP OF SHARES. Each Shareholder represents and warrants
to the other Shareholders that, on the date hereof, he beneficially owns and is
the registered holder of the number of shares of common stock, $.01 par value
per share, of the Company ("Common Stock") and Series A Convertible Preferred
Stock ("Series A Preferred Stock") set forth below his name on the signature
page of this Agreement. All of such shares of Common Stock and Series A
Preferred Stock and any additional shares of Common Stock or Series A Preferred
Stock hereinafter acquired by the Shareholders (including, without limitation,
any shares of stock issued in connection with a conversion of Series A
Preferred Stock, stock split, stock dividend or recapitalization 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
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<PAGE> 2
shareholder of the Company, in person or by agent or attorney, 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 TBCA or other applicable law.
3. STOCK CERTIFICATES. Each certificate representing the Shares,
and each certificate that may be issued and delivered upon transfer of such
Shares, shall contain the following legend:
"The shares evidenced by this certificate are subject to the
provisions of the Amended and Restated Voting Agreement dated
September 20, 1995, 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) in favor of the following actions:
(A) to fix and maintain the number of directors at five (5);
(B) to cause and maintain the election to the Board of
Directors of the Company of (i) James F. Stuart ("Stuart"), (ii) one
representative designated by Food Fund, who shall initially be Richard Coonrod,
(iii) one representative designated by Norwest, who shall initially be Steven
R. Sefton, (iv) one representative designated by Steven P. Rosenberg, who shall
initially be Steven P. Rosenberg and (v) A. J. Lewis, III ("Lewis").
The rights of a party to designate a representative to be elected to
the Board of Directors shall terminate in the event such party, his Affiliates
and Family Members shall own less than 50% of the Shares which such persons
owned as of the date hereof, adjusted for stock dividends, stock splits,
reverse stock splits, reorganizations, recapitalizations and the like.
"Affiliate" shall have the meaning as set forth in Rule 405 of the Securities
Act of 1933. "Family Member" shall mean such person's spouse, siblings,
parents, children, or other lineal descendants (whether by adoption or
consanguinity), and shall also mean a trust, the primary beneficiary of which
is the person's spouse, siblings, parents, children, or other lineal
descendants (whether by adoption or consanguinity).
None of the parties entitled to designate directors hereunder shall
vote to remove either Stuart, Lewis, or any director designated by any other
party or group of Shareholders pursuant hereto, except for bad faith or willful
misconduct. Each of the parties hereto shall vote or cause to be voted all
shares owned by them or over which they have voting control (i) to remove from
the Board of Directors any director designated by any party pursuant hereto at
the request of such party,
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<PAGE> 3
and (ii) to fill any vacancy in the membership of the Board of Directors with a
designee of the party whose designee's resignation or removal from the Board
caused such vacancy.
The Company shall provide to each party entitled to designate
directors hereunder prior written notice of any intended mailing of notice to
stockholders for a meeting at which directors are to be elected, and any party
entitled to designate directors pursuant hereto shall notify the Company in
writing, prior to such mailing, of the person(s) designated by it or them as
its or their nominee(s) for election as director(s).
If any party entitled to designate directors hereunder fails to give
notice to the Company as provided above, it shall be deemed that the designee
of such party then serving as director shall be its designee for reelection.
Each party entitled to designate directors hereunder hereby agrees
that the Company shall not have any executive or similar committee of the Board
of Directors unless the Board of Directors unanimously consents to the
formation of such committee.
If Stuart or Lewis shall cease to serve for any reason, the
Shareholders will negotiate in good faith a replacement for Stuart or Lewis
and, failing agreement, such replacement shall be designated by the majority of
the Shareholders.
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 the holders of not less than eighty percent (80%) of the
Shareholders (in interest, with Common Stock and Series A Preferred Stock
voting as a single class, with the Series A Preferred Stock 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 $7,500,000 or
more; or (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.
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; 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.
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<PAGE> 4
7. ENFORCEABILITY. The Shareholders 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 the Shareholders 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 them 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.
9. AMENDMENT. This Agreement may be amended, and any provision
hereof may be waived, only by a written agreement executed by 80% of the
Shareholders (in interest, with the Common Stock and Series A Preferred Stock
voting as a single class, with the Series A Preferred Stock Voting on an
as-converted basis.)
10. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the parties with respect to the subject matter
hereof. Any and all prior Voting Agreements, discussions, representations,
negotiations, understandings and agreements are hereby merged into this
Agreement and shall not survive the execution hereof.
11. 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
The Company: PACKAGED ICE, INC.
By:
----------------------------
JAMES F. STUART, President
SIGNATURE PAGE FOLLOWS
4
<PAGE> 5
Shareholders:
-------------------------------
Printed Name:
------------------
Number of Shares of Common Stock:
----------------
Number of Shares of Series A Preferred
Stock:
----------------
5
<PAGE> 1
EXHIBIT 10.29
AMENDMENT NO. 1
TO
AMENDED AND RESTATED VOTING AGREEMENT
This Amendment No 1 dated as of January 17, 1997 (this
"Amendment") to that certain Amended and Restated Voting Agreement effective
the 20th day of September, 1995 (the "Voting Agreement") by and among Packaged
Ice, Inc., a Texas corporation (the "Company"), and the shareholders of the
Company set forth on Exhibit A hereto (the "Shareholders"). All capitalized
terms used herein and not defined herein shall have the meanings set forth in
the Voting Agreement.
WHEREAS, Steven P. Rosenberg, Norwest Equity Partners V, a
Minnesota Limited Partnership, and The Food Fund II, Limited Partnership
(collectively, the "Purchasers") are desirous of purchasing shares of Series B
Convertible Preferred Stock of the Company ("Series B Preferred Stock")
pursuant to a Stock Purchase Agreement among the Purchasers and the Company
(the "Stock Purchase Agreement"); and
WHEREAS, as partial inducement for the Purchasers to enter
into the Stock Purchase Agreement and to purchase the Series B Preferred Stock
pursuant thereto, the Company in the Stock Purchase Agreement has agreed that
the obligation of the Purchasers to purchase the Series B Preferred Stock shall
be conditioned upon the execution and delivery of an amendment to the Voting
Agreement such that the Series B Preferred Stock is entitled to the same rights
and preferences and is subject to the same obligations as the Common Stock and
the Series A Preferred Stock as set forth in the Voting Agreement; and
WHEREAS, the parties hereto wish to enter into this Amendment
to implement the aforesaid condition of the Stock Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual obligations of
the parties hereto, the parties do hereby agree as follows:
1. Amendments. The Voting Agreement is amended as set
forth below.
(a) Section 1 of the Voting Agreement is hereby amended
and restated in its entirety as follows:
"1 . OWNERSHIP OF SHARES. Each Shareholder represents and
warrants to the other Shareholders that, on the date of Amendment No.
I to this Agreement ("Amendment No. 1"), he beneficially owns Ad is
the registered holder of the number of shares of common stock, $.01
par value per share, of the Company ("Common Stock"), Series A
Convertible Preferred Stock of the Company ("Series A Preferred
Stock") and Series B Convertible Preferred Stock of the Company
("Series B Preferred Stock") set forth below his name on the signature
page of Amendment No. 1. All of such shares of Common Stock, Series A
Preferred Stock and Series B Preferred Stock
<PAGE> 2
and any additional shares of Common Stock, Series A Preferred Stock,
Series B Preferred Stock and any additional shares of voting stool; of
the Company hereinafter acquired by the Shareholders (including,
without limitation, any shares of stock issued in connection with a
conversion of Series A Preferred Stock or Series B Preferred Stock or
stock splits, stock dividends or recapitalizations of the Company) are
collectively referred to herein as the "Shares"."
(b) Section 5 of the Voting Agreement is hereby amended
and restated in its entirety as follows:
"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 the Shareholders holding not less than
eighty percent (80%) of the Shares (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 Common Stock
pursuant to the Securities Act of 1933, as amended, resulting in
aggregate net proceeds to the Company and its Shareholders of
$7,500,000 or more; or (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."
(c) Section 9 of the Voting Agreement is hereby amended
and restated in its entirety as follows:
"9. AMENDMENT. This Agreement may be amended, and any
provision hereof may be waived, only by a written agreement executed by the
Shareholders holding 80% of the Shares (with the Common Stock, Series A
Preferred Stock and Series B Preferred Stock and other convertible securities
of the Company voting as a single class, with the Series A Preferred Stock,
Series B Preferred Stock and other convertible securities of the Company voting
on an as-converted basis)."
2. Effective Date. This Amendment shall be effective
when executed by 80% of the Shareholders (in interest, with the Common Stock
and the Series A Preferred Stock voting as a single class, with the Series A
Preferred Stock voting on an as-converted basis).
3. 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.
4. 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.
2
<PAGE> 3
5. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of Texas.
6. 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.
7. 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.
8. 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.
SIGNATURE PAGES FOLLOW
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
PACKAGED ICE, INC.
By
---------------------------------
Its
--------------------------------
4
<PAGE> 5
SHAREHOLDER:
If a Person:
--------------------------------------
Print Name
---------------------
If an Entity:
--------------------------------------
By:
-----------------------------------
Print Name
---------------------
Number of Shares of Common
Stock
-------------------------------
Number of Shares of Series A Preferred
Stock
------------------------------
Number of Shares of Series B
Preferred Stock:
-------------------
5
<PAGE> 1
EXHIBIT 10.30
AMENDMENT NO. 2
TO
AMENDED AND RESTATED VOTING AGREEMENT
This Amendment No. 2 dated as of March 14, 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 (the "Voting Agreement")
by and among Packaged Ice, Inc., a Texas corporation (the "Company"), and the
shareholders of the Company set forth on Exhibit A hereto (the "Shareholders").
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 at no
less than five (5) and no more than nine (9)."
2. Effective Date. This Amendment shall be effective 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).
3. 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.
4. 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.
5. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Texas.
6. 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.
<PAGE> 2
7. 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.
8. 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:
-------------------------------
James F. Stuart
Its Chief Executive Officer
SIGNATURE PAGE FOLLOWS
2
<PAGE> 3
AMENDMENT NO. 2 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 10.31
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement"), made and entered into
effective _________, 199___, is by and between Packaged Ice, Inc., a Texas
corporation (the "Company") and __________________ ("Indemnitee").
RECITALS
A. Indemnitee currently serves as a director of the Company and in
such capacity is performing a valuable service to the Company.
B. The Company's Bylaws (the "Bylaws") provide for the
indemnification of the directors and officers of the Company.
C. The Bylaws provide that the Company shall indemnify the directors
and officers of the Company to the fullest extent permitted by applicable law
including, without limitation, Article 2.02-1 of the Texas Business Corporation
Act, as amended to date and as may be amended from time to time (the
"Corporation Act").
D. The Corporation Act specifically provides that a corporation may
maintain another arrangement on behalf of any person who is or was a director,
officer, employee or agent of the corporation against any liability asserted
against him and incurred by him in such capacity or arising out of his status
as such a person, whether or not the corporation would have the power to
indemnify him against such liability under the Corporation Act, and thereby
contemplates that agreements may be entered into between the Company and
officers and directors of the Company with respect to the indemnification of
such officers and directors.
E. The applicability, amendment and enforcement of statutory and
bylaw indemnification provisions have raised questions concerning the adequacy
and reliability of the protection afforded thereby.
F. In order to resolve such questions and to induce Indemnitee to
serve or continue to serve as a director of the Company for the remainder of
his term and for any subsequent term to which he is elected by the shareholders
of the Company, the Company has deemed it to be in the best interest of the
Company to enter into this Agreement.
NOW, THEREFORE, in consideration of Indemnitee's agreement to serve or
continue to serve as a director of the Company after the date hereof, the
parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
<PAGE> 2
(a) Change in Control. A "Change in Control" shall be deemed
to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than persons currently holding securities representing 25% or more
of the combined voting power of the outstanding securities of the
Company, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the
outstanding securities of the Company, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new director
whose election by the Board of Directors or nomination for election by
the shareholders of the Company was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the shareholders of the Company
approve (A) a merger or consolidation of the Company with any other
entity (other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80%
of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation), (B) a plan of complete liquidation of the Company or (C)
an agreement or agreements for the sale or disposition, in a single
transaction or series of related transactions, by the Company of all or
substantially all of the property and assets of the Company.
Notwithstanding the foregoing, events otherwise constituting a Change in
Control in accordance with the foregoing shall not constitute a Change
in Control if such events are solicited by the Company and are approved,
recommended or supported by the Board of Directors of the Company in
actions taken prior to, and with respect to, such events.
(b) Reviewing Party. A "Reviewing Party" means (i) a quorum
of the Board of Directors of the Company who, at the time of the vote,
are not named defendants or respondents in the proceeding, (ii) if such
a quorum cannot be obtained, a committee of the Board of Directors of
the Company, designated to act in the matter by majority vote of all
members of the Board of Directors, consisting solely of two or more
directors who, at the time of the vote, are not named defendants or
respondents in the proceeding, (iii) special legal counsel selected by a
majority vote of a quorum of the Board of Directors of the Company or a
committee of the Board of Directors, as constituted in accordance with
(i) and (ii) above, or, if such a quorum cannot be obtained and such a
committee cannot be established, by a majority vote of all directors or
(iv) the shareholders excluding any shareholders who are named
defendants or respondents in the proceeding.
2. Indemnification of Indemnitee. The Company hereby agrees that it
shall hold harmless and indemnify Indemnitee to the fullest extent authorized
and permitted by the provisions of the Bylaws and the provisions of the
Corporation Act, or by any amendment thereof, but in the
2
<PAGE> 3
case of any such amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than the Bylaws or
Corporation Act permitted the Company to provide prior to such amendment, or
other statutory provisions authorizing or permitting such indemnification which
is adopted after the date hereof.
3. Insurance. So long as Indemnitee may be subject to any possible
claim or threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
Indemnitee is or was an officer or director, to the extent that the Company
maintains one or more insurance policy or policies providing directors' and
officers' liability insurance, Indemnitee shall be covered by such policy or
policies in accordance with its or their terms, to the maximum extent of the
coverage applicable to any director or officer then serving the Company.
4. Letter of Credit. So long as Indemnitee may be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that Indemnitee is or was an officer or director, the Company agrees to
establish a letter of credit (the "Letter of Credit") against which Indemnitee
may personally draw to cover expenses for which Indemnitee is indemnified
pursuant to Section 2 or Section 5 hereof. If not established by the Company
prior to receipt of notification pursuant to Section 7 or Section 13 hereof,
the Letter of Credit shall be promptly established by the Company upon receipt
of such notification.
5. Additional Indemnification. Subject only to the exclusions set
forth in Section 6 hereof, the Company hereby agrees that it shall hold
harmless and indemnify Indemnitee:
(a) against any and all judgments, penalties (including excise
and similar taxes), fines, settlements and reasonable expenses,
including attorneys' fees and court costs, actually and reasonably
incurred by Indemnitee in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an
action, suit, or proceeding, and any inquiry or investigation that could
lead to such an action, suit, or proceeding, including, without
limitation, an action by or on behalf of the shareholders of the Company
or by or in the right of the Company, to which Indemnitee is, was or at
any time becomes a party, or is threatened to be made a party, by reason
of the fact that Indemnitee is, was or at any time becomes a director or
officer of the Company, or is or was serving, or at any time serves, at
the request of the Company as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
corporation, partnership, joint venture, sole proprietorship, trust,
nonprofit entity, employee benefit plan, or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Indemnitee by the Company under the provisions of the Corporation Act
permitting such indemnification.
3
<PAGE> 4
6. Limitations on Additional Indemnification. No indemnification
pursuant to this Agreement shall be paid by the Company:
(a) in respect to any transaction if it shall be determined by
the Reviewing Party, or by final judgment or other final adjudication,
that Indemnitee derived an improper personal benefit;
(b) on account of Indemnitee's conduct which is determined by
the Reviewing Party, or by final judgment or other final adjudication,
to have involved acts or omissions not in good faith, intentional
misconduct or a knowing violation of law; or
(c) if the Reviewing Party or a court having jurisdiction in
the matter shall determine that such indemnification is in violation of
the Company's Articles of Incorporation (the "Articles"), the Bylaws or
the law.
7. Advancement of Expenses. In the event of any threatened or
pending action, suit or proceeding in which Indemnitee is a party or is
involved and which may give rise to a right of indemnification under this
Agreement, following written request to the Company by Indemnitee, the Company
shall pay promptly to Indemnitee amounts to cover expenses incurred by
Indemnitee in such proceeding (including, without limitation, payments of
retainers for legal services) in advance of its final disposition upon the
receipt by the Company of (i) a written affirmation by the Indemnitee of his
good faith belief that he has met the standard of conduct necessary for
indemnification and (ii) a written undertaking executed by or on behalf of
Indemnitee to repay the advance if it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company for such expenses
as provided in this Agreement or the Bylaws and (iii) satisfactory evidence as
to the amount of such expenses.
8. Fee to Indemnitee. If Indemnitee is not an officer or employee
of the Company at the time of any pending action, suit or proceeding to which
Indemnitee is a party, the Company agrees to pay to Indemnitee, in addition to
any other payments due to Indemnitee under any other contract or arrangement,
an amount equal to $100.00 per hour for each hour which Indemnitee spends in
connection with any such action, suit or proceeding to which Indemnitee is a
party or otherwise becomes involved as a result of Indemnitee's position as a
director of the Company, plus the amount of all reasonable out-of-pocket
expenses incurred by Indemnitee.
9. Repayment of Expenses. Indemnitee agrees that Indemnitee shall
reimburse the Company for all reasonable expenses paid by the Company in
defending any civil, criminal, administrative or investigative action, suit or
proceeding against Indemnitee in the event and only to the extent that it shall
be determined by final judgment or other final adjudication that Indemnitee is
not entitled to be indemnified by the Company for such expenses under the
provisions of the Corporation Act or any applicable law.
4
<PAGE> 5
10. Determination of Indemnification; Burden of Proof. With respect
to all matters concerning the rights of Indemnitee to indemnification and
payment of expenses under this Agreement or under the provisions of the Bylaws
now or hereafter in effect, the Company shall appoint a Reviewing Party, and
any determination by the Reviewing Party shall be conclusive and binding on the
Company. If under applicable law, the entitlement of Indemnitee to be
indemnified under this Agreement depends on whether a standard of conduct has
been met, the burden of proof of establishing that Indemnitee did not act in
accordance with such standard of conduct shall rest with the Company.
Indemnitee shall be presumed to have acted in accordance with such standard and
entitled to indemnification or advancement of expenses hereunder, as the case
may be, unless, based upon a preponderance of the evidence, it shall be
determined by the Reviewing Party that Indemnitee did not meet such standard.
For purposes of this Agreement, unless otherwise expressly stated herein, the
termination of any action, suit or proceeding by judgment, order, settlement,
whether with or without court approval, or conviction, or upon a plea of nolo
contendere or its equivalent shall not create a presumption that Indemnitee did
not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law.
11. Effect of Change in Control. If there has not been a Change in
Control after the date of this Agreement, the determination of the (i) rights
of Indemnitee to indemnification and payment of expenses under this Agreement
or under the provisions of the Bylaws, (ii) standard of conduct, and (iii)
evaluation of the reasonableness of amounts claimed by Indemnitee, shall be
made by the Reviewing Party or such other body or persons as may be permitted
by the Corporation Act. If there has been a Change in Control after the date
of this Agreement, such determination and evaluation shall be made by a
special, independent counsel who is selected by Indemnitee and approved by the
Company, which approval shall not be unreasonably withheld, and who has not
otherwise performed services for Indemnitee or the Company.
12. Continuation of Indemnification. All agreements and obligations
of the Company contained herein shall continue during the period that
Indemnitee is a director or officer of the Company, or is or was serving at the
request of the Company as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another corporation,
partnership, joint venture, sole proprietorship, trust, nonprofit entity,
employee benefit plan, or other enterprise, and shall continue thereafter so
long as Indemnitee shall be subject to any possible claim or threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action,
suit, or proceeding, and any inquiry or investigation that could lead to such
an action, suit, or proceeding, by reason of the fact that Indemnitee was an
officer or director of the Company or served in any other capacity referred to
herein.
13. Notification and Defense of Claim. Promptly after receipt by
Indemnitee of notice of the threat or commencement of any action, suit or
proceeding, Indemnitee shall, if a claim in respect hereof is to be made
against the Company under this Agreement, notify the Company of the threat or
commencement thereof; provided, however, that delay in so notifying the Company
5
<PAGE> 6
shall not constitute a waiver or release by Indemnitee of rights hereunder and
that omission by Indemnitee to so notify the Company shall not relieve the
Company from any liability which it may have to Indemnitee otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to
which Indemnitee notifies the Company of the threat or commencement thereof:
(a) The Company shall be entitled to participate therein at
its own expense.
(b) Except as otherwise provided below, to the extent that it
may wish, the Company, jointly with any other indemnifying party
similarly notified, shall be entitled to assume the defense thereof and
to employ counsel reasonably satisfactory to Indemnitee. After notice
from the Company to Indemnitee of its election to so assume the defense
thereof, the Company shall not be liable to Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by
Indemnitee in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Indemnitee shall
have the right to employ counsel of his own choosing in such action,
suit or proceeding but the fees and expenses of such counsel incurred
after notice from the Company of assumption by the Company of the
defense thereof shall be at the expense of Indemnitee unless (i) the
employment of counsel by Indemnitee has been specifically authorized by
the Company, such authorization to be conclusively established by action
by disinterested shareholders of the Company though less than a quorum;
(ii) representation by the same counsel of both Indemnitee and the
Company would, in the reasonable judgment of Indemnitee and the Company,
be inappropriate due to an actual or potential conflict of interest
between the Company and Indemnitee in the conduct of the defense of such
action, such conflict of interest to be conclusively established by an
opinion of counsel to the Company to such effect; (iii) the counsel
employed by the Company and reasonably satisfactory to Indemnitee has
advised Indemnitee in writing that such counsel's representation of
Indemnitee would likely involve such counsel in representing differing
interests which could adversely affect the judgment or loyalty of such
counsel to Indemnitee, whether it be a conflicting, inconsistent,
diverse or other interest; or (iv) the Company shall not in fact have
employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of counsel shall be paid by the Company.
The Company shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of the Company or as to which
a conflict of interest has been established as provided in (ii) hereof.
Notwithstanding the foregoing, if an insurance company has supplied
directors' and officers' liability insurance covering an action, suit or
proceeding, then such insurance company shall employ counsel to conduct
the defense of such action, suit or proceeding unless Indemnitee and the
Company reasonably concur in writing that such counsel is unacceptable.
(c) The Company shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or
claim effected without their written consent. The Company shall not
settle any action or claim in any manner which
6
<PAGE> 7
would impose any liability or penalty on Indemnitee without Indemnitee's
written consent. Neither the Company nor Indemnitee shall unreasonably
withhold consent to any proposed settlement.
14. Enforcement.
(a) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on the
Company hereby in order to induce Indemnitee to serve as an officer
and/or director of the Company and acknowledges that Indemnitee is
relying upon this Agreement in continuing in such capacity.
(b) If a claim for indemnification or advancement of expenses
is not paid in full, or if the Letter of Credit has not been
established, by the Company within 30 days after a written claim by
Indemnitee has been received by the Company, Indemnitee may at any time
assert the claim and bring suit against the Company to recover the
unpaid amount of the claim. In the event Indemnitee is required to
bring any action to enforce rights or to collect monies due under this
Agreement and is successful in such action, the Company shall reimburse
Indemnitee for all of Indemnitee's reasonable attorneys' fees and
expenses in bringing and pursuing such action.
15. Proceedings by Indemnitee. The Company shall not be liable to
make any payment under this Agreement in connection with any action, suit or
proceeding, or any part thereof, initiated by Indemnitee unless such action,
suit or proceeding, or part thereof, was authorized by the Company, such
authorization to be conclusively established by action by disinterested
shareholders of the Company though less than a quorum.
16. Effectiveness. This Agreement is effective for, and shall apply
to, (i) any claim which is asserted or threatened before, on or after the date
of this Agreement but for which no action, suit or proceeding has been brought
prior to the date hereof and (ii) any action, suit or proceeding which is
threatened before, on or after the date of this Agreement but which is not
pending prior to the date hereof. This Agreement shall not apply to any
action, suit or proceeding which was brought before the date of this Agreement.
So long as the foregoing is satisfied, this Agreement shall be effective for,
and be applicable to, acts or omissions occurring prior to, on or after the
date hereof.
17. Nonexclusivity. The rights of Indemnitee under this Agreement
shall not be deemed exclusive, or in limitation of, any rights to which
Indemnitee may be entitled under any applicable common or statutory law, or
pursuant to the Articles, the Bylaws, vote of shareholders or otherwise.
7
<PAGE> 8
18. Other Payments. The Company shall not be liable to make any
payment under this Agreement in connection with any action, suit or proceeding
against Indemnitee to the extent Indemnitee has otherwise received payment of
the amounts otherwise payable by the Company hereunder.
19. Subrogation. In the event the Company makes any payment under
this Agreement, the Company shall be subrogated, to the extent of such payment,
to all rights of recovery of Indemnitee with respect thereto, and Indemnitee
shall execute all agreements, instruments, certificates or other documents and
do or cause to be done all things necessary or appropriate to secure such
recovery rights to the Company including, without limitation, executing such
documents as shall enable the Company to bring an action or suit to enforce
such recovery rights.
20. Survival; Continuation. The rights of Indemnitee under this
Agreement shall inure to the benefit of Indemnitee, his heirs, executors,
administrators, personal representatives and assigns, and this Agreement shall
be binding upon the Company, its successors and assigns. The rights of
Indemnitee under this Agreement shall continue so long as Indemnitee may be
subject to any action, suit or proceeding because of the fact that Indemnitee
is or was a director or officer of the Company or is or was serving at the
request of the Company as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another corporation,
partnership, joint venture, sole proprietorship, trust, nonprofit entity,
employee benefit plan, or other enterprise. If the Company, in a single
transaction or series of related transactions, sells, leases, exchanges, or
otherwise disposes of all or substantially all of its property and assets, the
Company shall, as a condition precedent to any such transaction, cause
effective provision to be made so that the persons or entities acquiring such
property and assets shall become bound by and replace the Company under this
Agreement.
21. Amendment and Termination. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless made in
writing signed by both parties hereto.
22. Headings. Section headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
23. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
24. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by overnight
delivery service, cable, telegram, facsimile transmission or telex to the
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
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(a) if to the Company: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
with a copy to: Alan Schoenbaum, P.C.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1500 NationsBank Plaza
300 Convent Street
San Antonio, Texas 78205
(b) if to Indemnitee: to the address on the
signature page hereof
Notice so given shall, in the case of notice so given by mail, be
deemed to be given and received on the fourth calendar day after posting, in
the case of notice so given by overnight delivery service, on the date of
actual delivery and, in the case of notice so given by cable, telegram,
facsimile transmission, telex or personal delivery, on the date of actual
transmission or, as the case may be, personal delivery.
25. Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it
legal, valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties shall be construed and enforced accordingly.
26. Complete Agreement. This Agreement and those documents expressly
referred to herein embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
27. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Indemnification
Agreement to be executed on the day and year first above written.
COMPANY:
PACKAGED ICE, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
INDEMNITEE:
-------------------------------------------
Name:
--------------------------------------
Address:
-----------------------------------
-----------------------------------
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EXHIBIT 10.32
DEVELOPMENT AND MANUFACTURING AGREEMENT
This Agreement effective the 13th day of April, 1993, by and between
LANCER CORPORATION, a Texas corporation, whose business address is 235 W. Turbo
Street, San Antonio, Texas 78216 (hereinafter referred to as "LANCER") and
PACKAGED ICE, INC., a Texas corporation, whose business address is P.O. Box
79233, Houston, Texas 77279-9233 (hereinafter referred to as "PACKAGED ICE").
WITNESSETH:
WHEREAS, LANCER has a continuous program to design, develop, and
manufacture new systems, processes, apparatuses, articles, compositions of
matter, and the like for various purposes related to LANCER's business.
WHEREAS, PACKAGED ICE is the owner of certain proprietary and
confidential information with respect to an AUTOMATIC ICE BAGGER which
includes, but is not limited to, the subject matter of U.S. Patent No.
5,109,651 and other pending U.S. and foreign patent applications (hereinafter
referred to as the "LICENSED UNIT"); and
WHEREAS, the parties wish to mutually cooperate with respect to LANCER's
becoming the exclusive manufacturer of the LICENSED UNIT for PACKAGED ICE.
NOW THEREFORE, in consideration of the rights and obligations herein set
forth, the parties hereto agree as follows:
1. Development Phase. During the development phase, LANCER will
produce up to five prototype LICENSED UNITS for testing and approval for
PACKAGED ICE in accordance with the following terms and conditions:
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a. Simultaneously with the execution of this Agreement, PACKAGED ICE
will issue 16,077 shares of its common stock to LANCER, said
stock to be valued at $6.22 per share. The value of said 16,077
shares of common stock will be credited against the purchase
price of the first five hundred production units delivered to
PACKAGED ICE to reduce the cost of each of said units by Two
Hundred Dollars per unit.
b. PACKAGED ICE has provided Design and Performance Criteria, know-
how, and manufacturing drawings in the English language to LANCER
relating to the LICENSED UNIT (the Design Package); and LANCER
will produce a complete set of drawings for its new production
unit.
c. LANCER will use its reasonable best efforts to prototype and
deliver to PACKAGED ICE on or before October 1, 1993 at LANCER's
main office in San Antonio, Texas, up to a maximum of five
LICENSED UNITS which will be essentially identical to a
production unit, i.e. a production prototype. There will be no
charge to PACKAGED ICE for the first LICENSED UNIT delivered to
it;
d. After delivery of the first LICENSED UNIT, PACKAGED ICE may elect
to purchase up to four additional prototype LICENSED UNITS for
field testing. Upon receipt of PACKAGED ICE's written purchase
order, LANCER will manufacture and deliver the additional
prototype LICENSED UNITS to PACKAGED ICE. PACKAGED ICE shall pay
LANCER $5,000.00 each, f.o.b., LANCER's Plant in San Antonio,
Texas upon delivery of each additional LICENSED UNIT.
2. Manufacturing Phase. Upon completion of the filed testing,
which is not to exceed ninety days, PACKAGED ICE shall issue its Purchase Order
for a minimum of Thirty-Six Hundred LICENSED UNITS. If problems are found
during the field test, the test period shall be extended for the time required
to correct the problem.
Upon issuance of the Purchase Order, the Manufacturing Phase shall
commence in accordance with the following terms and conditions:
a. The initial term of the manufacturing contract shall be the
earlier of three years or until the thirty-six hundred LICENSED
UNITS have been delivered.
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b. LANCER will commence production at a monthly rate of units in
accordance with the schedule to be provided by PACKAGED ICE an
attached hereto as Exhibit "B" and, will escalate to produce a
minimum of 1200 units during the first year.
c. LANCER will guarantee the price for the first nine months of
actual production at $5,000.00 per unit, bolted to a forkliftable
pallet and plastic wrapped. Additional packaging will require an
additional charge. Actual production will commence upon receipt
of the first purchase order.
d. All sales under this Agreement shall be f.o.b. LANCER's Plant,
San Antonio, Texas. The terms of payment shall be subject to
LANCER's policy on credit rating its customers. This rating may
be reviewed and changed from time to time, thereby changing the
terms of payments.
e. Prior to the end of the first nine months of actual production,
LANCER will provide PACKAGED ICE with a costed bill of material
depicting LANCER's manufacturing cost. The price for LICENSED
UNITS will be adjusted for units delivered subsequent to said
first nine month production period on the following formula:
Manufacturing Cost divided by 0.65.
On November 11th of each year, LANCER will provided PACKAGED ICE
with a new costed bill of material which will determine the price
beginning on January 1 of each subsequent year.
Any additional features or design changes may result in an
additional costs which will be made at the time such changes are
introduced.
Manufacturing Cost shall be defined as costs of production less
the cost of engineering, sales, G & A, interest, and profits.
f. PACKAGED ICE will take delivery of LICENSED UNITS within ten
calendar days following completion of manufacture. the LICENSED
UNITS will be delivered in lot sizes to PACKAGED ICE's
discretion.
LANCER will invoice for LICENSED UNITS upon completion of
manufacture, regardless of shipment date.
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3. Term. The Manufacturing Contract shall be automatically
renewed for subsequent three year periods upon expiration of a given
term provided that LANCER is competitive in both price and quality.
Competitiveness of the price shall be determined by obtaining three good
faith bids from qualified manufacturers. LANCER shall be given the
opportunity to match the average of the three bids and retain its
manufacturing rights.
PACKAGED ICE may, at its sole discretion, opt to commence its own
manufacturing operation at the conclusion of any three year period.
4. Purchase Orders. Purchase Orders are non-cancelable without the
payment of cancellation charges, work-in-progress, materials on hand or
committed for, and other related cost. All Purchase Orders will require a
minimum 90-120 days lead time. If there are longer lead time components, then
the lead times shall be increased accordingly.
5. Warranty. All LICENSED UNITS manufactured by LANCER shall be
covered by LANCER's standard Manufacturer's Warranty, a copy of which is
attached hereto as Exhibit "A".
6. Product Liability. LANCER shall not be liable for any product
liability claims except those arising out of manufacturing defects and,
PACKAGED ICE agrees to indemnify an save LANCER harmless against all other
product liability claims. PACKAGED ICE will maintain product liability
insurance in the amount of Ten Million Dollars naming LANCER as an additional
insured.
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7. Tooling. During and following completion of the development
program, PACKAGED ICE agrees to pay for specialized production tooling per
LANCER's quotation provided LANCER obtains PACKAGED ICE's prior written
approval, which amount will be paid by PACKAGED ICE upon its receipt o the
invoices approved by LANCER and receipt of blueprints of such specialized
tooling. This tooling will include injection molding tools, membrane switch
tooling, vacuum forming tools, and related specialized tooling. Upon payment,
title of said special tooling shall become fully vest in PACKAGED ICE (and
plainly marked "Property of Packaged Ice, Inc.") and remain the personal
property of PACKAGED ICE, except as provided hereinafter. The tooling shall be
used only for he purpose of producing the LICENSED UNITS for PACKAGED ICE and
will not be removed from LANCER's and/or its subcontractors' premises without
the written consent of PACKAGED ICE. PACKAGED ICE shall give LANCER sixty days
written notice if PACKAGED ICE elects to remove the tooling from LANCER and its
subcontractors, providing there has been an uncured breach of this Agreement.
LANCER will provide normal maintenance for the tooling at its own
expense. Replacement cost of tolls that have reached the end of their service
life will be paid by PACKAGED ICE.
No tooling changes will be made without the prior written approval of
PACKAGED ICE.
LANCER will pay for welding fixtures, drill fixtures, and related
assembly tooling which shall remain the property of LANCER.
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All shop drawings, engineering drawings, specifications, bills of
materials, and elated engineering data is the property of LANCER, however, in
the event LANCER discontinues its business operation, or terminates this
Agreement without cause, or if LANCER cannot meet the reasonable requirements
with adequate lead time, the drawings shall become the property of PACKAGED
ICE. Furthermore, if PACKAGED ICE opts to change manufacturers or to do its
own manufacturing as provided herein, LANCER will set its drawings and other
data to PACKAGED ICE for $250,000.00.
8. Design Changes and Apparatus. LANCER will make no material
changes in the design that materially changes or affects the quality or
performance of the LICENSED UNIT without the prior written approval of PACKAGED
ICE.
PACKAGED ICE shall be liable for paying all fees associated with
regulatory agency approvals such as NSF, UL, or City of Los Angeles and any
quarterly or annual inspection fees. PACKAGED ICE shall determine which
approvals are necessary.
9. Manufacturing and Sales Rights. PACKAGED ICE shall retain the
exclusive right to market the LICENSED UNITS in the U.S. and throughout the
world except as otherwise limited by its prior License Agreements with third
parties.
LANCER shall have the exclusive manufacturing rights to supply PACKAGED
ICE's total requirements for the LICENSED UNITS pursuant to the terms of this
Agreement. LANCER will not sell to any third party without prior written
approval from PACKAGED ICE.
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10. Spare Parts. LANCER agrees that upon commencing production, it
will guarantee a minimum stocked inventory of spare parts as necessary to meet
the market demands. Such inventory levels will be mutually determined by
LANCER and PACKAGED ICE following completion of the development phase.
Thereafter, such inventory levels will be adjusted as required to meet the
market demands. Spare parts shall be priced at not more than 2-1/2 times
LANCER's actual costs. Furthermore, LANCER and PACKAGED ICE will assess the
spare parts prices on an annual basis and make adjustments as mutually agreed
upon.
11. Confidentiality. LANCER and PACKAGED ICE have disclosed and it
is anticipated will continue to disclose to each other or may come in contact
with or observe certain confidential information that is the property of the
other. Each party warrants that it will hold all such confidential information
pertaining to design, specifications, know-how, technical data, and marketing
data belonging to the other party in strict confidence. Each party shall keep
such information confidential, and shall not divulge or disclose and shall take
every reasonable precaution to see that its directors, officers, employees,
representatives, and shareholders shall not divulge or disclose such
confidential information and materials constituting any part thereof, to any
other person at any time during the life of this Agreement.
The term "confidential information" shall mean information that is not:
(a) previously known to a party as a matter of written records, (b) disclosed
to a third party by either party hereto either prior to or subsequent to its
disclosure to the other party hereto without an
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obligation on such third party to keep such information in strict confidence,
(c) previously unpublished, published or otherwise made available to the public
through sources other than LANCER or PACKAGED ICE, (d) information which a
party has given its written consent to the other party to disclose to another;
or (e) information which is made known to a party by a third party under no
obligation of confidentiality to either party.
12. Patent Rights. Any inventions or know-how made or developed
and/or patent applications and patents filed or owned by or licensed to a party
hereto prior to the date of this Agreement shall continue to belong to such
party and shall not be affected by this Agreement.
All right, title, and interest in and to the LICENSED UNITS and all
patents applications and patents, both domestic and foreign, that are filed or
granted for said LICENSED UNITS shall be the exclusive property of and belong
to PACKAGED ICE, and LANCER shall have the exclusive manufacturing rights in
the LICENSED UNITS except as set forth herein.
With respect to PACKAGED ICE's prior inventions that related to or cover
the LICENSED UNIT, PACKAGE ICE agrees to grant and grants to LANCER a royalty-
free, exclusive manufacturing license as aforesaid. Any improvements relating
exclusively to the LICENSED UNITS made by LANCER during the term of this
Agreement, including patentable inventions, will be disclosed to PACKAGED ICE
and will be assigned to PACKAGED ICE provided that PACKAGED ICE proceeds with
the filing of patent applications within six months following the date of
disclosure. LANCER shall have the
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exclusive manufacturing license under the terms of this Agreement. If PACKAGED
ICE declines to proceed with patent protection within said six month period,
LANCER will retain title to the invention and obtain patents in its own right.
Improvements which are developed by LANCER for other purposes but which may be
incorporated into the LICENSED UNITS are excluded, however, LANCER will grant a
royalty free license to PACKAGED ICE to use said improvements in connection
with the LICENSED UNIT. The term of such license shall continue for the life
of any patent covering said improvements. If an improvement is not patented
and constitutes a trade secret, the term of the license for such improvement
shall be for fifty years.
13. Patent Infringement.
a. PACKAGED ICE agrees that it shall, at its own expense, defend,
indemnify and hold harmless LANCER and its subsidiaries against
any claims, actions, or causes of action based on an alleged
infringement of any United States industrial Property Rights,
whether they be a patent, trade secret, trademark, or copyright,
of a third party, regarding any element, part or combination
provided or made pursuant to this Agreement, and PACKAGED ICE
shall pay all damages, awards, profits, interests, attorneys'
fees, and cost levied against LANCER, provided that LANCER
promptly notifies PACKAGED ICE of any such claims, actions, or
causes of action and provided further that LANCER renders
reasonable assistance in the defense of such suit or suits.
b. In the event that LANCER incorporates into the LICENSED UNIT any
of its inventions, or trade secrets, or any matter protectable by
trademark or copyright, LANCER agrees that it shall, at its own
expense, defend, indemnify and hold harmless PACKAGED ICE and its
subsidiaries against any claims, actions, or causes of action
based on an alleged infringement of any United States industrial
Property Rights, whether they be a patent, trade secret,
trademark, or copyright regarding any element, part or
combination provided or made pursuant to this Agreement, or trade
secrets, or any matter protectable by trademark or copyright, and
LANCER shall pay all damages, awards, profits, interests,
attorneys' fees, and costs levied against PACKAGED ICE, provided
that PACKAGED ICE promptly notifies LANCER of any such
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claims, actions, or causes of action and provided further that
PACKAGED ICE renders reasonable assistance in the defense of such
suit or suits.
14. Insolvency. Upon commencement by PACKAGED ICE of any act of
bankruptcy, receivership, insolvency, dissolution, liquidation, or other
similar proceedings, LANCER shall automatically be granted a non-exclusive
right and license under all patents, trade secrets, trademarks, and know-how to
make, use, and sell LICENSED UNITS throughout the world. LANCER shall also be
granted the first option to purchase the special tooling at its depreciated
value. In the event that PACKAGED ICE causes such proceedings to be dismissed
within ninety (90) days of such commencement, the non-exclusive right and
license and the purchase option shall be terminated provided that LANCER is
reinstated as the exclusive manufacturer under the terms of this Agreement.
15. Termination. This Agreement and the rights and obligations
hereunder may be terminated at any time by either party in the event the other
party has failed to perform any material obligations hereunder by giving such
other party sixty days' notice in writing of the intention to terminate and he
reasons therefor; provide, however, that should such other party during said
sixty day period perform such obligations, this Agreement shall continue in
full force and effect.
16. Assignment. Neither this Agreement nor any of the licenses
herein granted shall be assignable or otherwise transferable by either party
hereto, either in whole or in part without the prior written consent of the
other party except that this Agreement and the rights and licenses and
obligations herein provided shall inure to the benefit of and be binding upon
the successor of the entire business relating to the subject matter hereof of
such party.
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17. Status of Parties. Any work performed by either party hereunder
shall be in that party's capacity as an independent contractor and not as a
agent or representative of the other party and it is expressly understood that
this understanding does not constitute a joint venture by the parties hereto.
18. Notices. Notices to be given by PACKAGED ICE or LANCER pursuant
to this Agreement shall be given by certified or registered mail, return
receipt requested, at the addresses first above written.
19. Law. This Agreement shall be governed in all respects by the
laws of the State of Texas except that all questions relating to patents and
patent applications shall be governed by the laws of the country in which such
application is filed or such patent issued.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the date first above written.
LANCER CORPORATION PACKAGED ICED, INC.
By:_______________________________ By:_______________________________
Alfred A. Schroeder James F. Stuart
Chairman of the Board President
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EXHIBIT 10.33
Rev 9/90
L E A S E A G R E E M E N T
STATE OF TEXAS
COUNTY OF HARRIS
This Lease Agreement is made and entered into by and between
Robert S. Wilson, L.L.C.,
hereinafter referred to as "Landlord", and
Packaged Ice, Inc.,
hereinafter referred to as "Tenant".
W I T N E S S E T H:
1. PREMISES and TERM
In consideration of the obligation of Tenant to pay rent as herein
provided, and in consideration of the other terms, provisions and covenants
hereof, Landlord hereby demises and leases to Tenant, and Tenant hereby takes
from Landlord certain premises situated within the County of Harris, State of
Texas, more particularly described on Exhibit "A" attached hereto and
incorporated herein by reference, and as follows:
Approximately 13,050 square feet of office/warehouse area located in Building
"A", containing approximately 39,150 square feet, in a project containing
approximately 145,800 square feet, and situated on a tract of land out of the
A.H. Osbourne Survey, Abstract A-610 and being more particularly described on
Exhibit "A", attached hereto. The address for this facility is 8572 Katy
Freeway, Suite 101, Houston, Texas 77024;
together with all rights, privileges, easements, appurtenances and immunities
belonging to or in any way pertaining to the premises and together with the
building and other improvements situated or to be situated upon said premises
(said real property, building and improvements being hereinafter referred to as
the "Premises").
TO HAVE AND TO HOLD the same for a term commencing on the
"Commencement Date" as the later of May 1, 1994, or substantial completion of
the required tenant improvements to be made by Landlord, and ending sixty (60)
months thereafter; provided, however, that in the event the Commencement Date
is a date other than the first day of a calendar month, said term shall extend
for said number of months in addition to the remainder of the calendar month
following the Commencement Date.
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Tenant acknowledges that no representations as to the repair of
the Premises have been made by Landlord, unless such are expressly set forth in
this lease. After such Commencement Date Tenant shall, upon demand, execute
and deliver to Landlord a letter of acceptance of delivery of the Premises. In
the event of any dispute as to substantial completion or work performed or
required to be performed by Landlord, the certificate of Landlord's architect
or general contractor shall be conclusive.
2. BASE RENT and SECURITY DEPOSIT
A. Tenant agrees to pay to Landlord rent for the Premises, in
advance, without demand, deduction or set off, for years one through three,
Three Thousand Three Hundred Ninety-Three and 00/100 Dollars ($3,393.00) per
month; and for years four and five, Three Thousand Nine Hundred Fifteen and
00/100 Dollars ($3,915.00) per month). One such monthly installment, including
monthly common area maintenance payments, shall be due and payable on the date
hereof and a monthly installment shall be due and payable on or before the
first day of each calendar month succeeding the Commencement Date recited above
during the hereby demised term, except that the rental payment for any
fractional calendar month at the commencement or end of the lease period shall
be prorated. Failure by Tenant to pay any one monthly installment of rent by
the tenth (10) day from the date such payment was due shall be considered an
event of default in accordance with the provisions of Paragraph 18(a) of this
lease agreement. Upon such failure by Tenant to pay any rental installment
within five (5) days of when such installment is due, Tenant shall pay to
Landlord, on demand, a late charge in an amount equal to five percent (5%) of
such installment. Failure to pay such late charge within ten (10) days after
demand shall likewise be considered an event of default hereunder. The
provision for such late charge shall be in addition to all of Landlord's other
rights and hereunder or at law and shall not be construed as liquidated damages
or as limiting Landlord's remedies in any manner.
B. Tenant agrees to pay to Landlord, as additional rental, all
charges for any services, goods, or materials furnished by Landlord at Tenant's
request which are not required to be furnished by Landlord under this Lease (as
well as all other sums payable by Tenant hereunder) within ten (10) days after
Landlord renders a statement therefor to Tenant. All past due additional
rental amounts shall bear interest from the date due until paid at the maximum
rate allowed by law.
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C. In addition, Tenant agrees to deposit with Landlord on the
date hereof the sum of Three Thousand Eight Hundred Fifty-five and 00/100
Dollars ($3,855.00), which sum shall be held by Landlord, without obligation
for interest, as security for the performances of Tenant's covenants and
obligations under this lease, it being expressly understood and agreed that
such deposit is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Upon the occurrence of any event of
default by Tenant, Landlord may, from time to time, without prejudice to any
other remedy provided herein or provided by law, use such fund to the extent
necessary to make good any arrears of rent or other payments due Landlord
hereunder, and any other damage, injury, expense or liability caused by such
event of default; and Tenant shall pay to Landlord, on demand, the amount so
applied in order to restore the security deposit to its original amount.
Although the security deposit shall be deemed the property of Landlord, any
remaining balance of such deposit shall be returned by Landlord to Tenant
within thirty (30) days after termination of this lease, providing that all of
Tenant's obligations under this lease have been fulfilled.
3. USE
The demised Premises shall be used only for the purpose of
receiving, storing, shipping and selling (other than retail) products,
materials and merchandise made and/or distributed by Tenant and for such other
lawful purposes as may be incidental thereto. Outside storage, including,
without limitation, trucks and other vehicles, is prohibited without Landlord's
prior written consent. Tenant shall obtain, at its own cost and expense, any
and all licenses and permits necessary for any such use. Tenant shall comply
with all governmental laws, ordinances and regulations applicable to the use of
the Premises, and shall promptly comply with all governmental orders and
directives for the correction, prevention and abatement of nuisances in, upon,
or in connection with the Premises, all at Tenant's sole expense. Tenant shall
not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the Premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of the
Building in which the Premises are situated or unreasonably interfere with
their use of their respective Premises. Without Landlord's prior written
consent, Tenant shall not receive, store or otherwise handle any product,
material or merchandise which is explosive or highly inflammable. Tenant will
not permit the Premises to be used for any purpose or in any manner (including,
without limitation, any method or storage) which would render the insurance
thereon void or the insurance risk more hazardous or cause the State Board of
Insurance or other insurance authority to disallow any sprinkler credits.
4. TAXES
A. Landlord agrees to pay, before they become delinquent, all
taxes, assessments, and governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as "taxes") lawfully levied or assessed
against the Building and the grounds, parking areas, driveways and alleys
around the Building. If the Tenant's proportionate share of taxes levied or
assessed against the Building and the grounds, parking areas, driveways and
alleys around the Building during a real estate tax year, occurring within the
term hereof or during any renewal or extension of this term, shall exceed an
amount equal to the actual cost of such expense for the calendar year 1994,
Tenant shall pay to Landlord as additional rental, upon demand,
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the amount of such excess. In the event any such amount is not paid within ten
(10) days after the date of Landlord's invoice to Tenant, the unpaid amount
shall bear interest from the date due until paid at the maximum interest rate
allowed by law.
B. Tenant's "proportionate share", as used in this lease, shall
mean a fraction, the numerator of which is the space contained in the Premises
and the denominator of which is the entire space contained in the building(s).
Tenant's initial proportionate share shall be 13,050/145,800 = 8.951%.
C. If at any time during the term of this lease the present
method of taxation shall be changed so that in lieu of the whole or any part of
any taxes, assessments or governmental charges levied, assessed or imposed on
real estate and the improvements thereon, there shall be levied, assessed or
imposed on Landlord a capital levy or other tax directly on the rents received
therefrom and/or a franchise tax, assessment, levy or charge measured by or
based, in whole or in part, upon such rents for the present or any future
building(s) on the Premises, then all such taxes, assessments, levies or
charges or the part thereof so measured or based, shall be deemed to be
included within the term "taxes" for the purposes hereof.
D. The Landlord shall have the right to employ a tax consulting
firm to attempt to assure a fair tax burden on the building and grounds within
the applicable taxing jurisdiction. Tenant shall pay to Landlord the amount of
Tenant's "proportionate share" (as defined in subparagraph 4.B above) of the
reasonable cost of such service.
E. Any payment to be made pursuant to this Paragraph 4 with
respect to the real estate tax year in which this lease commences or terminates
shall be prorated.
F. Tenant shall pay all ad valorem and similar taxes or
assessments levied upon or applicable to all equipment, fixtures, furniture,
and other property placed by Tenant in the Premises and all license and other
fees or charges imposed on the business conducted by Tenant on the Premises.
It is agreed that Tenant will also be responsible for ad valorem taxes on the
value of leasehold improvements to the extent that such leasehold improvements
exceed standard building allowances, and are specifically referenced by the
taxing authority by improvement type and location in the assessment.
5. LANDLORD'S REPAIRS
Landlord shall, at his expense, maintain only the roof,
foundation, and the structural soundness of the exterior walls of the building
in good repair, reasonable wear and tear excepted. Tenant shall repair and pay
for any damage caused by the negligence of Tenant, or Tenant's employees,
agents or invitees, or caused by Tenant's default hereunder. The term "walls"
as used herein shall not include windows, glass or plate glass, doors, special
store fronts or office entries. Tenant shall immediately give Landlord written
notice of defect or need for repairs, after which Landlord shall have
reasonable opportunity to repair same or cure such defect. Landlord's
liability with respect to any defects, repairs or maintenance for which
Landlord is responsible under any of the provisions of this lease shall be
limited to the cost of such repairs or maintenance or the curing of such
defect.
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6. TENANT'S REPAIRS
A. Tenant shall, at its own cost and expense, keep and maintain
all parts of the Premises (except those for which Landlord is expressly
responsible under the terms of this lease) in good condition, promptly making
all necessary repairs and replacements, including, but not limited to, windows,
glass and plate glass, doors, special store fronts or office entries, interior
walls and finish work, floors and floor covering, downspouts, gutters, heating
and air conditioning systems, truck doors, dock bumpers, paving, plumbing work
and fixtures, termite and pest extermination, regular removal of trash and
debris, keeping the parking areas, driveways, alleys and the whole of the
Premises in a clean and sanitary condition. Tenant shall not be obligated to
repair any damage caused by fire, tornado or other casualty covered by the
insurance to be maintained by Landlord pursuant to subparagraph 13.A below,
except that Tenant shall be obligated to repair all wind damage to glass,
except with respect to tornado or hurricane damage. Tenant shall not be
responsible for repairs caused by the acts or proven negligence of Landlord,
its agents or employees.
B. Tenant shall not damage any demising wall or disturb the
integrity and support provided by any demising wall and shall, at its sole cost
and expense, promptly repair any damage or injury to any demising wall caused
by Tenant or its employees, agents or invitees.
C. Tenant and its employees, customers and licensees shall have
the right to use the parking areas, if any, as may be designated by Landlord in
writing, subject to such reasonable rules and regulations as Landlord may from
time to time prescribe and subject to rights of ingress and egress of other
tenants. Landlord shall not be responsible for enforcing Tenant's parking
rights against any third parties. Landlord reserves the right to perform the
paving and landscape maintenance, exterior painting, common sewage line
plumbing, and care for the grounds around the Building, and Tenant shall be
liable for its proportionate share (as defined in subparagraph 4.B above) of
the cost and expense. If Tenant or any other particular tenant of the Building
can be clearly identified as being responsible for obstructions or stoppage of
the common sanitary sewage line, then Tenant, if Tenant is responsible, or such
other responsible tenant, shall pay the entire cost thereof, upon demand, as
additional rent. Tenant shall pay, when due, its share, determined as
aforesaid, of such costs and expenses along with the other tenants of the
building to Landlord upon demand, as additional rent, of the amount of its
share as aforesaid of such costs and expenses in the event Landlord elects to
perform or cause to be performed such work. In the event any such amount is
not paid within ten (10) days after the date of Landlord's invoice to Tenant,
the unpaid amount shall bear interest from the date due until paid at the
maximum interest rate allowed by law.
D. Tenant shall, at its own cost and expense, enter into a
regularly scheduled preventive maintenance/service contract with a maintenance
contractor for servicing all hot water, heating and air conditioning systems
and equipment within the Premises. The maintenance contractor and the contract
must be approved by Landlord. The service contract must include all services
suggested by the equipment manufacturer within the operation/maintenance manual
and must become effective (and a copy thereof delivered to Landlord) within
thirty (30) days of the date Tenant takes possession of the Premises. At
Tenant's request, Tenant shall be authorized to provide the regularly scheduled
preventive maintenance/service required herein.
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Tenant shall not be required to enter into a maintenance/service contract with
an outside vendor to provide such service. Tenant shall continue to be
responsible for maintaining all such equipment as described herein. Preventive
maintenance/service shall be defined as a minimum of the following work being
performed on a quarterly basis: change filters, clean coils, check belts,
freon, contactors, compressor and fan morot.
7. COMMON AREA MAINTENANCE
A. Tenant agrees to pay Landlord $ 0.0193 /sq. ft. per month as
its estimated share of the common area services which are provided by Landlord
for the mutual benefit of all tenants. These services may include, but are not
limited to, general landscaping, mowing of grass, care of shrubs (including
replacement of expired plants); operation and maintenance of lawn sprinkler
system; operation and maintenance of exterior security lighting; water service
and sewer charges; repainting of exterior surfaces of truck doors, handrails,
downspouts, and other parts of the building which require periodic preventive
maintenance; parking lot maintenance; and pro rata share of the project's
common area maintenance and security service.
B. The actual cost of these services shall be prorated among
tenants on the basis of square footage occupied in the same manner as provided
in subparagraph 4.B above. Landlord shall send Tenant an annual statement of
actual common area service costs, along with either an invoice or a rebate for
the amount that Tenant's actual proportionate share exceeded or was less than
Tenant's $ 0.0193/sq. ft. per month common area service payment for the year
then ended. Tenant agrees to reimburse Landlord within thirty (30) days after
receipt of such invoice from Landlord. Subject to landlord's reasonable
discretion, this monthly common area service charge may be renegotiated
periodically based upon increases in Landlord's annual cost of providing these
services. See Paragraphs 28.d. AND 28.g.
8. ALTERATIONS
Tenant shall not make any alterations, additions or improvements
to the Premises (including, but not limited to, roof and wall penetrations)
without the prior written consent of Landlord which shall not be unreasonably
withheld. Tenant may, without the consent of Landlord, but at its own cost
and expense and in a good workmanlike manner, erect such shelves, bins,
machinery and trade fixtures as it may deem advisable, without altering the
basic character of the Building or improvements and without overloading or
damaging such Building or improvements, and in each case complying with all
applicable governmental laws, ordinances, regulations and other requirements.
All alterations, additions, improvements and partitions erected by Tenant shall
be and remain the property of Tenant during the term of this lease; and Tenant
shall, unless Landlord otherwise elects as hereinafter provided, remove all
alterations, additions, improvements and partitions erected by Tenant and
restore the Premises to their original condition by the date of termination of
this lease or upon earlier vacating of the Premises, provided, however, that,
if Landlord so elects, prior to termination of this lease or upon earlier
vacating of the Premises, such
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alterations, additions, improvements and partitions shall become the property
of Landlord as of the date of termination of this lease or upon earlier
vacating of the Premises and shall be delivered up to the landlord with the
Premises. All shelves, bins, machinery and trade fixtures installed by Tenant
may be removed by Tenant prior to the termination of this lease, if Tenant so
elects, and shall be removed by the date of termination of this lease or upon
earlier vacating of the Premises if required by Landlord. Upon any such
removal, Tenant shall restore the Premises to their original condition. All
such removals and restoration shall be accomplished in a good workmanlike
manner so as not to damage the primary structure or structural qualities of the
Buildings and other improvements situated on the Premises. See Paragraph 28.e.
9. SIGNS
Tenant shall have the right to install signs upon the Premises
only when first approved in writing by Landlord and subject to any applicable
governmental laws, ordinances, regulations, Landlord's standard sign criteria
and other requirements. At Landlord's direction, Tenant shall be responsible
for the removal of all such signs by the termination of this Lease. Such
installations and removals shall be made in such a manner as to avoid injury or
defacement of the building and other improvements, and Tenant shall be
responsible for the repair of any injury or defacement, including, without
limitation, discoloration caused by such installation and/or removal.
10. INSPECTION
Landlord and Landlord's agents and representatives shall have the
right to enter and inspect the Premises at any reasonable time during business
hours, for the purpose of ascertaining the condition of the Premises or in
order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this lease. During the period that is six (6)
months prior to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any reasonable
time during business hours for the purpose of showing the Premises and shall
have the right to erect on the Premises a suitable sign indicating the Premises
are available. Tenant shall give written notice to Landlord at least thirty
(30) days prior to vacating the Premises and shall arrange to meet with
Landlord for a joint inspection of the Premises prior to vacating. In the
event of Tenant's failure to give such notice or arrange such joint inspection,
Landlord's inspection at or after Tenant's vacating the Premises shall be
conclusively deemed correct for purposes of determining Tenant's responsibility
for repairs and restoration.
11. UTILITIES
Landlord agrees to provide, at its cost, water, electricity and
telephone service connections into the Premises; but Tenant shall pay for all
water, gas, heat, light, power, telephone, sewer, sprinkler charges and other
utilities and services used on or from the Premises, together with any taxes,
penalties, surcharges or the like pertaining thereto and any maintenance
charges for utilities, and shall furnish all electric light bulbs and tubes.
If any such services are not separately metered to Tenant, Tenant shall pay its
proportionate share, as determined by Landlord, of all charges jointly metered
with other Premises. Landlord shall in no event be liable for any interruption
or failure of utility services on the Premises, unless caused by the acts or
proven negligence of Landlord, its agents or employees.
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12. ASSIGNMENT and SUBLETTING
Tenant shall not have the right to assign this lease or to sublet
the whole or any part of the Premises without the prior written consent of
Landlord. Notwithstanding any permitted assignment or subletting, Tenant shall
at all times remain directly, primarily and fully responsible and liable for
the payment of the rent herein specified and for compliance with all of its
other obligations under the terms, provisions and covenants of this lease.
Upon the occurrence of an "event of default" as hereinafter defined, if the
Premises or any part thereof are then assigned or sublet, Landlord, in addition
to any other remedies herein provided or provided by law, may, at its option,
collect directly from such assignee or subtenant all rents becoming due to
Tenant under such assignment or sublease and apply such rent against any sums
due to Landlord from Tenant hereunder, and no such collection shall be
construed to constitute a novation or a release of Tenant from the further
performance of Tenant's obligations hereunder. Notwithstanding the terms
above, Landlord reserves the right to either: 1) enter into a new lease
agreement with the proposed assignee or subtenant and terminate the lease
coincident with occupancy by the new tenant and commencement of the new lease;
or, 2) Landlord and Tenant may mutually agree to terminate this lease. See
Article 28.h.
13. FIRE and CASUALTY DAMAGE
A. Landlord agrees to maintain standard fire and extended
coverage insurance covering the Building, of which the Premises are a part, in
an amount not less than eighty percent (80%) (or such greater percentage as may
be necessary to comply with the provisions of any co-insurance clauses of the
policy) of the "replacement cost" thereof, as such term is defined in the
Replacement Cost Endorsement to be attached thereto insuring against the perils
of Fire, Lightning and Extended Coverage, such coverage and endorsements to be
as defined, provided and limited in the standard bureau forms prescribed by the
insurance regulatory authority for the State of Texas for use by insurance
companies admitted in the State of Texas for the writing of such insurance on
risks located within the State of Texas. Subject to the provisions of
subparagraphs 13.C, 13.D and 13.E below, such insurance shall be for the sole
benefit of Landlord and under its sole control. In addition Landlord agrees to
maintain general liability coverage insurance in an amount deemed prudent and
necessary by Landlord or required by mortgagee presently (or in the future)
holding a mortgage and/or deed(s) of trust constituting a lien against the
Building of which the Premises are a part. If the annual premiums charged
Landlord for insurance exceed the standard premium rates because the nature of
the Tenant's operation results in extra hazardous exposure, and if Landlord
permits such operations, then Tenant, upon receipt of appropriate premium
notices, shall reimburse Landlord for such increase in such premiums as
additional rent hereunder. Tenant shall maintain, at its own expense, fire and
extended coverage insurance on all of its personal property, including
removable trade fixtures, located in the Premises and on all additions and
improvements made by Tenant and not required to be insured by Landlord. In
addition, Tenant shall reimburse Landlord annually, as additional rent and upon
receipt of notice from Landlord, for Tenant's proportionate share of all
amounts paid by Landlord for insurance premiums which exceed an amount equal to
the actual cost of such premiums for the calendar year 1994 In the event the
Premises constitute a portion of a multiple-occupancy building, Tenant shall be
responsible for reimbursing Landlord for Tenant's full proportionate share of
such excess, as such share is defined in subparagraph 4.B above. Said payment
shall be made to Landlord within ten (10) days after presentation to Tenant
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of Landlord's statement setting forth the amount due. Any payment to be made
pursuant to this subparagraph A with respect to the year in which this lease
commences or terminates shall bear the same ratio to the payment which would be
required to be made for the full year as the part of such year covered by the
term of this lease bears to a full year. In the event any such additional
rental amount is not paid within ten (10) days after the date of Landlord's
invoice to Tenant, the unpaid amount shall bear interest from the date due
until paid at the maximum interest rate allowed by law.
B. If the buildings situated upon the Premises should be damaged
or destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
C. If the buildings situated upon the Premises should be totally
destroyed by fire, tornado, or other casualty, or if they should be so damaged
thereby that rebuilding or repairs cannot, in Landlord's estimation, be
completed within two hundred (200) days after the date upon which Landlord is
notified by Tenant of such damage, this lease shall terminate and the rent
shall be abated during the unexpired portion of this lease, effective upon the
date of the occurrence of such damage.
D. If the Building of which the Premises is a part should be
damaged by any peril covered by the insurance to be provided by Landlord under
subparagraph 13.A above, but only to such extent that rebuilding or repairs
can, in Landlord's estimation, be completed within one hundred twenty (120)
days after the date upon which Landlord is notified by Tenant of such damage,
this lease shall not terminate, and Landlord shall, at its sole cost and
expense, thereupon proceed with reasonable diligence to rebuild and repair such
buildings to substantially the condition in which they existed prior to such
damage, except that Landlord shall not be required to rebuild, repair or
replace any part of the partitions, fixtures, additions and other improvements
which may have been placed in, on or about the Premises by Tenant. If the
Premises are untenable in whole or in part following such damage, the rent
payable hereunder during the period in which they are untenable shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances. In the event that Landlord should fail to complete such repairs
and rebuilding within one hundred twenty (120) days after the date upon which
Landlord is notified by Tenant of such damage, Tenant may, at its option,
terminate this lease by delivering written notice of termination to Landlord as
Tenant's exclusive remedy, whereupon all rights and obligations hereunder shall
cease and terminate.
E. Notwithstanding anything herein to the contrary, in the event
the holder of any indebtedness secured by a mortgage or deed of trust covering
the Building requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this lease by
delivering written notice of termination to tenant within fifteen (15) days
after such requirement is made by any such holder, whereupon all rights and
obligations hereunder shall cease and terminate.
F. Landlord and Tenant each hereby releases the other from any
loss or damage to property caused by fire or any other perils insured through
or under them by way of subrogation, or otherwise for any loss or damage to
property caused by fire or any other perils insured in policies of insurance
covering such property, even if such loss or damage shall have been
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caused by the fault or negligence of the other party or anyone for whom such
party may be responsible; provided, however, that his release shall be
applicable and in force and effect only with respect to loss or damage
occurring during such times in which the releasor's policies contain a clause
or endorsement stating that any such release shall not adversely affect or
impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Both Landlord and Tenant agree that they will request their
insurance carriers to include such a clause or endorsement in their policies.
If extra cost shall be charged therefor, each party shall advise the other
thereof and of the amount of the extra cost, and the other party, at its
election, may pay the same, but shall not be obligated to do so.
14. LIABILITY
Landlord shall not be liable to Tenant or Tenant's employees,
agents, patrons or visitors, or to any other person whomsoever, for any injury
to person or damage to property on or about the Premises, resulting from and/or
caused in part or whole by the negligence or misconduct of Tenant, its agents,
servants, employees, or of any other person entering upon the Premises, or
caused by the buildings and improvements located on the Premises becoming out
of repair, or caused by leakage of gas, oil, water or steam or by electricity
emanating from the Premises, or due to any cause whatsoever, and Tenant hereby
covenants and agrees that it will at all times indemnify and hold safe and
harmless the property, the Landlord (including, without limitation, the trustee
and beneficiaries if Landlord is a trust), Landlord's agents and employees from
any loss, liability, claims, suits, costs, expenses, including, without
limitation, attorney's fees and damages, both real and alleged, arising out of
any such damage or injury; except injury to persons or damage to property the
sole cause of which is negligence of Landlord or the failure of Landlord to
repair any part of the Premises which Landlord is obligated to repair and
maintain hereunder within a reasonable time after the receipt of written notice
from Tenant of needed repairs. Tenant shall, at Tenant's sole cost and
expense, fully insure its property located within the Premises against fire and
other casualty and shall maintain public liability insurance with combined
limits of at lease $1,000,000. The limits or amounts of said insurance
coverage shall not, however, limit the liability of the Tenant hereunder.
Tenant shall cause Landlord, and Landlord's Manager, RW Management Company,
Inc., to each be named as an additional insured under such public liability
policy. In addition, Landlord shall be named as additional insured on the fire
and casualty insurance policy which Tenant is required to maintain with respect
to Tenant's property located in the Premises. If Tenant fails to procure and
maintain said insurance, Landlord may, but shall not be required to, procure
and maintain same, and in such event, premiums and costs thereof shall be
reimbursed and paid by Tenant to Landlord on demand by Landlord. All such
policies shall be procured by Tenant from responsible insurance companies
satisfactory to Landlord. Certified copies of such policies, together with
receipt evidencing payment of premiums therefor, shall be delivered to Landlord
prior to the commencement date of this lease. Not less than fifteen (15) days
prior to the expiration date of any such policies, certified copies of the
renewals thereof (bearing notations evidencing the payment of renewal premiums)
shall be delivered to Landlord. Such policies shall further provide that not
less than thirty (30) days written notice shall be given to Landlord before
such policy may be canceled or changed to reduce insurance provided thereby.
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15. CONDEMNATION
A. If the whole or any substantial part of the Premises should be
taken for any public or quasi-public use under any governmental law, ordinance
or regulation or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the use of
the Premises for the purpose for which they are being used, this lease shall
terminate and the rent shall be abated during the unexpired portion of this
lease, effective when the physical taking of said Premises shall occur.
B. If part of the Premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and the taking
does not prevent or materially interfere with the use of the Premises, and this
lease is not terminated as provided in subparagraph above, this lease shall not
terminate but the rent payable hereunder during the unexpired portion of this
lease shall be reduced to such extent as may be fair and reasonable under all
of the circumstances.
C. In the event of any such taking or private purchase in lieu
thereof, Landlord shall be entitled to receive and retain all compensation
awarded in any condemnation proceedings. Provided, however, Tenant shall be
entitled to any compensation awarded for the taking of leasehold improvements
made by Tenant, Tenant's furniture, fixtures and equipment.
16. HOLDING OVER
Tenant will, at the termination of this lease by lapse of time or
otherwise, yield up immediate possession to Landlord. If Landlord agrees in
writing that Tenant may hold over after the expiration or termination of this
lease, unless the parties hereto otherwise agree in writing on the terms of
such holding over, the hold-over tenancy shall be subject to termination by
Landlord at any time upon not less than thirty (30) days advance written
notice, or by Tenant at any time upon not less than thirty (30) days advance
written notice, and all of the other terms and provisions of this lease shall
be applicable during that period, except that Tenant shall pay Landlord from
time to time upon demand, as rental for the period of any hold-over, an amount
equal to two (2) times rent in effect on the termination date, computed on a
daily basis for each day of the hold-over period. No holding over by Tenant,
whether with or without consent of Landlord, shall operate to extend this lease
except as otherwise expressly provided. The preceding provisions of this
paragraph 16 shall not be construed as Landlord's consent for Tenant to hold
over.
17. QUIET ENJOYMENT
Landlord covenants that it now has, or will acquire before Tenant
takes possession of the Premises, good title to the Premises, free and clear of
all liens and encumbrances, excepting only the lien for current taxes not yet
due, such mortgage or mortgages as are permitted by the terms of this lease,
zoning ordinances and other building and fire ordinances and governmental
regulations relating to the use of such property, and easements, restrictions
and other conditions of record. In the event this lease is a sublease, then
Tenant agrees to take the Premises subject to the provisions of the prior
leases. Landlord represents and warrants that it has full right
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and authority to enter into this lease and that Tenant, upon paying the rental
herein set forth and performing its other covenants and agreements herein set
forth, shall peaceably and quietly have, hold and enjoy the Premises for the
term hereof without hindrance or molestation from Landlord, subject to the
terms and provisions of this lease.
18. EVENTS OF DEFAULT
The following events shall be deemed to be events of default by
Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent herein
reserved when due, or any payment with respect to taxes hereunder when due, or
any other payment or reimbursement to Landlord required herein when due and
such failure shall continue for a period of TEN (10) days from the date such
payment was due.
(b) Tenant shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of creditors.
(c) Tenant shall file a petition under any section or chapter of
the National Bankruptcy Act, as amended, or under any similar law or statute of
the United States or any state thereof; or Tenant shall be adjudged bankrupt or
insolvent in proceedings filed against Tenant thereunder.
(d) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant.
(e) Tenant shall desert or vacate any substantial portion of the
Premises.
(f) Tenant shall fail to comply with any term, provision or
covenant of this lease (other than the foregoing in this Paragraph 18), and
shall not cure such failure within ten (10) days after written notice thereof
to Tenant.
19. REMEDIES
Upon the occurrence of any of such events of default described in
Paragraph 18 hereof, Landlord shall have the option to pursue any one or more
of the following remedies without any notice or demand whatsoever:
(a) Terminate this lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearage in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying such Premises or any
part thereof, by force if necessary, without being liable for prosecution or
any claim of damages therefor; and Tenant agrees to pay Landlord, on demand,
the amount of all loss and damage which Landlord may suffer by reason of such
termination, whether through inability to relet the Premises on satisfactory
terms or otherwise.
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(b) Enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying such Premises or any
part thereof, by force if necessary, without being liable for prosecution or
any claim for damages therefor, and relet the Premises and receive the rent
therefor; and Tenant agrees to pay to the Landlord, on demand, any deficiency
that may arise by reason of such reletting. In the event Landlord is
successful in reletting the Premises at a rental in excess of that agreed to be
paid by Tenant pursuant to the terms of this lease, Landlord and Tenant each
mutually agree that Tenant shall not be entitled, under any circumstances, to
such excess rental, and Tenant does hereby specifically waive any claim to such
excess rental.
(c) Enter upon the Premises, by force if necessary, without being
liable for prosecution or any claim for damages therefor, and do whatever
Tenant is obligated to do under the terms of this lease; and Tenant agrees to
reimburse Landlord, on demand, for any expenses which Landlord may incur in
thus effecting compliance with Tenant's obligations under this lease, and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to the Tenant from such action, whether caused by the negligence of
Landlord or otherwise.
(d) Alter locks and other security devices at the Premises,
without being liable for prosecution or any claim of damages therefor, and such
alteration of locks and security devices shall not be deemed unauthorized or
constitute a conversion. Tenant acknowledges that Landlord may require full
payment of all sums then due to Landlord under this Lease as a condition to
Tenant's entitlement to a key to new or altered locks that Landlord may have
placed on the Premises after an Event of Default.
(e) Receive payment from Tenant, in addition to any sum provided
to be paid above, for any and all of the following expenses for which Tenant
shall be considered liable:
1. Reasonable broker's fees incurred by Landlord in
connection with reletting the whole or any part of the Premises;
2. The reasonable cost of removing and storing Tenant's or
other occupant's property;
3. The reasonable cost of repairing, altering, remodeling or
otherwise putting the Premises into condition acceptable to a new tenant or
tenants, plus a reasonable charge to cover overhead; and
4. All reasonable expenses incurred by Landlord in enforcing
Landlord's remedies.
Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies herein provided or any other remedies
provided by law, nor shall pursuit of any remedy herein provided constitute a
forfeiture or waiver of any rent due to Landlord
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hereunder or of any damages accruing to Landlord by reason of the violation of
any of the terms, provisions and covenants herein contained. No act or thing
done by the Landlord or its agents during the term hereby granted shall be
deemed a termination of this lease or an acceptance of the surrender of the
Premises, and no agreement to terminate this lease or accept a surrender of
said Premises shall be valid unless it is in writing and signed by Landlord.
No waiver by Landlord of any violation or breach of any of the terms,
provisions and covenants herein contained shall be deemed or construed to
constitute a waiver of any other violation or breach of any of the other terms,
provisions and covenants herein contained. Landlord's acceptance of the
payment of rental or other payments hereunder after the occurrence of an event
of default shall not be construed as a waiver of such default, unless Landlord
so notifies Tenant in writing. Forbearance of default shall not be deemed or
construed to constitute a waiver of such default or of Landlord's right to
enforce any such remedies with respect to such default or any subsequent
default. If, on account of any breach or default by Tenant in Tenant's
obligations under the terms and conditions of this lease, it shall become
necessary or appropriate for Landlord to employ or consult with an attorney
concerning any of Landlord's rights or remedies hereunder, Tenant agrees to pay
any reasonable attorney's fees so incurred.
20. LANDLORD'S LIEN
In addition to any statutory lien for rent in Landlord's favor,
Landlord shall have, and Tenant hereby grants to Landlord, a continuing
security interest for all rentals and other sums of money becoming due
hereunder from Tenant, upon all goods, wares, equipment, fixtures, furniture,
inventory, accounts, contract rights, chattel paper and other personal property
of Tenant situated on the Premises, and such property shall not be removed
therefrom without the consent of Landlord until all arrearage in rent, as well
as any and all other sums of money then due to Landlord hereunder, shall first
have been paid and discharged. In the event of a default under this lease,
Landlord shall have, in addition to any other remedies provided herein or by
law, all rights and remedies under the Uniform Commercial Code, including
without limitation the right to sell the property described in this Paragraph
20 at public or private sale upon five (5) days notice to Tenant. Any
statutory lien for rent is not hereby waived, the express contractual lien
herein granted being in addition and supplementary thereto. See Paragraph
28.k.
21. MORTGAGES
Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a
lien or charge upon the Premises or the improvements situated thereon;
provided, however, that if the mortgagee, trustee or holder of any such
mortgage or deed of trust elects to have Tenant's interest in this lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this lease shall be deemed superior to such lien, whether
this lease was executed before or after said mortgage or deed of trust. Tenant
shall at any time hereafter on demand execute any instruments, releases or
other documents which may be required by any mortgagee for the purpose of
subjecting and subordinating this lease to the lien of any such mortgage. See
Paragraph 28.l.
14
<PAGE> 15
22. LANDLORD'S DEFAULT
A. In the event Landlord should become in default in any payments
due on any such mortgage described in Paragraph 21 hereof or in the payment of
taxes or any other items which might become a lien upon the Premises and which
Tenant is not obligated to pay under the terms and provisions of this lease,
Tenant shall simultaneously give Landlord and Landlord's mortgagee (provided
Landlord or Landlord's mortgagee shall have advised Tenant of the name and
address of Landlord's mortgagee) written notice specifying such default with
particularity and Landlord shall thereupon have thirty (30) days (plus an
additional reasonable period as may be required in the exercise by Landlord of
due diligence) in which to cure any such default. In addition, Landlord's
mortgagee shall have the right (but not the obligation) to cure or remedy such
default during the period that is permitted to Landlord hereunder, plus an
additional period of thirty (30) days, and Tenant will accept such curative or
remedial action taken by Landlord's mortgagee with the same effect as if such
action had been taken by Landlord.
B. Upon the failure of Landlord or Landlord's mortgagee to cure
such default in accordance with the provisions of Paragraph 22.A hereof, Tenant
shall be authorized and empowered to pay any such items for and on behalf of
Landlord, and the amount of any item so paid by Tenant for and on behalf of
Landlord, together with any interest or penalty required to be paid in
connection therewith, shall be payable on demand by Landlord to Tenant;
provided, however, that Tenant shall not be authorized and empowered to make
any payment under the terms of this Paragraph 22 unless the item paid shall be
superior to Tenant's interest hereunder. Tenant's exclusive remedy shall be an
action for damages against Landlord, and Tenant hereby waives the benefit of
any laws granting it a lien upon the property of Landlord and/or upon rent due
Landlord. In the event Tenant pays any mortgage debt in full, in accordance
with this paragraph, it shall, at its election, be entitled to the mortgage
security by assignment or subrogation.
23. MECHANIC'S LIENS
Tenant shall have no authority, express or implied, to create or
place any lien or encumbrance of any kind or nature whatsoever upon, or in any
manner to bind, the interest of Landlord in the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs, and each such claim shall affect and each such lien
shall attach to, if at all, only the leasehold interest granted to Tenant by
this instrument. Tenant covenants and agrees that it will pay or cause to be
paid all sums legally due and payable by it on account of any labor performed
or materials furnished in connection with any work performed on the Premises on
which any lien is or can be validly and legally asserted against its leasehold
interest in the Premises or the improvements thereon, and that it will save and
hold Landlord harmless from any and all loss, cost or expenses based on or
arising out of asserted claims or liens against the leasehold estate or against
the right, title and interest of the Landlord in the Premises or under the
terms of this lease.
24. ASSIGNMENT BY LANDLORD
Landlord shall have the right to assign or transfer, in whole or
in part, every feature of its rights and obligations hereunder and in the
Building and leased Premises. Such
15
<PAGE> 16
assignments or transfers may be made to a corporation, trust, trust company,
individual or group of individuals, howsoever made shall be in all things
respected and recognized by Tenant.
25. DISCLAIMER
This lease and the obligations of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on the part of the
Tenant to be performed shall not be affected, impaired or executed because
Landlord is unable to fulfill any of its covenants and obligations under this
lease, expressly or impliedly to be performed by Landlord, if Landlord is
prevented or delayed from doing so by reason of strike, labor troubles,
accident, adjustment to insurance, or by any reason or cause whatsoever
reasonably beyond Landlord's control. Reasons beyond Landlord's control shall
include, but not be limited to, laws, governmental preemption in connection
with a National Emergency or by any reason of any rule, order or regulation of
any governmental agency, federal, state, county or municipal authority or any
department or subdivision thereof, or by reason of the conditions of supply and
demand which have been or are affected by war or other emergency.
26. NOTICES
Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with
reference to the sending, mailing or delivery of any notice or the making of
any payment by Landlord to Tenant or with reference to the sending, mailing or
delivery of any notice or the making of any payment by Tenant to Landlord shall
be deemed to be complied with when and if the following steps are taken.
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligation to pay
rent and any other amounts to Landlord under the terms of this lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
(b) All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address hereinbelow set forth, or
at such other address within the continental United States as Tenant may
specify from time to time by written notice delivered in accordance herewith.
(c) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered, whether actually received or not,
when deposited in the United States mail, postage prepaid, certified or
registered mail, addressed to the parties hereto at the respective addresses
set out below, or at such other address as they have theretofore specified by
written notice delivered in accordance herewith.
16
<PAGE> 17
Landlord: Tenant:
c/o RW Management Company, Inc. Packaged Ice, Inc.
8554 Katy Freeway, Suite 300 8572 Katy Freeway, Suite 101
Houston, Texas 77024 Houston, Texas 77024
If and when included within the term "Landlord", as used in this instrument,
there is more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included within the term "Tenant", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively, shall be bound
by notices given in accordance with the provisions to this paragraph to the
same effect as if each had received such notice.
27. MISCELLANEOUS
A. Words of any gender used in this lease shall be held and
construed to include any other gender, and words in the singular number shall
be held to include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained
in this lease shall apply to, inure to the benefit of, and be binding upon the
parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly
provided. Landlord shall have the right to assign any of its rights and
obligations under this lease. Each party agrees to furnish to the other,
promptly upon demand, a corporate resolution, proof of due authorization by
partners, or other appropriate documentation evidencing the due authorization
of such party to enter into this lease.
C. Whenever a clause or provision of this lease requires
Landlord's consent or approval, Landlord agrees not to unreasonably withhold or
delay its consent or approval.
D. The captions inserted in this lease are for convenience only
and in no way define, limit or otherwise describe the scope or intent of this
lease, or any provision hereof, or in any way affect the interpretation of this
lease.
E. [Intentionally Deleted]
17
<PAGE> 18
F. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
G. All obligations of Tenant hereunder not fully performed as of
the expiration or earlier termination of the term of this lease shall survive
the expiration or earlier termination of the term hereof, including, without
limitation, all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the Premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
Premises, Tenant shall pay to Landlord any amount reasonably estimated by
Landlord as necessary to put the Premises, including, without limitation, all
heating and air conditioning systems and equipment therein, in good repair,
ordinary wear and tear excepted. Tenant shall also, prior to vacating the
Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's
obligation hereunder for real estate taxes and insurance premiums for the year
in which the lease expires or terminates. All such amounts shall be used and
held by Landlord for payment of such obligations of Tenant hereunder, with
Tenant being liable for any additional costs therefor upon demand by Landlord,
or with any excess to be returned to Tenant after all such obligations have
been determined and satisfied, as the case may be. Any security deposit held
by Landlord shall be credited against the amount payable by Tenant under this
Paragraph 27.G. See Paragraph 28.i.
H. If any clause or provision of this lease is illegal, invalid
or unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that, in lieu of each clause or
provision of this lease that is illegal, invalid or unenforceable, there be
added as a part of this lease contract a clause or provision as similar in
terms to such illegal, invalid or unenforceable clause or provision as may be
possible and be legal, valid and enforceable.
I. Because the Premises are on the open market and are presently
being shown, this lease shall be treated as an offer with the Premises being
subject to prior lease and such offer subject to withdrawal or non-acceptance
by Landlord or to other use of the Premises without notice, and this lease
shall not be valid or binding unless and until accepted by Landlord in writing
and a fully executed copy delivered to both parties hereto.
J. All references in this lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on
which all parties hereto have executed this lease.
K. Both parties agree, from time to time within ten (10) days
after request of the other party, to deliver an estoppel certificate to the
requesting party or its designee. Such estoppel certificate shall state that
this lease is in full force and effect, the date to which rent has been paid,
the unexpired term of this lease and such other matters pertaining to this
lease as may be requested.
18
<PAGE> 19
EXECUTED by the parties this 22nd day of March, 1994.
LANDLORD: Robert S. Wilson, L.L.C.
By:
---------------------------------
Robert S. Wilson
Title: Manager
------------------------------
ATTEST:
By:
---------------------------------
Janet L. Wilson
Title: V.P. for Manager
------------------------------
Before me, the undersigned authority, on this day personally appeared Robert S.
Wilson, of Robert S. Wilson, L.L.C., known to me to be the person whose name is
subscribed to the foregoing instrument, and acknowledged to me that he executed
the same for the purposes and consideration therein expressed, and in the
capacity stated. Given under my hand and seal of office on this, the 22nd day
of March, 1994.
----------------------------------
Notary Public in and for the
County of Harris, State of Texas
19
<PAGE> 20
TENANT: Packaged Ice, Inc.
By:
---------------------------------
James F. Stuart
Title: President
------------------------------
ATTEST:
By:
---------------------------------
Jack Stazo
Title: Vice President
------------------------------
Before me, the undersigned authority, on this day personally appeared James F.
Stuart, of Packaged Ice, Inc., a Texas Corporation, known to me to be the
person whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the same for the purposes and consideration therein
expressed, and in the capacity stated. Given under my hand and seal of office
on this, the 21st day of March, 1994.
----------------------------------
Notary Public in and for the
County of Harris, State of Texas
20
<PAGE> 21
EXHIBIT "A"
Legal Description: West Memorial Park, Phase I
Being a tract of land out of the A.H. Osbourne Survey Abstract No. A-610,
Houston, Harris County, Texas, and being more particularly described as
follows:
The point of reference is the north R.O.W. (right-of-way) line of the MKT
Railroad R.O.W. (100' wide) and the east R.O.W. line of Bingle Road; thence
east a distance of 959.15' to a point:
Thence north 0o 15' 23" W. a distance of 754.27' to the point of beginning;
Thence west a distance of 621.47' to a point for a corner;
Thence north a distance of 544.43' to a point for a corner;
Thence north 89o 21' 11" E. a distance of 619.04' to a point for a corner;
Thence south 0o 15' 23" E. a distance of 551.43 to the point of beginning and
containing 7.802 acres of land more or less.
<PAGE> 22
Exhibit "B"
[blueprint layout of building, ground floor]
8572 Katy Freeway,
Suite 104, 4,350
square feet
8572 Katy Freeway, Suite 101, approximately 13,050 square feet
<PAGE> 23
Special Provisions
Exhibit "C" - Paragraph 28
a. In the event Tenant shall occupy the leased premises prior to May 1,
1994, then all of the terms, covenants and conditions of this lease shall be in
full force and effect beginning on the date of occupancy. Tenant's rental for
the partial month of April, 1994 (if any) shall be prorated at the rate of
$113.10 per day; such amount being due and payable upon occupancy by Tenant.
b. Landlord shall improve the leased premises as shown on construction
drawings prepared by Thomas M. Weaver Associates, dated February 16, 1994, as
approved by both parties. All associated costs incurred in the improvement of
the leased premises, including but not limited to, space planning, construction
document preparation, mechanical and/or electrical engineering services, and
construction administration, shall be included. These tenant improvements have
been bid at $29,488.00. A portion of this work, $15,699.00, shall be the sole
cost and expense of the Landlord. All cost and expense in excess of $15,699.00
shall to be the sole cost and expense of Tenant, and shall be due and payable
according to the following schedule: 50% upon execution of this lease and 50%
prior to full occupancy of the leased premises. Landlord's contribution shall
not exceed $15,699.00. The projected tenant improvement expense in excess of
the available allowance is $13,789.00. Any and all changes to the plans
specified herein, as approved by Landlord and Tenant, must be submitted in
writing to Landlord for approval prior to any such construction, and all costs
and expense incurred as a result of such change orders shall be the sole cost
and expense of Tenant.
c. The leased premises and their use under this Lease Agreement comply
fully with (and no notices of violation have been received in connection with)
all environmental, air quality, building, health, fire, safety, and
governmental or regulatory rules, laws, ordinances, statutes, codes and
requirements applicable to the leased premises, including the Americans with
Disabilities Act of 1990. However, in the event that through amendment,
interpretation or through Tenant's use of the leased premises, modifications to
same become necessary to fully comply with the terms and provisions of the
Americans with Disabilities Act of 1990, the parties agree that it shall be the
sole responsibility of the Tenant to comply with any and all provisions of the
Americans with Disabilities Act of 1990, as same may be amended or interpreted
in the future, and Tenant agrees to be fully responsible for all expenses
related to the Tenant improvements or the later modifications of the leased
premises during the term of this Lease Agreement. The Tenant further agrees
to indemnify and hold the Landlord harmless against any claims which may arise
out of Tenant's failure to comply with the Americans with Disabilities Act of
1990. Such indemnification shall include, but shall not be limited to, all
fines, fees and penalties, and all legal and other expenses (including
attorney's fees), incurred by Landlord and for the costs of collection of the
sums due under the terms of this indemnity.
d. Tenant's initial monthly common area services payment shall be
$252.00.
e. All tenant improvement work to be performed by Tenant shall be
performed by a licensed contractor and pursuant to the following terms and
conditions:
<PAGE> 24
1. Landlord shall be notified in writing prior to the commencement
of any work. Said notification shall specify in detail the work to
be performed and the contractor who will be performing it; and
2. Tenant is to acquire a permit from the City of Spring Valley prior
to the commencement of any work and/or any improvements requiring a
permit. Furthermore, all work shall be completed in compliance with
all applicable laws and/or ordinances of the city, county, state,
federal or any municipal governing authority; and
3. All work shall be completed in a workmanlike manner by a licensed
contractor/subcontractor and in accordance with the following:
A. The contractor/subcontractor shall have Workman's Compensation
and Liability insurance in the amounts of $500,000.00 for bodily
injury and $500,000.00 for property damage, Landlord shall be
supplied with insurance certificates verifying such insurance
coverages; and
B. A signed release of Lien and Warranty by all contractors
and/or subcontractors who perform any work in the Premises; and
C. All work is subject to final acceptance by Landlord.
f. While this lease is in full force and effect, provided that Tenant is
not in default of any of the terms, covenants and conditions thereof, Tenant
shall have the right or option to extend the original term of this lease for
one (1) additional term of sixty (60) months. Notice of Tenant's intention to
exercise this option must be given to Landlord in writing at least one hundred
twenty (120) days prior to the expiration of the original term of this lease.
Such extension or renewal of the original term shall be on the same terms,
covenants and conditions as provided for in the original term except for tenant
improvements and that the base rent during the renewal term shall be at fair
market value for comparable space, for a comparable use, for a comparable
tenant, in the Katy Freeway/West Loop market.
g. Pursuant to Paragraph 7 of the lease, for the purposes of determining
Tenant's proportionate share of common area services expense, as defined
therein, the actual common area services expenses, excluding utilities as a
non-controllable expense which shall be passed through to Tenant in its
entirety without restriction, shall be capped not to increase more than 10% per
calendar year on a cumulative basis over the actual common area services
expense for calendar year 1994.
h. 1. Pursuant to Paragraph 12 of the lease, Landlord shall look at the
following criteria in making a decision as to consenting to any request by
Tenant, such consent not to be unreasonably withheld contingent upon the
following criteria being satisfied in the sole reasonable judgment of the
Landlord, to sublease or assignment of the leased premises, other than to an
affiliate or subsidiary of Tenant:
<PAGE> 25
A. Tenant shall, at the time of making such request, not be in
default of any of the terms, covenants or conditions of this lease;
and
B. The prospective subtenant or assignee's parking shall be no
greater than that amount allocated to Tenant; and
C. The prospective subtenant or assignee's credit shall be
acceptable to Landlord; and
D. The prospective subtenant or assignee's use of the leased
premises shall be compatible with the other tenants in the project and
in compliance with the terms of this lease; and
E. If Landlord is in negotiations with a prospective subtenant or
assignee prior to Tenant's request to sublease or assign the space,
Landlord shall have the right to refuse Tenant's request to sublease
or assignment of the leased premises.
2. In the event Landlord consents to a sublease or assignment and is
called upon to prepare the necessary documentation, Landlord shall be
entitled to a fee of $300.00 for preparation of said documents. This fee
shall be apart from, and in addition to, any leasing commissions,
renovations, or other costs incidental to the subleasing or assignment of
the leased premises.
3. In the event Tenant subleases or assigns the leased premises,
Landlord shall be entitled to all net rents in excess of Tenant's monthly
rent collected or received by Landlord, less the monthly proration of
Tenant's costs for renovations, construction, or direct costs incidental to
the subleasing or assignment of the leased premises.
i. Pursuant to Paragraph 27.G.. of this Lease Agreement, at the
termination of this Lease Agreement, Tenant agrees to surrender the leased
premises to Landlord in the same condition as when occupancy was taken by
Tenant, ordinary wear & tear excluded. Ordinary wear and tear as described
above shall be that condition or conditions which may exist as a result of the
use of the leased premises in the ordinary course of business which does not
physically alter the character of the leased premises, beyond smudges to the
paint, washable blemishes to any wallcoverings, or carpet wear as a result of
normal foot traffic. Damages to the leased premises which exceed ordinary wear
and tear include but shall not be limited to:
1. Doors: holes, stains, missing hardware, and/or displacement.
2. Overhead Doors: holes, bent panels or tracks, missing or damaged
rollers, inoperable condition, and/or missing hardware.
3. Office Walls: holes, and/or gouges.
4. Warehouse demising Walls: holes, cracks, dislocation, or
graffiti.
5. Ceiling Tile: holes, chips, and/or missing tiles.
6. Pipe Bollards and Structural Columns: bent, dented, cracked,
and/or displaced.
<PAGE> 26
7. Concrete Floors: cracks or gouges caused by Tenant's operation,
and/or any unremoved foreign material from the floor surface; i.e.
spilled epoxy, glues, oils, etc.
8.
9. Electrical: broken light lenses or lights, chipped electrical
outlets or switches, damaged electrical panels, inoperable
fixtures, any unremoved electrical conduits, boxes or wiring added
by Tenant.
10. Sprinklers:
11. Warehouse Heaters:
12. Air Conditioning Systems: thermostats missing and/or inoperable,
disconnected duct work; dirty air diffusers, coils and/or filters;
unit inoperable, improperly serviced and/or not in proper working
condition.
13. Exterior Building: bent or displaced downspouts, damaged or
missing truck bumpers, any cracks or damages to the exterior wall,
any broken or cracked windows, and/or any graffiti.
14. Concrete Parking Lot: cracks, gouges, or any damage caused by
Tenant's operation.
15. Any equipment or part of the leased premises described in
Paragraph 6 of the Lease Agreement that is not operational and in
proper condition as described therein.
j. While this lease is in full force and effect, provided that Tenant is
not in default of any of the terms, covenants and conditions thereof, Tenant
shall have a continuing Right of First Refusal on Suite 104 of 8572 Katy
Freeway, as defined in "green" on Exhibit "B" attached hereto and made a part
hereof. Should Landlord have a bonafide prospect for the space as defined
above, Landlord shall provide Tenant with written notice setting forth a
description of the rental terms. From the date of receipt of said proposal,
Tenant shall have five (5) business days in which to either accept or reject
Landlord's offer. Should Tenant accept Landlord's offer to lease the space,
Tenant shall confirm said interest in writing and Tenant and Landlord must
consummate a lease within five (5) business days of Tenant's written notice to
Landlord to lease such space. Should Tenant reject Landlord's offer, or fail
to respond within the aforesaid time limits, Tenant's Right of First Refusal
with respect to this prospect on said space shall be null and void and of no
further force and effect. Should such space again become available during the
term of this lease, Tenant's Right of First Refusal shall, again, be in full
force and effect.
k. Provided Tenant is not in default under this Lease Agreement, Landlord
will subordinate all statutory and contractual landlord's liens (and sign the
document included in this Lease Agreement as Exhibit "E" so indicating, upon
Tenant's written request and Tenant providing Landlord with all requested
documentation to support such a request) to any liens or security interests
covering financed fixtures, furniture or equipment of Tenant in favor of bona-
fide third-party lenders (or other secured parties, specifically excluding any
person or entity owning or controlling any portion of Tenant or Tenant's stock)
providing financing to Tenant (including purchase-money financing); provided
that such lenders or secured parties to whom Landlord subordinates shall remove
the collateral if, after subordination, a default occurs under the Lease
<PAGE> 27
Agreement even though Tenant may not be in default in its obligation to pay the
lender or secured party.
l. Landlord shall attempt to obtain a non-disturbance agreement from the
mortgagee on behalf of Tenant. All costs incurred in the negotiation and
execution of this agreement by Landlord shall be reimbursed to Landlord by
Tenant within thirty (30) days of receipt of Landlord's invoice.
<PAGE> 28
EXHIBIT "D"
HAZARDOUS MATERIAL
1. Tenant shall not cause or permit any Hazardous Material to be brought
upon, manufactured, kept, or used in or about the Premises by Tenant, its
agents, employees, contractors, or invitees, except for such Hazardous Material
as is necessary or useful to Tenant's business and the use of which is
expressly approved by Landlord in writing.
2. Any Hazardous Material permitted on the Premises as provided in
Section 1, and all containers therefor, shall be used, kept, stored, and
disposed of in a manner that complies with all federal, state, and local laws
or regulations applicable to this Hazardous Material.
3. Tenant shall not discharge, leak, or emit, or permit to be discharged,
leaked or emitted, any material into the Premises, the building which includes
the Premises, the atmosphere, ground, sewer system, or any body of water, if
that material (as is reasonably determined by the Landlord, or any governmental
authority) does or may pollute or contaminate the same, or may adversely affect
(a) the health, welfare, or safety or persons, whether located on the Premises
or elsewhere, or (b) the condition, use, or enjoyment of the building or any
other real or personal property.
4. At the commencement of each Lease Year, Tenant shall disclose to
Landlord the names and approximately amounts of all Hazardous Material that
Tenant intends to store, use, or dispose of on the Premises in the coming Lease
Year. In addition, at the commencement of each Lease Year, beginning with the
second Lease Year, Tenant shall disclose to Landlord the names and amounts of
all Hazardous Materials that were actually used, stored, or disposed of on the
Premises if those material were not previously identified to the Landlord at
the commencement of the previous Lease Year.
5. As used herein, the term "Hazardous Material" means (a) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act of 1976, as
amended from time to time, and regulations promulgated thereunder; (b) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder; (c) any oil, petroleum products, and their
by-products; (d) any substance that is or become regulated by any federal,
state, or local governmental authority; and (e) any other ignitable, reactive,
corrosive, hazardous, toxic or dangerous substance or material.
6. Tenant hereby agrees that it shall be fully liable for all costs and
expenses related to the use, manufacture, storage, and disposal of Hazardous
Material kept on the Premises, and the Tenant shall give immediate notice to
the Landlord of any violation or potential violation of the provisions of
Section 2. Tenant shall defend, indemnify, and hold harmless Landlord, and its
agents, and employees from and against all claims, demands, penalties, fines,
liabilities, settlements, damages, costs, expenses (including, without
limitation, attorneys and consultants fees, court costs, and litigation
expenses), or losses (including, without limitation, a decrease in value of the
Premises or Land or building on which the Premises are a part, loss or
restriction of rentable or usable space) of whatever kind or nature, known or
unknown, contingent or otherwise, arising out of or in any way
<PAGE> 29
related to (a) the presence, disposal, release, or threatened release of any
such Hazardous Material that is on, from, or affecting the soil, water,
vegetation, buildings, personal property, persons, persons, animals, or
otherwise; (b) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to that Hazardous Material;
(c) any lawsuit brought or threatened, settlement reached, or government order
relating to that Hazardous Material; (d) any violation of any laws applicable
thereto; or (e) any violation of any requirements or provisions of this Lease
concerning Hazardous Material, providing such action is caused by Tenant's
or Tenant's customers, agents, employees, or invitees, use of the leased
premises. The provisions of this Section 6 shall be in addition to any other
obligations and liabilities Tenant may have to Landlord at law or equity and
shall survive the transactions contemplated herein and shall survive the
termination of this Lease.
<PAGE> 30
TENANT'S RESPONSIBILITY REGARDING HAZARDOUS SUBSTANCES
1. Hazardous Substances.
The term "Hazardous Substances," as used in this Lease, shall include,
without limitations, flammable, explosives, radioactive materials,
asbestos, polychlorinated biphenyl (PCB), chemicals known to cause cancer
or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic
substances, or related materials, petroleum and petroleum products, and
substances declared to be hazardous or toxic under any or regulation now or
hereafter enacted or promulgated by any governmental authority.
2. Tenant's Restrictions.
(a) Any violation of any federal, state, or local law, ordinance, or
regulation now or hereafter enacted, related to environmental
conditions on, under, or about the Premises, or arising from Tenant's
use or occupancy of the Premises, including, but not limited to, soil
and ground water conditions; or
(b) The use, generation, release, manufacture, refining, production,
processing, storage, or disposal of any Hazardous Substance on, under
or about the Premises, or the transportation to or from the Premises
of any Hazardous Substance, except as specifically disclosed on
Schedule A to this Lease.
3. Environmental Clean-Up.
(a) Tenant shall, at Tenant's own expense, comply with all laws regulating
the use, generation, storage, transportation, or disposal of Hazardous
Substances ("Laws").
(b) Tenant shall, at Tenant's own expense, make all submissions to,
provide all information required by, and comply with all requirements
of all governmental authorities (the "Authorities") under the Laws.
(c) Should any Authority or any third party demand that a clean-up plan be
prepared and that a clean-up be undertaken because of any deposit,
spill, discharge, or other release of Hazardous Substances caused by
Tenant, or Tenant's customers, agents, employees, or invitees, that
occurs during the term of this Lease, at or from the Premises, or
which arises at any time from Tenant's use or occupancy of the
Premises, then Tenant shall, at Tenant's own expense, prepare and
submit the required plans and all related bonds and other financial
assurances; and Tenant shall carry out all such clean-up plans.
(d) Tenant shall promptly provide all information regarding the use,
generation, storage, transportation, or disposal of Hazardous
Substances that is requested by Owner. If Tenant fails to fulfill any
duty imposed under this Paragraph (3) within reasonable time, Owner
may do so; and in such case, Tenant shall cooperate with Owner in
<PAGE> 31
order to prepare all documents Owner deems necessary or appropriate to
determine the applicability of the Laws to the Premises and Tenant's
use thereof, and for compliance therewith, the Tenant shall execute
all documents promptly upon Owner's request. No such action by Owner
and no attempt made by Owner to mitigate damages under any Law shall
constitute a waiver of any of Tenant's obligations under this
Paragraph (3).
(e) Tenant's obligations and liabilities under this Paragraph (3) shall
survive the expiration of this Lease
4. Tenant's Indemnity.
(a) Tenant shall indemnify, defend, and hold harmless Owner, the manager
of the property, and their respective officers, directors,
beneficiaries, shareholders, partners, agents, and employees from all
fines, suits, procedures, claims and actions of every kind, and all
costs associated therewith (including attorneys' and consultants'
fees) arising out of or in any way connected with any deposit, spill,
discharge, or other release of Hazardous Substances that occurs during
the term of this Lease, at or from the Premises, or which arises at
any time from Tenant's use or occupancy of the Premises, or from
Tenant's failure to provide all information, make all submissions, and
take all steps required by all Authorities under the laws and all
other environmental laws.
(b) Tenant's obligations and liabilities under this Paragraph (4) shall
survive the expiration of this Lease.
<PAGE> 32
Exhibit "E"
LANDLORD'S SUBORDINATION
STATE OF TEXAS )
KNOWN ALL MEN BY THESE PRESENTS:
COUNTY OF HARRIS )
In consideration of Ten Dollars ($10.00) and other good and valuable
considerations to us in hand paid by (name of mortgagee), of (address of
mortgagee), Houston, Texas, ("Mortgagee") does hereby agree as follows:
I.
Landlord does hereby subordinate its Landlord Liens whether contractual or
statutory, in favor of a security interest in favor of the Mortgagee dated
(month/day/year), covering the following described property:
(address of leased premises, and property description)
the foregoing equipment (the "Equipment") now being located on the aforesaid
premises which are leased to packaged Ice, Inc., Tenant herein.
II.
It is agrees that so long as any part of the indebtedness secured by the
aforesaid security interest or any renewals or extensions thereof remain
unpaid, said security interest shall constitute a superior and prior lien
against the Equipment, as against the Landlord's Lien described in Paragraph 1
above.
III.
It is further understood and agreed that the execution of this
subordination is not a waiver of any rights but is only a subordination thereof
in favor of the rights of the Mortgagee as specifically granted herein.
IV.
It is further understood and agreed that in the event foreclosure or
repossession of the Equipment becomes necessary, the Mortgagee may enter upon
the premises and remove the Equipment during reasonable business hours provided
Mortgagee affects such removal without any damage to the premises. Mortgagee
shall remain responsible for and agree to promptly repair any damage resulting
by such removal.
<PAGE> 33
V.
Landlord shall be entitled to any excess AS MAY BE ALLOWED BY LAW over and
above the indebtedness of the Mortgagee, which may be recovered from the sale
of the Equipment upon foreclosure or repossession.
VI.
In the event that the Landlord shall terminate the Lease contract with the
Tenant of the premises, 8572 Katy Freeway, Suite 101, or terminate said
Tenant's right to possession prior to the expiration of the term for which the
premises were leased or any extension thereof or in the event that Tenant
abandons the premises prior to the expiration of the term for which the
premises were leased or any extension thereof, Landlord shall in any of such
events, give written notice to the Mortgagee, and said Mortgagee shall be
permitted a period of fourteen (14) days from the giving of such notice in
which to remove all of the Equipment from the premises in accordance with the
terms of this Agreement. In the event that all of the said Equipment has not
been removed within the fourteen (14) days following giving of such notice,
then this Subordination agreement shall cease and it is agreed that the
statutory and contractual liens of Landlord shall be prior and superior to any
lien or other interest in the Equipment in favor of the Mortgagee who shall not
thereafter remove said Equipment but it is agreed that without further
instrument in writing all of the right, title and interest of the Mortgagee in
said Equipment shall be considered conveyed to the Landlord.
EXECUTED this ____________ day of _______________________________________,
199____, in multiple counterparts, each of which shall have the force and
effect of an original.
MORTGAGEE: (name of mortgagee)
---------------------
BY:
---------------------------------------
TITLE:
------------------------------------
LANDLORD: Robert S. Wilson, L.L.C.,
c/o RW MANAGEMENT COMPANY, INC.
------------------------------------------
BY:
---------------------------------------
Robert S. Wilson
TITLE: Manager
------------------------------------
<PAGE> 1
EXHIBIT 10.34
LEASE AGREEMENT
STATE OF TEXAS )
)
COUNTY OF BEXAR )
This LEASE AGREEMENT (hereinafter called the "Agreement"), made and
entered into by and between J.K. NEAL, INC. and J. KENNETH NEAL (hereinafter
called "Lessor") and MISSION PARTY ICE, INC. (hereinafter called "Lessee"):
W I T N E S S E T H:
1. Lessor agrees to lease to Lessee and Lessee hereby agrees to
lease from Lessor, for use and occupancy as an ice plant facility and any other
use to which the properties are currently utilized, together with all rights,
privileges and appurtenances thereunto belonging, the real property and
improvements consisting of nine (9) tracts located in Bexar, Gonzales,
Caldwell, Webb and Tom Green Counties in the State of Texas, each being more
particularly described on Exhibit "A" attached hereto and herein incorporated
by reference, with all of the real property and improvements wherever located
hereinafter called the "leased premises". The term of this Lease shall be for
a period of ten (10) years commencing on the 1st day of March, 1988 and
terminating on the 28th day of February, 1998.
2. Lessee covenants and agrees to pay promptly to Lessor at the
address hereinafter specified for notice, as monthly rental for the leased
premises during the term above described under paragraph 1 of this Agreement,
the sum of THREE MILLION AND NO/100 DOLLARS ($3,000,000.00), payable monthly in
advance during each month during the term hereof at the rate of $25,000.00 per
month.
3. It is the intent of the parties that the rent payable
hereunder shall be paid to Lessor net of all costs and expenses of ownership of
the leased premises and Lessee covenants and agrees, in addition to rental, to
pay:
a. All ad valorem or real estate taxes assessed against the
leased premises and becoming due and payable during the term
hereof. City, county, school and all other ad valorem taxes
for the first and last years of the term of this Agreement
shall be apportioned between Lessor and Lessee.
b. Any assessment for local improvements which become a lien upon
the leased premises after the commencement of the term hereof.
c. The premiums on policies of fire and extended coverage
insurance upon the leased premises which are to be obtained
and maintained in force by Lessee during the term hereof in
amounts at least equaling the fair
<PAGE> 2
replacement value of the improvements upon the leased
premises, which Lessor and Lessee agree are the sum of present
coverage for any of the buildings on the leased premises and
other permanent improvements thereon.
d. The costs and expense of all gas, water, electricity and other
utilities used by Lessee, and Lessor and Lessee agree that the
connections for the gas, electric and water utilities shall
remain in the name of Lessor and Lessee shall promptly pay all
bills rendered to Lessor for the services furnished to the
leased premises.
e. Lessee shall, at all times during the term of this Lease, and
at its own cost and expense, keep and maintain or cause to be
kept and maintained in repair and good condition (ordinary
wear and tear excepted), all improvements on the leased
premises, and shall use all reasonable precaution to prevent
waste, damage or injury. Lessor shall not be required to
furnish any services or facilities or to make any
improvements, repairs or alterations in or to the leased
premises during the term of this Lease.
Nothing contained in this paragraph 3 shall be construed as precluding
either party from the right, individually or jointly, to contest the amount or
legality of any taxes or local improvement assessments levied upon the leased
premises, or the right to make application, for reduction thereof or reduction
of the assessment upon which the same may be based. In the event of such
contest or application, the time within which Lessee shall be required to pay
the same shall be extended until final determination of the proper amount due
and within thirty (30) days after such final determination Lessee shall pay the
amount so determined, including all interest, penalties, costs and charges
incident thereto.
If Lessor shall make any expenditure for which Lessee is responsible,
or which Lessor should make hereunder, the amount thereof, together with
interest at the rate of eighteen percent (18%) per annum may, at Lessor's
election, be added to and deemed a part of the installment of rental next
falling due and shall be subject to collection or enforcement in accordance
with the law applicable to collection of rentals. Lessor agrees to give Lessee
fifteen (15) days written notice before making any such expenditures.
4. In the event that the leased premises are damaged or destroyed
by fire or other casualty, Lessee shall give immediate notice in writing to
Lessor who shall promptly notify the appropriate insurance carrier. In the
event the damage to the premises or contents is 25% or less, the leased
premises shall then be repaired promptly by Lessee at Lessee's exclusive
expense, however, Lessor agrees that any proceeds paid to Lessor under the
policy of fire and extended coverage insurance shall be held by Lessor in trust
for the benefit of Lessee and shall be paid directly to Lessee's contractor in
the form of monthly payments
2
<PAGE> 3
equal to the value of the work completed on the job or reconstruction or
repair, such values to be certified by the contractor in writing and approved
in writing by Lessee prerequisite to the payment from Lessor. In the event the
damage to the premises or contents exceeds 25% of the leased premises, Lessor
then shall have the option to repair or reconstruct the premises to its
condition prior to the casualty insofar as this is practical. During any
period of repairs or reconstruction, if the leased premises shall be unfit to
be used by Lessee for the manufacture and distribution of ice or other use
which the property is currently utilized, the rental payable by Lessee shall be
abated until such time as Lessee can continue its operations. In the event
Lessor does not exercise its option to repair or reconstruct the premises,
Lessor shall notify Lessee of such intention within 30 days from the date of
the damage and this lease only as to the particular tract and improvements
thereon shall be deemed cancelled, terminated and of no further force or effect
but shall not effect the remainder of the tracts. The amount of rental
attributable to the cancelled tract shall be determined and the monthly rental
payment shall be reduced by such amount.
The percentage of damage shall be determined by an adjuster for the
insurance carrier, and if either Lessor or Lessee disagrees as to this figure,
each party shall appoint a disinterested adjuster or appraiser, which two
adjusters or appraisers shall select a third adjuster or appraiser. The
average percentage figure of the three adjusters or appraisers shall be binding
on the parties.
5. Lessee shall make no alterations or additional improvements to
the leased premises without prior written consent of Lessor, which shall not be
unreasonably withheld. Lessee shall not permit the filing of any liens against
the leased premises and Lessee shall save Lessor harmless from any claims,
liens, or causes of action by mechanics, materialmen, or other parties entitled
to a lien by reason of services performed or materials furnished in connection
with any such alterations, additions or improvements or in connection with any
reconstruction under paragraph 4 above. At the expiration of the term of this
Agreement all alterations, additions and improvements made by Lessee shall
remain upon the leased premises and become the property of Lessor. Any trade
fixture installed by Lessee may be removed by it at the expiration of the term
hereof at Lessee's sole cost and expense provided that all damage caused to the
leased premises by such removal is repaired by Lessee and the premises restored
to a serviceable and useable condition at Lessee's sole cost and expense.
6. In the event of default of any of the covenants contained
under this Agreement, or in the event of bankruptcy, receivership or assignment
for the benefit of creditors on the part of Lessee, Lessor may enforce the
performance hereof in any manner provided by law and/or may declare the lease
forfeited at its discretion, and Lessor, its agents or attorneys, shall have
the right to re-enter and remove all persons and/or property from the leased
premises without being guilty of any manner of trespass, without prejudice
3
<PAGE> 4
to its claims for arrears of rent or breach of covenants, or Lessor may take
possession of the premises and re-rent the same for the remainder of the term
or for any other term at the best rent Lessor may obtain for the account of
Lessee, and Lessee shall remain liable to Lessor for any deficiency of said
rentals received by Lessor that are attributable to the remainder of Lessee's
term; provided that prior to the time that Lessor shall take any action herein
because of any alleged default on the part of Lessee, Lessor shall give to
Lessee at least thirty (30) days prior written notice of such claimed default;
if during such thirty (30) day period such claimed default is remedied by
Lessee, then Lessor shall not be permitted to declare the rights of Lessee
forfeited because of any such default. If Lessee should default in the
performance of any of the covenants, conditions or obligations contained
herein, Lessee agrees to pay Lessor's reasonable attorney's fees.
7. Lessee shall and does hereby agree to indemnify Lessor and to
hold Lessor harmless of and from any and all claims, demands, costs and
expenses (including but not limited to Lessor's reasonable attorney's fees),
damages, and causes of action of every nature whatsoever arising from or
related to Lessee's use or occupancy of the leased premises; or arising from
any act, omission or negligence of Lessee, its agents, servants, employees,
licensees or invitees; or arising from any accident, injury or damage
whatsoever caused to any person or persons or property occurring in, on or
about the leased premises; or arising from any act, omission, or negligence of
Lessee, its agents, servants, employees, licensees or invitees; or arising from
any accident, injury or damage whatsoever caused to any person or persons or
property occurring in, on or about the leased premises or any part thereof
during the entire term of this Agreement; or arising from any violation of
Sections 112 and 301(a) of the Clean Air Act, as amended (42 U.S.C. 7412,
7601(a)). Without limitation to the foregoing indemnification and hold
harmless agreement but in addition to the same, Lessee agrees that any and all
of its property located in the leased premises shall be kept at Lessee's sole
risk and Lessee shall during the entire term hereof at Lessee's expense
maintain public liability insurance covering and protecting Lessee, said
policies to be issued with reasonable substantial amounts of coverage of not
less than $5,000,000.00 per injury and $5,000,000.00 per occurrence. In
addition Lessee shall at its expense purchase and maintain public liability
insurance covering and protecting Lessor as a Landlord or owner in the name of
Lessor as the insured for $1,000,000.00.
8. Lessor agrees that upon compliance with the terms, covenants
and conditions of this Agreement, Lessee shall and may peaceably and quietly
have, hold and enjoy the leased premises for the term of this Agreement.
Lessee covenants and agrees that at the expiration of the term hereof or any
extension thereof, it will quit and surrender the improvements located on the
leased premises in as good of state and condition as delivered to Lessee,
subject only to reasonable use and wear thereof. Any holding over by Lessee
shall not operate, except by written agreement, to extend or
4
<PAGE> 5
renew this Agreement and no tenancy of any duration shall be created thereby.
9. Lessee accepts the leased premises in its current condition.
At all times during the entire term covered under this Agreement, Lessee agrees
at its exclusive expense to keep the entire leased premises, including the
buildings and their roofs, exterior walls, structural supports and foundations
thereof, and all windows, doors, plate glass, air conditioning, heating and
plumbing and other mechanical and electrical equipment, and the adjoining
sidewalks, curbs, driveways, parking areas, and landscaping in good order,
repair and condition (reasonable wear and tear excepted) and shall make all
repairs, replacements and renewals, whether ordinary or extraordinary,
necessary to maintain the leased premises in good order, repair and condition.
10. Lessee agrees to permit authorized representatives of Lessor
to inspect or examine the leased premises at any reasonable time.
11. At the request of either party, a memorandum form of this
Agreement shall be executed to facilitate recordation in appropriate records of
Bexar, Caldwell, Gonzales, Webb and Tom Green Counties, Texas, to give notice
of the pertinent provisions hereof.
12. All notices or demands given or required to be given hereunder
shall be in writing and sent by United States certified mail, return receipt
requested, postage prepaid, addressed to the party to be affected thereby, at
the address indicated below; provided that either party, by like written
notice, may designate a different address to which such subsequent notices
shall be sent. Said addresses are:
LESSOR: J.K. NEAL, INC.
J. KENNETH NEAL
266 Rockhill
San Antonio, Texas 78209
LESSEE: MISSION PARTY ICE, INC.
1106 E. Durango
San Antonio, Texas 78210
13. Lessee shall not be responsible to Lessor and Lessor shall not
be responsible to Lessee for any damages caused by fire or other casualty
covered by the Texas Standard Form of Fire and Extended Coverage Insurance,
even though such damages are caused by the negligence of some person for whom
Lessee or Lessor would, except for this provision, be responsible; and Lessee
and Lessor likewise waive any rights against the other which would, except for
this waiver, inure to the benefit of their respective fire and extended
coverage insurance carriers (if any) by way of subrogation or otherwise. Each
party agrees that it will arrange for any policy or policies of fire and
extended coverage insurance to
5
<PAGE> 6
contain, if obtainable, a clause whereby the insurer waives its rights of
subrogation.
14. Lessee shall not assign this Agreement or sublet the whole or
any part of the leased premises without obtaining the prior written consent of
Lessor, however, such consent shall not be unreasonably withheld.
Lessor shall have the right freely to assign, mortgage and sell the
fee interest in the leased premises subject to this Lease Agreement, and shall
also have the right, without selling the fee interest, freely to transfer,
assign, mortgage or pledge this Agreement. Lessee hereby expressly covenants
and agrees that this Agreement shall be subject to and subordinate to any
mortgage or mortgages now on the leased premises or hereafter placed thereon.
15. Should the leased premises at 1106 Durango Blvd. in San
Antonio, Texas be taken or condemned for public purposes during the term
hereof, in whole or in such amount to effectively prevent Lessee from operating
the ice manufacturing business, Lessor agrees that from the funds received in
the taking or condemnation, it will build equal facilities for Lessee and this
Lease shall continue unabated. Should any of the balance of the leased
premises be taken or condemned in whole or in part for public purposes during
the term hereof, Lessor agrees to build equal facilities for Lessee or at
Lessor's option may elect to terminate this Agreement as to the portion or
tract so taken or condemned or to continue the same in effect; provided,
however, if that portion or tract of the leased premises are so affected by any
such taking so that the same become unfit for use by Lessee in the ordinary
conduct of its business and Lessor has not constructed or agreed to construct
equal facilities, Lessee shall have the option of terminating this Agreement as
to the portion or tract within 30 days after taking or condemnation. If after
a partial condemnation the Agreement be continued, the rental shall be reduced
in accordance and proportion to the area and use by Lessee of the leased tract
and premises so taken, and Lessor shall repair any damage to the improvements
or buildings resulting from any such taking. All sums awarded as a result of
such taking shall be the exclusive property of Lessor, except for amounts
specifically awarded to Lessee for its trade fixtures, if any. Lessor and
Lessee specifically contract and agree that in the event the ice manufacturing
facilities in any of the leased premises shall, for any reason not attributable
to Lessee's operations, be condemned for health purposes by any governmental
agency, including the City of San Antonio, Texas, Bexar County, State of Texas
or any federal agency, Lessee shall have the option to terminate this lease as
to that portion or tract on giving 30 days' written notice to Lessor, whereupon
the Lease shall be cancelled as to that portion or tract and of no further
force and effect with respect to either Lessor Lessee, but shall not effect
this lease as to the remaining tracts of land and improvements. In the event
such option is exercised by Lessee, it shall have 30 days in which to vacate
the particular tract or premises.
6
<PAGE> 7
16. To secure payment of all rent due and to become due hereunder,
and the faithful performance of all of the other covenants of this Lease
required by Lessee to be performed, Lessee hereby gives to Lessor an express
contract lien on and security interests in and to all proceeds of any insurance
which may accrue to Lessee by reason of damage to or destruction of any such
property. This lien and security interest are given in addition to the
Lessor's statutory lien(s) and shall be cumulative thereto. This lien and
security interest may be foreclosed with or without court proceedings, by
public or private sale, with or without notice and Lessor shall have the right
to become purchaser, upon being the highest bidder at such sale. Upon request
of Lessor, Lessee agrees to execute Uniform Commercial Code financing
statements relating to the aforesaid security interest.
17. The mention in this Lease of any specific right or remedy
shall not preclude Lessor from exercising or having any other right or remedy
or from maintaining any action to which Lessor may otherwise be entitled either
at law or in equity. No waiver or indulgence by Lessor of any default or
breach of covenant, condition or stipulation herein contained shall be treated
as a waiver of any subsequent default, or breach of the same or any other
covenant, condition or stipulation hereof. The acceptance by Lessor of any
payment, partial or otherwise, made hereunder after the time when it becomes
due as herein set forth, will not establish a custom or constitute a waiver by
Lessor of any right to enforce prompt payment hereof. To the extent permitted
by applicable law, Lessee hereby waives the application of and all of its
rights and powers under all statutes of limitation and similar powers under all
statutes of limitation and similar statutes and laws as to this Lease and all
portions hereof. Demand, presentment for payment, protest and notice of
non-payment and protest hereby are waived by Lessee. No act or thing done by
Lessor or its agents shall be deemed to be an acceptance of surrender of the
Leased Premises and no agreement to accept a surrender of the Leased Premises
shall be valid unless it is in writing and signed by a duly authorized officer
or agent of Lessor.
18. Subject to the provisions of paragraph 14 above regrading the
restriction on sub-letting and assignments on the part of Lessee, the covenants
and agreements herein contained shall inure to the benefit of and be binding
upon the parties hereto, their successor and assigns.
19. Lessee shall at its own expense, promptly execute and fulfill
all ordinances of Bexar, Caldwell, Gonzales, Webb and Tom Green Counties and
all laws of the State of Texas, including but not limited to all orders or
requirements of any public authority for the correction, prevention and
abatement of nuisances in or connection with the leased premises.
20. Notwithstanding anything contained herein to the contrary, if
at any time during the term of this Lease, Lessor shall receive from a third
party a bona fide offer to purchase any of the properties described in Exhibit
"A", or any part thereof
7
<PAGE> 8
which includes any of the leased premises, and Lessor shall desire to sell same
pursuant to such terms and provisions, the Lessor shall first offer the
property for sale to Lessee upon identical terms, except time for closing if
different than stated below.
After receipt of notice of the terms on which the property is being
considered for sale, Lessee shall then have fifteen (15) days in which to
respond in writing to Lessor. If Lessee elects to purchase, then Lessee shall
close on the basis offered within sixty (60) days of such election to purchase,
or if Lessee elects not to purchase or fails to respond in writing within said
fifteen (15) day period, then Lessor shall be free to close the sale to the
third party on the basis indicated. In the event that Lessor receives an
offer, notifies Lessee and Lessee fails or elects not to close on that basis,
but later Lessor's proposed sale to a third party shall not close, then in such
event Lessee's first right of refusal shall be revitalized and effective under
its original terms through the full term of this Lease.
21. Lessee has deposited with Lessor, the receipt of which is
hereby acknowledged, the sum of $25,000.00 as rental paid in advance for the
first month's rental.
22. Lessor grants to Lessee reasonable ingress to and egress from
the leased premises.
23. At the expiration of the term of this Lease, if Lessee is not
at that time in any manner in default under the Lease, Lessee shall have the
option to extend the term of the Lease for an additional period of five (5)
years on the same terms and conditions contained in this Lease, except however,
the rental to be paid by Lessee shall be the fair lease market value of the
real properties and premises as shall be determined by the agreement of the
parties. If the parties are unable to agree, they shall each name an appraiser
who jointly shall name a third appraiser and they shall together agree upon
such fair rental value. The option shall be exercised by Lessee delivering to
Lessor, at least 120 days prior to the termination date, written notice of
Lessee's intention to so exercise the option.
24. This Lease Agreement contains the entire agreement between the
parties, and no agreement shall be effective to change, modify or terminate
this Agreement, in whole or in part, unless such agreement is in writing and
duly signed by the parties against whom enforcement of such change,
modification or termination is sought, and both parties agree that this
contract cannot be altered or varied by any prior contemporaneous or subsequent
oral agreement, stipulation, representation or understanding.
8
<PAGE> 9
SIGNED, EXECUTED AND EFFECTIVE March 1, 1988.
J.K. NEAL, INC.
BY:
----------------------------------
J. Kenneth Neal
President
-------------------------------------
J. KENNETH NEAL
LESSOR
MISSION PARTY ICE, INC.
BY:
-----------------------------------
A.J. Lewis, III
President
9
<PAGE> 10
EXHIBIT "A"
Bexar County, Texas:
Dixie Ice Plant - 1106 E. Durango:
Lot 9 - Lot 10, except the South 66.43 feet of the West 13.4 feet Lots
11 and 12, except the South 66.43 feet and North 10 feet of the East
52.0 of Lot 6, Block 2, NCB 635, San Antonio, Bexar County, Texas.
Office Building - East side of Dixie Ice Plant called A.F.Cadena
Property:
Portion of Lots 1, 2 and 3 - Block 2, NCB 635, San Antonio, Bexar
County, Texas - Volume 7995, Page 883.
Poe Property:
5.65 of Lots 11 and 12 - 5.65 of W13.4 of Lot 10 - N. 9 of Lots 7 and
8, N. 9 of W. 13.4 of Lot 6 - S. 140.5 of Lot 8 - S. 140.5 of W. 14 of
Lot 7, Block 2, NCB 635, San Antonio, Bexar County, Texas.
Office Building - 1130 Durango:
.0185 acres out of Lots 1, 2 and 3, Block 2, NCB 635 and also being
Tracts #2 and #3 as recorded in Vol. 7959, Page 245, Deed Records of
Bexar County, Texas and also 55 1/2 feet on Walnut Street, 90 feet on
Iowa Street.
Standard Ice Company - 120 W. Lachapelle Street:
0.430 acres, being known as Lot B-18, a portion of Lot C-18, and a
portion of Lot A-18, NCB 2828, San Antonio, Bexar County, Texas.
Merchandise Repair Shop - 810 N. Cherry:
The N. 55.0' of Lots 9, 10 and 11, except the E. 10.0 of Lot 11, Block
1, NCB 528, San Antonio, Texas.
Webb County, Texas:
Laredo Mission Ice Plant - 2215 Laredo Street, Laredo, Texas:
Lots No. 3 and No. 4, Block No. 1278, E.D. City of Laredo, Texas.
10
<PAGE> 11
Tom Green County, Texas:
San Angelo Mission Ice Plant - 3rd Street, San Angelo, Texas:
A 2.078 acre tract of land out of Block 42, Miles Addition and various
lots in Fair Banks Addition, City of San Angelo, Tom Green County,
Texas
Gonzales County, Texas:
Gonzales Mission Ice Plant - Gonzales, Texas:
A tract being part of Lot No. Four (4) in Block No. Two (2) in the
Original Inner Town of Gonzales, by and being situated in Gonzales
County, Texas and within the corporate limits of the City of Gonzales.
Caldwell County, Texas:
Luling Mission Ice Plant - Davis Street, Luling, Texas:
A tract of land situated in the Spencer Morris Survey, A-18, Luling
Caldwell County, Texas, being Lots No. Seventeen (17), Eighteen (18),
Nineteen (19), and Twenty (20) in the J.E. Leary, First Addition in
the City of Luling, in Caldwell County, Texas; and Second Tract: Being
Lot No. Four (4) in Block No. Four (4) of the Pierce Addition in City
of Luling in Caldwell County, Texas.
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EXHIBIT 10.35
COMMERCIAL LEASE AGREEMENT
THIS LEASE AGREEMENT (this "lease" or "Lease"), made and entered into
by and between ________________ ("Landlord"), and MISSION PARTY ICE, INC., a
Texas corporation ("Tenant");
W I T N E S S E T H:
1. Premises, and Term and Condition of Premises.
A. In consideration of the obligation of Tenant to pay
rent as herein provided, and in consideration of the other terms, provisions
and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby accepts and leases from Landlord, for the term stated herein, certain
premises, more particularly described on Exhibit "A" attached hereto and
incorporated herein by reference, together with all rights, privileges,
easements and appurtenances belonging to or in any way pertaining to the
premises, including rights to common areas, and together with the buildings and
other improvements situated upon said premises (said real property, buildings
and improvements hereinafter referred to as the "premises", "Premises" and/or
"Leased Premises").
B. TO HAVE AND TO HOLD the same for a term commencing
immediately following the acquisition by Landlord of those certain properties
pursuant to the Contract for Purchase and Sale of Real Estate, dated February
15, 1995, by and among J. Kenneth Neal, Gail A. Neal, J. K. Neal, Inc., Mission
Ice Services of Laredo, Inc. and Mission Party Ice, Inc., which rights to
purchase the property subject thereto was subsequently assigned to Landlord
(the "Commencement Date"). The term of this Lease shall begin on the
Commencement Date and continue until the tenth anniversary thereof (the
"Initial Term"), subject to the right of Tenant to extend the term of the Lease
as hereinafter provided (the "Termination Date"). The Tenant shall have the
right to extend the term of the Lease for an additional five (5) year period
immediately following the expiration of the Initial Term (the "Option");
provided that Tenant provides Landlord with notice of its intent to exercise
the Option at least one hundred eighty (180) days prior to the expiration of
the Initial Term. The Initial Term and any extension thereof is hereinafter
referred to as the "Term."
C. Tenant acknowledges that it has inspected and accepts
the premises, specifically the buildings and improvements comprising the same
in their present conditions as suitable for the purpose for which the premises
are leased. By executing this Lease, Tenant shall be deemed to have
conclusively agreed and acknowledged that said building and other improvements
are in good and satisfactory condition as of the date of execution hereof by
Tenant. Tenant further acknowledges that no representations as to the repair of
the premises, nor promises to alter, remodel or improve the premises have been
made by Landlord. After the Commencement Date Tenant shall, upon request of
Landlord, execute and deliver to Landlord a letter of acceptance of delivery of
the premises. TENANT HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT THE PREMISES
SHALL BE DELIVERED BY LANDLORD IN 'AS IS' CONDITION WITH NO WARRANTIES, EITHER
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
SUITABILITY, HABITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF SUCH
WARRANTIES BEING EXPRESSLY HEREBY WAIVED BY TENANT.
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2. Rent.
A. Tenant agrees to pay to Landlord rent (the "Rent")
for the premises in advance, without demand, deduction, offset or set off as
follows (the rental payment for any fractional calendar month during the lease
period being prorated):
(1) From the Commencement Date, and continuing
throughout the Term, the Rent shall accrue at the rate of, and be payable in
regularly and monthly in payments of, $29,600 per month, subject to the
adjustments as hereinafter described. The first payment of rent shall be due on
the Commencement Date. Thereafter, payments shall be due on the first (1st) day
of each calendar month, commencing on the first (1st) day of the month
succeeding the month in which the Commencement Date occurs, until the
Termination Date. On the fifth anniversary of the Commencement Date, and again
at the end of the Initial Term if the Tenant exercises the Option, the Rent
shall be increased by an amount equal to the Rent in effect on the Commencement
Date multiplied by the Inflation Adjustment. The "Inflation Adjustment" for
such date shall be equal to the fraction the numerator of which is the revised
Bureau of Labor Statistics (the "Bureau") Consumer Price Index for all Items
and Major Group Figures for All Urban Consumers, U.S. City Average (1982-
84=100)(the "Index") most recently published on the date in question and the
denominator of which is the Index most recently published as of the
Commencement Date. If the Index should ever cease to published by the Bureau
during the Term, "Inflation Adjustment" shall be computed by using an economic
index mutually agreed upon by the Landlord and Tenant of generally recognized
standing that reflects the increase or decrease in the purchasing power of the
dollar.
B. A late charge of five percent (5%) of any rental
amount which is not received within ten (10) days after it is due shall be due
and payable by Tenant to Landlord in addition to such rental amount.
3. Use. The premises are to be used for purposes relating
directly to the business of Tenant, and for no other purpose without the
written consent of the Landlord. Tenant shall (i) at its own cost and expense
obtain any and all licenses and permits necessary for any such permitted use,
and (ii) comply, at Tenant's sole cost and expense, with all governmental laws,
ordinances, regulations and restrictive covenants of record affecting the
premises applicable to the use of the premises, and shall promptly comply with
all governmental orders and directives for the correction, prevention and
abatement of nuisances in or upon, or connected with, the premises. Tenant
shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise
or vibrations to emanate from the premises, nor take any other action which
would constitute a nuisance. Tenant will not permit the premises to be used for
any purpose or in any manner (including without limitation any method of
storage) which would render the insurance thereon void or the insurance risk
more hazardous. Notwithstanding the foregoing, Tenant may use the Premises to
provide parking for events at the Alamodome, provided that Tenant shall pay to
Landlord, in addition to the Rent described in paragraph 2 above, the first
$200 of revenue from each day on which the Premises are used for such Alamodome
event parking.
4. Taxes.
A. Tenant agrees to pay to Landlord, as additional rent,
all taxes, assessments and governmental charges of any kind and nature
whatsoever (hereinafter collectively referred to as "taxes") lawfully levied or
assessed against the premises during the term of this lease. Taxes shall
include all taxes and assessments (special or otherwise) levied or assessed
directly or indirectly against the Premises (land, buildings and improvements),
imposed by federal, sate, or local governmental authority or any other taxing
authority having jurisdiction over the Premises. Franchise, capital stock,
income, estate or inheritance taxes personal in nature to Landlord are not
deemed to be
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taxes. If in any year during the Term the Landlord has received the annual
property tax bills referred to in this Paragraph relating to the premises prior
to December 1 of such year, the Tenant shall pay to Landlord the amount of such
tax bill on or before December 1 of such year, provided that Landlord has
delivered such tax bill to Tenant at least 15 days prior to October 1 of such
year. If the annual property tax bills referred to in this Paragraph relating
to the premises for a year during the Term have not been received by Landlord
on or before December 1, Landlord shall estimate the annual taxes referred to
in this Paragraph for such year and deliver such estimate, in writing, to the
Tenant. Tenant shall pay such estimated tax, on or before the later of (i)
December 1 of such year and (ii) the tenth (10th) day following receipt by
Tenant of such estimate of annual taxes due. After Landlord has received the
annual property tax bills relating to the premises, Landlord shall furnish
Tenant with a copy of such actual bill(s) for property taxes on the premises
and there shall be an adjustment between Landlord and Tenant, to the end that
Landlord shall receive any payment of the entire amount of taxes due for such
period within fifteen (15) days after such statement is delivered to Tenant or
Tenant shall receive a refund for any overpayment within fifteen (15) days
after such statement is delivered to Landlord.
B. Any payment to be made pursuant to this Paragraph 4
with respect to the real estate tax year in which this lease commences or
terminates shall be prorated.
C. Additionally, Tenant shall be liable for all taxes
levied against leasehold improvements, merchandise, inventory, equipment,
furnishings, personal property, trade fixtures and all other taxable property
located in the premises. When reasonably possible, Tenant shall cause said
trade fixtures, furnishings, equipment and all other personal property to be
assessed and billed separately from the real property of Landlord. If any such
taxes for which Tenant is liable are levied against Landlord or Landlord's
property, or if the assessed value of Landlord's property is increased by
inclusion of personal property and trade fixtures placed by Tenant in the
premises, Tenant shall also pay the taxes so levied against Landlord or
associated with such increase in accordance with Paragraph 4A above. Tenant
shall pay when due any and all taxes related to Tenant's use and operation of
its business on the premises.
D. Nothing contained in this paragraph 4 shall be construed as
precluding either party from the right, individually or jointly, to contest the
amount or legality of any taxes or local improvement assessments levied upon
the premises, or the right to make application for reduction thereof or
reduction of assessment upon which the same may be based. In the event of such
contest or application and the payment with respect to such taxes is not
required to be paid to preserve such right to contest the amount or legality of
such taxes or assessments, the time within which Tenant shall be required to
pay the same shall be extended until final determination of the proper amount
due and within 10 days after such final determination Tenant shall pay the
amount so determined, including all interest, penalties, costs and charges
thereto (less any amounts previously paid to Landlord to be held in reserve as
hereinafter provided); provided, however, in the event that Tenant elects to
contest the amount or legality of any taxes or assessments and a final
determination has not been made by December 1 of such tax year, Tenant shall
pay to the Landlord the amount of such taxes or assessments then being
contested and Landlord shall hold such amounts in reserve until final
determination has been made. Thereupon, Landlord shall pay to the proper amount
of taxes and assessments based upon the final determination and return any
excess amount, without interest, to the Tenant. Nothing in this paragraph D
shall relieve the Tenant of its obligations with respect to the portion of
taxes or assessments not being contested.
5. Tenant's Repairs.
A. Tenant shall at its own cost and expense keep and
maintain the entire
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premises in good condition, reasonable wear and tear excepted, promptly making
all reasonable necessary repairs and replacements, whether same are of a
capital nature or otherwise. Tenant shall be responsible for maintaining and
making the necessary repairs and replacements to all parts of the premises, to
include, but shall not be limited to, the roof, foundation, exterior structural
walls, windows, glass and plate glass, doors, interior walls (structural,
loadbearing or otherwise) and finish work, floor and floor covering,
downspouts, gutters, heating and air conditioning systems, paving, plumbing
work and fixtures. Tenant shall also be responsible for termite and pest
extermination, regular removal of trash and debris, regular mowing of any
grass, trimming, weed removal and general landscape maintenance, and keeping
the parking areas, driveways, alleys and the whole of the premises in a clean
and sanitary condition (maintenance of the parking areas and driveways shall
include, but not be limited to, repairing any and all potholes located thereon
and repaving and restriping any such areas as necessary). Except as provided in
Paragraph 12 below, Tenant shall not be obligated to repair any damage caused
by fire or other casualty covered by the insurance to be maintained by Tenant
pursuant to subparagraph 11(A) below, except that Tenant shall be obligated to
repair all wind and/or other damage to glass.
B. Tenant shall not damage any load bearing walls of the
premises or disturb the integrity and support provided by any such wall, and
shall, at Tenant's sole cost and expense, promptly repair any damage or injury
to any such wall caused by Tenant or its employees, contractors, agents or
invitees.
C. In connection with Tenant's obligations under
subparagraph 5(A), Tenant shall establish, at its own cost and expense, a
preventative maintenance/service program with a maintenance contractor for
servicing all hot water, heating and air conditioning systems within the
premises. (With respect to the heating and air conditioning systems, such
program shall provide for the regular replacement or cleaning of all filters
incorporated into such system or associated therewith.)
6. Alterations and Equipment.
A. Tenant shall not make any material alterations,
additions or improvements to the premises (including but not limited to roof
and wall penetrations), without the prior written consent of Landlord which
consent may be not be unreasonably withheld by Landlord.
B. Landlord acknowledges and agrees that the equipment
on the premises is not the property of the Landlord, except for any lien rights
the Landlord may have.
7. Signs. Tenant may maintain and continue to use its signs
installed upon the premises in the same places(s) that such signs are located
upon the premises on the date this Lease is executed by Tenant subject,
however, to any applicable governmental laws, ordinances, regulations and other
requirements. Tenant shall remove all such signs by the termination of this
lease. Such removals shall be made in such manner as to avoid injury or
defacement of the building and other improvements.
8. Inspection. Landlord and Landlord's agents and representatives
shall have the right to enter and inspect the premises at any reasonable time
during business hours, for the purpose of (i) showing the premises to any
prospective or future tenant and any such prospective or future tenant's
employees, agents, contractors and subcontractors, then-present mortgagee(s)
and/or prospective purchasers or mortgagee(s), or (ii) ascertaining the
condition of the premises or in order to make such repairs as may be permitted
to be made by Landlord under the terms of this lease; provided, however, that
Landlord shall have the right, but not the obligation, to enter the premises,
without notice to
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Tenant, at any time during the existence of an emergency and take whatever
action Landlord deems necessary, in its sole discretion, to cure and/or remedy
such emergency condition or the effects thereof.
9. Utilities. Tenant hereby acknowledges and agrees that current
utility connections serving the premises are sufficient and satisfactory for
Tenant's intended use of the premises. Tenant shall pay for all water, gas,
heat, light, power, telephone, sewer, sprinkler charges and other utilities and
services used on or from the premises, together with any taxes, penalties,
surcharges or the like pertaining thereto and any maintenance charges for
utilities. During the Term, all accounts relating to utilities used on or from
the premises shall be maintained in the name of Tenant. Landlord shall in no
event be liable for any interruption or failure of utility services on the
premises, except as may be caused by the Landlord's wilfull acts or omissions
or negligence.
10. Assignment and Subletting. Tenant shall not have the right to
assign this lease, absolutely, collaterally, voluntarily, involuntarily, by
operation of law or otherwise, or to sublet the whole or any part of the
premises without the prior written consent of Landlord. Any assignment of this
lease, whether absolutely, collaterally, voluntarily, by operation of law or
otherwise, sublease or other encumbrance of this lease not made in accordance
with this paragraph shall be null and void and of no force and effect.
Notwithstanding the foregoing, Landlord hereby consents to any proposed
assignment of this Lease in connection with the sale of all or substantially
all of the assets of Tenant. Tenant agrees that it shall not transfer all or
substantially all of its assets without the assignment of this Lease to the
transferee. The assignment of this Lease, regardless of whether or not Landlord
has consented to such assignment, will not release Tenant of its obligations,
duties and responsibilities hereunder.
11. Insurance and Liability.
A. Fire and Casualty Insurance. Tenant agrees to
maintain at all times from and after the Commencement Date through the
expiration of the term hereof standard fire and extended coverage insurance
covering the improvements on the premises in an amount not less than the full
"replacement cost" thereof as such term is defined in the Replacement Cost
Endorsement to be attached thereto, insuring against the perils covered by fire
and extended coverage insurance policies, and against vandalism, malicious
mischief, flood and special extended perils (i.e., "all risks" as such term is
used in the insurance industry), such coverages and endorsements to be as
defined, provided and limited in the standard bureau forms prescribed by the
insurance regulatory authority for the State of Texas for use by insurance
companies admitted in such state for the writing of such insurance on risks
located within such state. Subject to the provisions of paragraph 12 below,
such insurance shall be for the sole benefit of Landlord and under Landlord's
sole control. Copies of such policies, or certificates of insurance, together
with receipts evidencing payment of premiums therefor, shall be delivered to
Landlord prior to the Commencement Date. If Tenant fails to deliver such
policies or certificates on or before the Commencement Date, Landlord shall
have no duty to deliver possession of the Premises to Tenant until such
policies or certificates are provided, but such failure by Tenant shall not
delay the Commencement Date or have any effect on Tenant's other obligations
hereunder, including, without limitation, the obligation to pay Rent. Not less
than fifteen (15) days prior to the expiration date of any such policies,
copies of the renewals thereof (bearing notations evidencing the payment of
renewal premiums) shall be delivered to Landlord. Such policies shall further
provide that not less than thirty (30) days written notice shall be given to
Landlord before such policy may be canceled or changed to reduce insurance
provided thereby. If Tenant fails to obtain or maintain such policy of
insurance, then in addition to any other remedy Landlord may have for such
default, Landlord may obtain the required insurance and Tenant shall reimburse
Landlord, on demand, for the cost associated therewith, together with interest
on the amount paid by Landlord at the rate of ten
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percent (10%) per annum from the date of such payment by Landlord until payment
by Tenant. Any payment to be made pursuant to this subparagraph A with respect
to the calendar year in which this lease terminates shall be prorated. Such
policy or policies shall be procured by Tenant from reputable insurance
companies satisfactory to Landlord.
B. Liability and Liability Insurance. Landlord shall not
be liable to Tenant or Tenant's employees, agents, patrons, invitees, business
invitees, guests or visitors, or to any other person whomsoever, for any injury
to person or damage to property on or about the premises, resulting from and/or
caused in part or whole by the negligence or misconduct of Tenant, its agents,
servants, invitees, business invitees, guests or employees, or of any other
person entering upon the premises, or caused by the buildings and improvements
located on the premises becoming out of repair, or caused by leakage of gas,
oil, water or steam or by electricity emanating from the premises, or due to
any cause whatsoever (except Landlord's negligence or willful misconduct), and
TENANT HEREBY COVENANTS AND AGREES THAT IT WILL AT ALL TIMES INDEMNIFY AND HOLD
SAFE AND HARMLESS THE PROPERTY, LANDLORD (INCLUDING ANY INDIVIDUALS OR ENTITIES
WHICH CONSTITUTE LANDLORD), LANDLORD'S AGENTS AND EMPLOYEES FROM ANY LOSS,
LIABILITY, CLAIMS, SUITS, COSTS, EXPENSES, INCLUDING WITHOUT LIMITATION
ATTORNEY'S FEES AND DAMAGES, BOTH REAL AND ALLEGED, ARISING OUT OF ANY SUCH
DAMAGE OR INJURY; EXCEPT INJURY TO PERSONS OR DAMAGE TO PROPERTY TO THE EXTENT
SAME IS CAUSED BY LANDLORD'S NEGLIGENT ACTIONS OR WILLFUL MISCONDUCT. Tenant
shall procure and maintain from the Commencement Date through the expiration of
the term of this lease a policy or policies of insurance, at its sole cost and
expense, insuring both Landlord and Tenant against all claims, demands or
actions arising out of or in connection with; (i) the premises; (ii) the
condition of the premises; (iii) Tenant's operations in and maintenance and use
of the premises; and (iv) Tenant's liability assumed under this lease, the
combined single limits of such policy or policies to be in the amount of not
less than $2,000,000 per occurrence. Copies of all policies or certificates of
insurance, together with receipts evidencing payment of premiums therefor,
shall be delivered to Landlord prior to the Commencement Date. If Tenant fails
to deliver such policies or certificates on or before the Commencement Date,
Landlord shall have no duty to deliver possession of the Premises to Tenant
until such policies or certificates are provided, but such failure by Tenant
shall not delay the Commencement Date or have any effect on Tenant's other
obligations hereunder, including, without limitation, the obligation to pay
Rent. Not less than fifteen (15) days prior to the expiration date of any
described policies, copies of the renewals thereof or certificates of insurance
(bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be canceled or changed to reduce insurance provided thereby.
C. Waiver of Subrogation. In the event the Premises or
its contents are damaged or destroyed by fire or other casualty for which
insurance is maintained, or an employee sustains an injury covered by any
Worker's Compensation insurance maintained by Tenant (or such damage or injury
is of a type for which insurance was required to be maintained under the terms
of this Lease), the rights, if any of Tenant against Landlord with respect to
such damage, destruction or injury are waived with respect to both, and to the
extent of both, losses covered by insurance (or which should have been covered
under the terms of the insurance required to be maintained by Tenant under the
terms of this Lease) and losses not covered due to deductibles, coinsurance
penalties, insurance carrier insolvency, disputes with the insurance carrier
regarding coverage or under-insurance. All policies of fire and/or extended
coverage, other insurance covering the Premises or its contents required
hereunder to be maintained by Tenant shall contain a clause or endorsement
providing in substance that the insurance shall not be prejudiced if the
insured has waived right of recovery from any person or persons prior to the
date and time of loss or damage, if any. The failure of Tenant to obtain such
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endorsement, however, shall not negate or otherwise adversely affect the waiver
herein set forth, which waiver in all instances shall be binding upon Tenant
and Tenant's respective insurers.
D. Insurance required hereunder shall be in companies
holding "general policyholders rating" of at least "A Minus", or such other
rating as may be required by a lender having a lien on the Premises, as set
forth in the in the most current issue of "Best's Insurance Guide".
E. Tenant, as a material part of the consideration to
Landlord, hereby assumes all risk of damage to property or injury to persons,
in, upon or about the Premises arising from any cause other than Landlord's
negligence or willful misconduct and Tenant hereby waives all claims in respect
thereof against Landlord.
12. Fire and Casualty Damage.
A. Tenant shall give immediate written notice to
Landlord of any damage caused to the Premises by fire or other casualty.
B. In the event the Premises shall be damaged or
destroyed by fire or other casualty, Landlord at its option may either
terminate this Lease or elect to rebuild and repair the Premises. Landlord
shall give written notice to Tenant of its election within thirty (30) days
after the date it receives notice of such casualty and if Landlord elects to
rebuild and repair shall proceed to do so with reasonable diligence; provided,
however, that if Landlord has not completed the repair of the Premises on or
before the date which is one hundred eighty (180) days from and after the date
Landlord learns of the casualty, Tenant shall be entitled to terminate this
Lease at any time thereafter but prior to the date such repair and restoration
is completed.
C. Landlord's obligation to rebuild and repair under
this paragraph 12 shall in any event be limited to restoring the Premises to
substantially the condition in which the same existed prior to such casualty,
exclusive of any alterations, additions, improvements, fixtures and equipment
installed by Tenant unless the same are covered by insurance proceeds. Tenant
agrees that promptly after completion of Landlord's repairs, Tenant will
proceed with reasonable diligence and at Tenant's sole cost and expense to
restore, repair, and replace all alterations, additions, improvements,
fixtures, signs and equipment installed by Tenant to the extent the same have
not been covered by insurance proceeds.
D. Tenant agrees that during any period of
reconstruction or repair of the Premises, it will continue to operate its
business within the Premises to the extent that same is practical. During the
period from the occurrence of any casualty until Landlord's repairs are
completed, the rent shall be reduced to such extent as may be fair and
reasonable under the circumstances, however, there shall be no abatement of
rent in the event such casualty was caused by any act or omission of Tenant,
its employees, contractors, agents, invitees, business invitees, guests or any
of the aforesaid parties' negligence.
E. Landlord and Tenant waive the provisions of any
statutes which relate to termination of leases when leased property is
destroyed and agree that such event shall be governed by the terms of this
Lease.
13. Condemnation.
A. If the whole or any substantial part of the premises
should be taken for any public or quasi-public use under governmental law,
ordinance or regulation, or by private purchase
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in lieu thereof and the taking would prevent or materially interfere with the
use of the premises for the purpose for which they are being used, this lease
shall terminate and the rent shall be abated during the unexpired portion of
this lease, effective as of the date the physical taking of said premises shall
occur.
B. If part of the premises shall be taken for any public
or quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this lease
is not terminated as provided in the subparagraph above, this lease shall not
terminate, but the rent payable hereunder during the unexpired portion of this
lease shall be reduced to such extent as may be fair and reasonable under all
of the circumstances.
C. All compensation awarded for any taking, or resulting
from any action or proceedings in lieu thereof, whether for the whole or a
portion of the premises, shall be the sole property of Landlord without any
participation by Tenant, and Tenant hereby expressly waives all claims for
compensation and hereby assigns to Landlord all rights with respect thereto;
provided, however, that Tenant may claim and recover directly from the
condemning authority (if permitted by law), such compensation as may be
separately awarded or recovered by Tenant in Tenant's own right for moving
expenses, the expense of removing Tenant's merchandise, furniture, fixtures and
equipment or the loss of Tenant's business goodwill, provided, further, that no
such claim shall diminish or otherwise adversely affect Landlord's award. In no
event shall Tenant be entitled to receive any compensation for the lost value
of its leasehold estate.
14. Surrender of Premises and Holding Over. Tenant will, at the
termination of this lease by lapse of time or otherwise, yield up immediate
possession of the Premises to Landlord; provided, however, that upon such
tender of possession of the Premises to Landlord by Tenant, the Premises and
the systems used therein, including without limitation, the HVAC system, shall
be in at least the same condition in which the Premises and such systems were
in on the date hereof, normal wear and tear excepted. So long as Tenant is not
in default under the terms of the Lease, Tenant shall, at the expiration of the
Term, remove all equipment (other than equipment that is part of the
mechanical, electrical or plumbing systems servicing the Premises) and other
personal property from the Premises, such removals to be made at Tenant's
expense and in such manner as to avoid injury or defacement of the building and
other improvements, it being acknowledged by the Landlord that such equipment
and personal property is the property of Tenant, subject to any lien rights the
Landlord may possess. In the event that Tenant is in default at the expiration
of the Terms, such equipment and personal property shall be removed by Tenant
at the discretion of the Landlord., it being acknowledged by the Landlord that
such equipment is the property of Tenant, subject to any statutory landlord
liens. Notwithstanding anything contained herein to the contrary, if Tenant
holds over, any such holding over shall be deemed to be a tenancy at sufferance
and the rent during any such period of time shall be three (3) times the rent
in effect on the termination date, computed on a daily basis for each day of
the hold over period. The preceding provisions of this paragraph 14 shall not
be construed as Landlord's consent for Tenant to hold over.
15. Quiet Enjoyment. Landlord agrees that upon Tenant's paying the
rent and performing and observing the agreements and conditions contained
herein on its part to be performed and observed, Tenant shall and may peaceably
and quietly have, hold and enjoy the premises and all rights of Tenant
hereunder during the term of this lease without any manner of hindrance or
molestation, subject, nevertheless, to the terms and conditions of this lease,
any mortgage affecting the premises, zoning ordinances and other building and
fire ordinances and governmental regulations relating to the use of the
premises, and easements, restrictions and other conditions of record. Landlord
represents and warrants that it has full right and authority to enter into this
lease.
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16. Events of Default. The following events shall be deemed to be
events of default by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent
herein reserved when due, or any payment with respect to taxes hereunder when
due, or any other payment or reimbursement to Landlord required herein when due
and such failure shall continue for a period of 5 days following written notice
from Landlord to Tenant, provided Tenant shall not be entitled to more than 2
such notices and right to cure within 12 consecutive months and no more than 5
such notices and right to cure during the Term.
(b) Tenant shall become insolvent, or shall make a
transfer in fraud of creditors, or shall make an assignment for the benefit of
creditors, or shall permit the premises or the leasehold estate created hereby
to be taken on execution or other process of law in any action against Tenant..
(c) Tenant shall file a petition, or a petition is filed
against Tenant, under any section or chapter of the United States Bankruptcy
Code (Title 11 of the United States Code), as amended, or under any similar law
or statute of the United States or any State thereof; or Tenant shall be
adjudged a bankrupt or insolvent in proceedings filed against Tenant
thereunder.
(d) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant.
(e) Tenant shall fail to take occupancy of the premises
or shall abandon, desert or vacate the premises or any substantial portion of
the premises for more than 30 consecutive days..
(f) Tenant shall fail to comply with any term, provision
or covenant of this lease (other than the foregoing in this Paragraph 16), and
shall not cure such failure within twenty (20) days after written notice
thereof to Tenant or such longer period as may be reasonably necessary provided
Tenant commences such cure within the 20 day period and thereafter diligently
pursues the same to completion.
17. Remedies. Upon the occurrence of any of such events of default
described in Paragraph 16 hereof, subject to applicable notice and cure
periods, Landlord shall have the option to pursue any one or more of the
remedies available to Landlord at law or in equity in connection with such
event of default, without any notice or demand to Tenant whatsoever, including,
without limitation, the right to enter upon and take possession of the
premises, without terminating this Lease, by picking and/or altering the locks
if necessary, and expel or remove Tenant and any other person who may be
occupying such premises or any part thereof, by force if necessary, without
being liable for prosecution or any claim for damages therefor, and relet the
premises and receive the rent therefor on Tenant's account, which rent Landlord
shall first apply to any and all expenses it incurred in so reletting the
premises and then to the satisfaction of Tenant's obligations hereunder; and
Tenant agrees to pay to the Landlord on demand any deficiency between the
rental received from reletting (after first covering Landlord's expenses of
reletting) and the rental reserved hereunder.
In the event Tenant fails to pay any installment of rent hereunder
within then (10) days of the date when such installment is due and as due, to
help defray the additional cost to Landlord for processing such late payments
Tenant shall pay to Landlord on written demand a late charge in an amount equal
to five percent (5%) of such installment; and the failure to pay such amount
within five (5) days after written demand therefor shall be an event of default
hereunder. The provision for such late charge shall be in addition to all of
Landlord's other rights and remedies hereunder or at law and shall not be
construed as liquidated damages or as limiting Landlord's remedies in any
manner.
9
<PAGE> 10
All rights and remedies of Landlord and Tenant herein existing at law
or in equity are cumulative and the exercise of one or more rights or remedies
shall not be taken to exclude or waive the right to the exercise of any other.
No act or thing done by the Landlord or its agents during the term hereby
granted shall be deemed a termination of this lease or an acceptance of the
surrender of the premises, and no agreement to terminate this lease or accept a
surrender of said premises shall be valid unless such agreement is in writing
and signed by Landlord. No waiver by Landlord or Tenant of any violation or
breach of any of the terms, provisions and covenants herein contained shall be
deemed or construed to constitute a waiver of any other violation or breach of
any of the terms, provisions and covenants herein contained.
18. Mortgages. Tenant accepts this lease subject and subordinate
to any mortgage(s) and/or deed(s) of trust now or at any time hereafter
constituting a lien or charge upon the premises or the improvements situated
thereon, provided, however, that if the mortgagee, trustee, or holder of any
such mortgage or deed of trust elects to have Tenant's interest in this lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this lease shall be deemed superior to such lien, whether
this lease was executed before or after said mortgage or deed of trust, and
provided further that Landlord shall agree to use reasonable good faith efforts
to obtain an agreement from such holder of the mortgage or deed of trust that,
so long as Tenant is not in default under this lease, that Tenant's possession
of the premises will not be disturbed. Tenant shall at any time hereafter on
demand execute any instruments, releases or other documents which may be
reasonably required by any mortgagee for the purpose of subjecting and
subordinating this lease to the lien of any such mortgage. If the interests of
the Landlord under this lease shall be transferred by reason of foreclosure or
other proceedings for enforcement of any mortgage or deed of trust on the
premises, Tenant shall be bound to the transferee (sometimes called the
"Purchaser") at the option of the Purchaser, under the terms, covenants, and
conditions of this lease for the balance of the term remaining, including any
extensions and renewals, with the same force and effect as if the Purchaser
were Landlord under this lease, and if requested by the Purchaser, Tenant
agrees to attorn to the Purchaser, including the mortgagee under any such
mortgage if it be the Purchaser, as its Landlord.
19. Mechanic's Liens. Tenant shall have no authority, express or
implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind, the interest of Landlord in the
premises. Tenant covenants and agrees that it will save and hold Landlord
harmless from any and all loss, cost or expense based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Landlord in the premises or under the terms of this
lease.
20. Notices.
(a) All rent and other payments required to be made by
Tenant to Landlord hereunder shall be payable to Landlord at the address
hereinbelow set forth or at such other address as Landlord may specify from
time to time by written notice delivered in accordance herewith.
Notwithstanding anything contained herein to the contrary, Tenant's obligation
to pay rent and any other amounts to Landlord under the terms of this lease
shall not be deemed satisfied until such rent and other amounts have been
actually received by Landlord.
(b) All payments required to be made by Landlord to
Tenant hereunder shall be payable to Tenant at the address hereinbelow set
forth, or at such other address within the continental United States as Tenant
may specify from time to time by written notice delivered in accordance
herewith. Amounts owing to Tenant under the terms of this lease shall not be
deemed satisfied until actually received by Tenant.
10
<PAGE> 11
(c) Any notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered (whether actually received
or not) two (2) days after the date the same is deposited in the United States
Mail, postage prepaid, Certified or Registered Mail, return receipt requested,
addressed to the parties hereto at the respective addresses set out below, or
at such other address as they have theretofore specified by written notice
delivered in accordance herewith:
LANDLORD: TENANT:
____________ Mission Party Ice, Inc.
801 Ivy Lane P.O. Box 10180
San Antonio, Texas 78209 San Antonio, Texas 78210
Attn: A. J. Lewis III Attention: President
All parties included within the terms "Landlord" and "Tenant", respectively,
shall be bound by notices given in accordance with the provisions of this
paragraph to the same effect as if each had received such notice.
21. Miscellaneous.
A. Words of any gender used in this lease shall be held
and construed to include any other gender, and words in the singular number
shall be held to include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions
contained in this lease shall apply to, inure to the benefit of, and be binding
upon, the parties hereto and upon their respective heirs, legal
representatives, successors and permitted assigns, except as otherwise herein
expressly provided. Landlord shall have the right to assign any of its rights
and obligations under this lease in connection with a sale of the premises to a
third party, and, upon execution of an assumption of Landlord's obligations
hereunder by such transferee, Landlord shall be relieved of any further
obligations under this Lease, and the term "Landlord" shall thenceforth mean
such transferee.
C. Each party agrees to furnish to the other, promptly
upon demand, a corporate resolution, proof of due authorization by partners, or
other appropriate documentation evidencing the due authorization of such party
to enter into this lease.
D. The captions inserted in this lease are for
convenience only and in no way define, limit or otherwise describe the scope or
intent of this lease, or any provision hereof, or in any way affect the
interpretation of this lease.
E. Landlord shall not be required to perform any
covenant or obligation in this lease, or be liable in damages to Tenant, so
long as the performance or the nonperformance of the covenant or obligation is
delayed, caused or prevented by an "Act of God," "force majeure," or Tenant. An
"Act of God" or "force majeure" is defined for the purpose of this lease as
strikes, lock-outs, sit-downs, material or labor restrictions by any
governmental authority, unusual shortages of material, unusual transportation
delays, riots, floods, wash-outs, explosions, earthquakes, fire storms, weather
(including wet grounds or inclement weather which prevents construction), acts
of the public enemy, wars, insurrections and any other cause not reasonably
within the control of Landlord and which by the exercise of due diligence
Landlord is unable, wholly or in part, to prevent or overcome.
F. This lease may not be altered, changed or amended
except by an instrument in writing signed by both parties hereto.
11
<PAGE> 12
G. All obligations of Tenant hereunder not fully
performed as of the expiration or earlier termination of the term of this lease
shall survive the expiration or earlier termination of the term hereof,
including without limitation all payment obligations with respect to taxes and
insurance and all obligations concerning the condition of the premises. Upon
the expiration or earlier termination of the term hereof, and prior to Tenant
vacating the premises, Tenant shall pay to Landlord any amount reasonably
estimated by Landlord as necessary to put the premises, including without
limitation all heating and air conditioning systems and equipment therein, in
good condition and repair, normal wear and tear excepted. Tenant shall also,
prior to vacating the premises, pay to Landlord the pro rated amount, as
estimated by Landlord, of Tenant's obligation hereunder for real estate taxes
and insurance premiums for the year in which the lease expires or terminates.
All such amounts shall be used and held by Landlord for payment of such
obligations of Tenant hereunder, with Tenant being liable for any additional
costs therefor upon demand by Landlord, or with any excess to be returned to
Tenant after all such obligations have been determined and satisfied as the
case may be.
H. If any clause or provision of this lease is illegal,
invalid or unenforceable under present or future laws effective during the term
of this lease, then and in that event, it is the intention of the parties
hereto that the remainder of this lease shall not be affected thereby, and it
is also the intention of the parties to this lease that in lieu of each clause
or provision of this lease that is illegal, invalid or unenforceable, there be
added as a part of this lease contract a clause or provision as similar in
terms to such illegal, invalid or unenforceable clause or provision as may be
possible and be legal, valid and enforceable.
I. This lease shall not be valid or binding unless and
until it is fully and duly executed by Landlord and Tenant and shall not be
effective until the Commencement Date.
J. All references in this lease to "the date hereof" or
similar references shall be deemed to refer to the date of execution set forth
below.
K. If Landlord shall be in default under this lease and
as a consequence, Tenant shall recover a money judgment against Landlord, such
judgment shall be satisfied only out of the right, title, and interest of
Landlord in the premises, as the same may then be encumbered, and neither
Landlord nor any person or entity comprising Landlord shall be liable for any
deficiency. In no event shall Tenant have the right to levy execution against
any property of Landlord nor any person or entity comprising Landlord other
than its interest in the premises as herein expressly provided.
L. The time of the performance of all the covenants,
conditions and agreements of this lease is of the essence.
M. It is expressly agreed by Tenant, as a material
consideration for the execution of this lease, that this lease, with its
specific references to written extrinsic documents, if any, is the entire
agreement of the parties; that there are, and were, no verbal representations,
warranties, understandings, stipulations, agreements or promises pertaining to
this lease or to the expressly mentioned written extrinsic documents, if any,
not incorporated in writing in this lease.
N. Tenant shall not have the right to withhold or to
offset rent or terminate this lease except as expressly provided herein. Tenant
waives and releases any and all statutory liens and offset rights.
12
<PAGE> 13
O. Neither Landlord nor Tenant has contacted any real
estate broker, finder or similar person in connection with this lease. With
respect to this lease and the payment of brokers' commissions, Landlord agrees
to indemnify and hold harmless Tenant from and against any liability or claim,
whether meritorious or not, arising with respect to any broker whose claim
arises by, through, or on behalf of Landlord. With respect to this lease and
the payment of brokers' commissions, Tenant agrees to indemnify and hold
harmless Landlord from and against any liability or claim, whether meritorious
or not, arising with respect to any broker, whose claim arises by, through or
on behalf of Tenant.
22. Hazardous Substances.
A. As used herein, "Hazardous Substances" means any
substance that has toxic, corrosive, flammable or reactive properties and that
is regulated by the State of Texas or the United States Government. Hazardous
Substances include, but are not limited to, asbestos, polychlorobiphenyls
("PCBs"), flammable explosives, radioactive materials, chemical carcinogens,
pollutants, effluent, contaminants, emissions and petroleum.
B. Tenant hereby agrees, warrants and represents that
Tenant, its agents, employees or contractors have not prior to the date hereof,
and will not during the term hereof, knowingly store, place or discard
Hazardous Substances in the premises, other than cleaning supplies or other
materials customarily used by Tenant in the course of its operations which may
constitute Hazardous Substances which will at all times be stored and discarded
in compliance with any applicable laws. Notwithstanding the immediately
preceding sentence, in the event Tenant, its agents, employees or contractors
bring upon, store on or in, use on or in, or install in, the premises any
materials that are then known to be, or are later classified as, Hazardous
Substances, then Tenant shall, upon written demand from Landlord, promptly
proceed to remove such Hazardous Substances, at Tenant's sole cost and expense,
in accordance with all applicable governmental regulations. Tenant hereby
agrees to indemnify and hold Landlord harmless from and against and to
reimburse Landlord with respect to any and all claims, demands, causes of
action, loss, damage, liabilities, cost and expenses (including attorneys' fees
and court costs) of any and every character, known or unknown, fixed or
contingent, asserted against or incurred by Landlord at any time and from time
to time by reason of, or arising out of, the presence of any Hazardous
Substances within the premises or in, on or under the building, or the
premises, the presence of which was caused by an act or omission of Tenant.
Tenant's agreement to so indemnify and hold harmless Landlord and Tenant's
other obligations under this paragraph shall survive the termination of this
Lease.
C. Landlord hereby agrees, warrants and represents that
Landlord, its agents, employees or contractors have not prior to the date
hereof, and will not during the term hereof, knowingly store, place or discard
Hazardous Substances in the premises, other than cleaning supplies or other
materials customarily used by Landlord in the course of its operations which
may constitute Hazardous Substances which will at all times be stored and
discarded in compliance with any applicable laws. Notwithstanding the
immediately preceding sentence, in the event Landlord, its agents, employees or
contractors bring upon, store on or in, use on or in, or install in, the
premises any materials that are then known to be, or are later classified as,
Hazardous Substances, then Landlord shall, upon written demand from Tenant,
promptly proceed to remove such Hazardous Substances, at Landlord's sole cost
and expense, in accordance with all applicable governmental regulations.
Landlord hereby agrees to indemnify and hold Tenant harmless from and against
and to reimburse Tenant with respect to any and all claims, demands, causes of
action, loss, damage, liabilities, cost and expenses (including attorneys' fees
and court costs) of any and every character, known or unknown, fixed or
contingent, asserted against or incurred by Tenant at any time and from time to
time by reason of, or arising out of, the presence of any Hazardous Substances
within the premises or in, on or under
13
<PAGE> 14
the building, or the premises, the presence of which was caused by an act or
omission of Landlord. Landlord's agreement to so indemnify and hold harmless
Tenant and Landlord's other obligations under this paragraph shall survive the
termination of this Lease.
23. Governing Law. The interpretation and construction of this Lease,
and all disputes, controversies or claims arising out of or relating to this
Lease, or the breach, termination or invalidity thereof, shall be governed by
the laws of the State of Texas applicable to contracts made and to be performed
entirely within the State of Texas, without regard to the principles of the
conflicts of laws.
24. Enforcement; Venue. In the event either party shall seek
enforcement of any covenant, warranty or other term or provision of this Lease
or seek to recover damages for the breach thereof, the party which prevails in
such proceedings shall be entitled to recover reasonable attorneys' fees and
expenses actually incurred by it in connection therewith. The parties hereto
agree that this Lease is performable in Bexar County, Texas and that the sole
and exclusive venue for any proceeding involving any claim arising under or
relating to this Lease shall be in Bexar County, Texas.
14
<PAGE> 15
EXECUTED to be effective as of this ______ day of ____________, 199_ .
"LANDLORD" "TENANT"
MISSION PARTY ICE, INC.
a Texas corporation
By:
- --------------------------- -----------------------------
Name:
---------------------------
Title:
--------------------------
15
<PAGE> 16
EXHIBIT "A"
PROPERTY DESCRIPTION
16
<PAGE> 1
EXHIBIT 10.36
LEASE, SHORT FORM
(COMMERCIAL OR RESIDENTIAL)
THIS LEASE, made and entered into this 1st day of March, 1992, by and
between Robert Grant Miller, the Lessor(s), and Southwestern Ice, Inc., the
Lessee(s).
WITNESSETH: That the Lessor(s), in consideration of the covenants of said
lease, hereby lease(s) to Lessee(s), under the terms and conditions set forth,
the property described as follows: 5925 West Van Buren, Phoenix, AZ 85043.
THE PARTIES COVENANT AND AGREE AS FOLLOWS:
1. TERMS: The term of this lease shall be for a period of sixty (60) months,
commencing the 1st day of March, 1992 and ending the 28th day of February,
1997.
2. RENT: The total rents payable under this lease shall be the sum of One
Hundred Eighty Thousand dollars )$180,000.00), payable as follows:
$3,000/month triple net. Lessee shall pay for all repairs, taxes, and
insurance on the premises.
3. ASSIGNMENT/SUBLETTING: Lessee(s) agrees that he(she)(they)(it) will not
assign this lease, nor sublet the leased property without the written
consent of the Lessor.
4. SURRENDER OF PROPERTY: At the expiration of this lease, Lessee(s) agrees
to return peaceable possession of the property of Lessor(s) in as good
condition as received, reasonable wear and tear excepted.
5. BREACH: a) If the rent is not paid when due and Lessee(s) fail to pay
the rent within seven (7) days after written notice, Lessor(s) may
exercise his(her)(their)(its) rights to terminate this lease and recover
possession of the property by appropriate court action, including the
right to recover all costs, Court costs, damages and attorney fees.
b) The failure of either party to fully perform under any or all
of the terms and/or conditions of this lease shall constitute a breach of
this lease, entitling the offended party to bring an appropriate Court
action and recover all equitable relief available under law, including
attorney fees and all Court costs.
6. OTHER CONDITIONS: Lessor(s) and Lessee(s) further agree to the following
additional conditions: See Addendum.
7. NOTICES: a) Any notices or demands to be given to Lessor(s) under this
lease, shall be given at _________________________________________________
__________________________________________________________________________
b) If other than the above-named person or firm, the person or
firm authorized to manage this property, collect the rents or otherwise
enforce the terms of this lease is _______________________________________
__________________________________________________________________________
__________________________________________________________________________
IN WITNESS WHEREOF, the parties have executed this lease this 1st day of
March, 1992.
SOUTHWESTERN ICE, INC. ROBERT GRANT MILLER
Lessee Lessor
By
- ---------------------------------- --------------------------------
Lessee Signature of agent, if firm
<PAGE> 2
ADDENDUM
1. Option to extend term:
A. Lessee shall have the right to extend the term of their lease for
an additional 5 year period commencing March 1, 1997 and ending
February 28, 2002, subject To all terms and conditions at a lease
rate of $5,000.00 per month.
B. Lessee shall have the additional right to extend the term of their
lease for another 5 year period commencing March 1, 2002 and
ending February 28, 2007, subject To all terms and conditions at a
lease rate of $7,000.00 per month.
<PAGE> 1
EXHIBIT 10.37
LICENSE AGREEMENT
THIS AGREEMENT is made this 28th day of May, 1993 (the "Effective
Date"), by and among PACKAGED ICE, INC., a Texas corporation ("PI") and
HOSHIZAKI ELECTRIC CO., LTD., a Japanese corporation, and HOSHIZAKI AMERICA,
INC., a Georgia corporation (collectively, "Hoshizaki").
WHEREAS, PI and Hoshizaki entered into a Settlement and Release
Agreement, dated as of the date hereof (the "Settlement Agreement"), under
which Hoshizaki agreed to execute this Agreement to grant to PI certain rights
relating to the PI Bagger (hereinafter defined); and
WHEREAS, PI desires to obtain from Hoshizaki, and Hoshizaki is willing
to grant to PI, a license relating to the PI Bagger in accordance with the
terms and conditions herein;
NOW, THEREFORE, for and in consideration of the premises, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, PI and Hoshizaki hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) "PI Bagger" means (a) a device or machine and related
components which automatically bags and maintains ice for
retail sale, as reflected in PI's United States Patent No.
5,109,651, (b) any bagger which incorporates inventions
protected by PI's patent rights, (c) the prototype bagger
models manufactured by Hoshizaki in 1991 designated "B" type
and "C" type, and (d) any and all past and future improvements
to any of the foregoing.
(b) "Proprietary Information" means any and all information
relating to the PI Bagger, including without limitation
patents, patent applications, engineering information,
drawings, designs, technical data, know-how, trade secrets,
processes and methods, specifications, parts lists, operating
instructions and other manufacturing or technical information,
in whatever form, that was conceived or developed by Hoshizaki
prior to the Effective Date, or information which is conceived
or developed thereafter by Hoshizaki which relates to patents
or patent applications related to the PI Bagger; provided,
however, the term "Proprietary Information" does not include
any such information, data or other material if the same is:
(1) In the public domain;
(2) Publicly disclosed by a third party, with the prior
written approval of Hoshizaki, who received such
information from Hoshizaki; or
(3) Obtained lawfully from a source other than Hoshizaki.
<PAGE> 2
Other terms used herein are defined in the context in which
they are used and will have the respective meanings there
indicated.
2. Grant of Rights and License. Hoshizaki hereby grants to PI, and PI
hereby accepts from Hoshizaki, a perpetual, irrevocable, exclusive and
paid-up license to:
(a) Use the Proprietary Information to make, use, sell
and distribute the PI Bagger;
(b) Manufacture, use, sell and distribute the PI Bagger
throughout the world;
(c) Authorize other persons or entities to act as
subcontractors or sublicensees for PI to use the
Proprietary Information and to manufacture, use, sell
and distribute the PI Bagger provided that PI shall
cause each such subcontractor or sublicensee to agree
to maintain the confidentiality of any Proprietary
Information; and
(d) In connection with this grant of license, PI shall
protect, defend, indemnify and hold Hoshizaki
harmless from and against any and all claims,
actions, proceedings, damages, costs, expenses and
other losses and liabilities, consequently, directly
or indirectly incurred (including without limitation
attorneys' fees) as a result of, arising out of, or
connected with any claims of infringement or alleged
infringement of any third party's patent or other
rights, by the PI Bagger from the distribution, use,
marketing or sale of the PI Bagger by PI;
3. Improvements. In the event any improvements, enhancements or
modifications are made by PI to the PI Bagger after the Effective Date
of this Agreement, PI shall own such improvements, enhancements or
modifications.
4. Severability. The provisions of this Agreement are severable, and in
the event that any provisions of this Agreement are determined to be
invalid or unenforceable under any controlling body of the law, such
invalidity or unenforceability will not in any way affect the validity
or enforceability of the remaining provisions hereof.
5. Relationship of Parties. It is the intention of the parties that the
relationship existing among them be that of independent contractors.
Nothing herein contained or done pursuant hereto will constitute any
party or its agents or employees, the legal representative, agent or
employee of the others for any purpose whatsoever and these
individuals or entities will have no right, power or authority to
assume, create or incur, in writing or otherwise, any expense,
liability or obligation in the name or on behalf of the others.
6. Governing Law. This Agreement shall be construed, governed, and
interpreted in
<PAGE> 3
accordance with the laws of the State of Texas, United States of
America. The English language version of this Agreement shall be the
official text hereof, notwithstanding any translation of this
Agreement in other language.
7. Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties with respect to its subject matter
and supersedes all prior oral or written representations,
understandings or agreements with respect to the subject matter
hereof; provided, however, that the terms and conditions of the
Settlement Agreement shall remain to be effective to the extent that
they are not inconsistent with those of this Agreement. No
modification to this Agreement will be binding upon the parties hereto
unless acknowledged in writing by their duly authorized
representatives.
8. Assignment. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns; provided, however, this Agreement may not be assigned by any
party without the written consent of the other party hereto.
Notwithstanding anything to the contrary herein contained, an
assignment of this Agreement to an affiliate of a party, or an
assignment of this Agreement in connection with the sale by a party of
all or substantially all of its assets, shall not require the consent
of the other party hereto. For the purposes of this Agreement, an
"affiliate" of a party means any person which, directly or indirectly,
controls, is controlled by, or is under common control with, such
person. The term "control" (including, with correlative meaning, the
terms "controlled by" and "under common control with"), as used with
respect to any person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting
securities, by contract or otherwise.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives identified below as of the
Effective Date.
PACKAGED ICE, INC. HOSHIZAKI ELECTRIC CO., LTD.
By: By:
--------------------------------- -----------------------------
Name: Name:
-------------------------------- ---------------------------
Title: Title:
------------------------------- --------------------------
HOSHIZAKI AMERICA, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE> 1
EXHIBIT 11.1
PACKAGED ICE, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Three Months Year Ended
Ended March 31, December 31,
-----------------------------------------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net loss $(592,179) $(428,520) $(990,432) $(688,482) $(721,913)
Add interest expense on convertible
demand notes 505 6,236
Less dividends on preferred stock:
Series A
Series B
-----------------------------------------------------------------
Loss applicable to common stock $(591,674) $(428,520) $ (984,196) $(688,482) $ (721,913)
=================================================================
Weighted average common shares outstanding 2,828,085 2,826,371 2,826,371 2,682,261 2,614,681
Incremental shares attributable to
conversion of demand notes 5,814 8,550
Incremental shares attributable to
outstanding stock options and warrants 243,481 272,769 272,822 174,293 124,724
-----------------------------------------------------------------
As adjusted for fully diluted calculation 3,077,380 3,099,140 3,107,743 2,856,554 2,739,405
Loss per common and common =================================================================
equivalent share:
Primary $ (0.21) $ (0.15) $ (0.35) $ (0.26) $ (0.28)
Fully-Diluted (0.19) (0.14) (0.32) (0.24) (0.26)
</TABLE>
This calculation is submitted in accordance with Regulation S-K; although it is
contrary to paragraphs 14, 30 and 40 of Accounting Principles Board Opinion
No. 15 because it produces an antidilutive result.
<PAGE> 1
EXHIBIT
12.1
PACKAGED ICE, INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED
CHARGES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Historical
-------------------------------------------------------------
Year
Ended Three Months
December 31, Ended March 31,
1992 1993 1994 1995 1996 1997
--------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
FIXED CHARGES AS DEFINED:
(1) Interest on long-term
debt $1 $11 $25 $76 $130 $85
-------------------------------------------------------------
(2) Total Fixed Charges $1 $11 $25 $76 $130 $85
=============================================================
EARNINGS AS DEFINED:
(3) Loss from continuing ($166) ($391) ($722) ($688) ($990) ($592)
operations
(4) Income taxes for
continuing operations
(5) Total Fixed Charges 1 11 25 76 130 85
-------------------------------------------------------------
(6) Loss From Continuing
Operations Before
Income Taxes and ($165) ($380) ($697) ($612) ($860) ($507)
Fixed Charges
=============================================================
RATIO OF EARNINGS TO FIXED CHARGES
(line 6 divided by line 2) (a) N/A N/A N/A N/A N/A N/A
=============================================================
COVERAGE DEFICIENCY: ($166) ($391) ($722) ($688) ($990) ($592)
=============================================================
(a) Earnings are
inadequate to
cover fixed
charges
</TABLE>
<PAGE> 1
EXHIBIT 12.2
PACKAGED ICE, INC. AND
SUBSIDIARIES
COMPUTATION OF RATIOS OF
EARNINGS TO FIXED CHARGES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Unaudited Proforma Combined
------------------------------------
Three Months
Year Ended Ended
December 31, 1996 March 31, 1997
------------------------------------
<S> <C> <C>
FIXED CHARGES AS DEFINED:
(1) Interest on $7,534 $1,807
long-term debt
------------------------------------
(2) Total Fixed $7,534 $1,807
Charges
====================================
EARNINGS AS DEFINED:
(3) Loss from ($7,450) (3,375)
continuing
operations
(4) Income taxes for
continuing
operations
(5) Total Fixed 7,534 1,883
Charges
------------------------------------
(6) Income From
Continuing
Operations Before
Income $84 (1,492)
Taxes and Fixed
Charges
====================================
RATIO OF EARNINGS TO FIXED
CHARGES
(line 6 divided by line 2) (a) 0.01 N/A
====================================
COVERAGE DEFICIENCY: $(7,450) $(3,375)
====================================
</TABLE>
(a) Earnings are
inadequate to
cover fixed
charges
<PAGE> 1
EXHIBIT 21.1
PACKAGED ICE, INC.
Subsidiary List
at June 11, 1997
1. Mission Party Ice, Inc., a Texas corporation
2. Southwest Texas Packaged Ice, Inc., a Texas corporation
3. Southwestern Ice, Inc., a Texas corporation
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-4 of Packaged
Ice, Inc. and subsidiaries (the "Company") of our reports dated March 21, 1997,
appearing in the Prospectus, which is part of this Registration Statement, with
respect to (i) the consolidated financial statements of the Company as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 and (ii) the combined financial statements as of and for the
year ended December 31, 1996 of Mission Party Ice, Inc. (a S corporation) and
Southwest Texas Packaged Ice, Inc. (an affiliated S corporation) with
additional combining information as of and for the year ended December 31,
1996.
We also consent to the reference to us under the heading "Experts" in this
Registration Statement.
DELOITTE & TOUCHE LLP
Houston, Texas
June 16, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in or made a part of this
registration statement.
ARTHUR ANDERSON LLP
Phoenix, Arizona
June 12, 1997
<PAGE> 1
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) X
---
---------------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Avenue, Suite 2700 75201-2936
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
(214) 754-1200
(Name, address and telephone number of agent for service)
---------------
Packaged Ice, Inc.
(Exact name of obligor as specified in its charter)
Delaware 76-0316492
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
8572 Katy Fwy., Suite 101
Houston, TX 77024
(Address of principal executive offices) (Zip Code)
---------------
$50,000,000 12% Senior Notes Due 2004
(Title of the indenture securities)
================================================================================
<PAGE> 2
GENERAL
1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of Dallas (11th District),
Dallas, Texas (Board of Governors of the Federal
Reserve System) Federal Deposit Insurance
Corporation, Dallas, Texas The Office of the
Comptroller of the Currency, Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust
powers.
2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of
the Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting
securities of the Trustee:
<TABLE>
<CAPTION>
As of June 11, 1997
- --------------------------------------------------------------------------------
Col A. Col B.
- --------------------------------------------------------------------------------
Title of Class Amount Outstanding
- --------------------------------------------------------------------------------
<S> <C> <C>
Capital Stock - par value $100 per share 5,000 shares
</TABLE>
4. Trusteeships under Other Indentures.
Not Applicable
5. Interlocking Directorates and Similar Relationships with the Obligor
or Underwriters.
Not Applicable
<PAGE> 3
6. Voting Securities of the Trustee Owned by the Obligor or its
Officials.
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their
Officials.
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person
Owning 50 Percent or More of the Voting Securities of the Obligor.
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
Not Applicable
13. Defaults by the Obligor.
Not Applicable
14. Affiliations with the Underwriters.
Not Applicable
15. Foreign Trustee.
Not Applicable
16. List of Exhibits.
T-1.1 - A copy of the Articles of Association of U.S. Trust Company
of Texas, N.A.; incorporated herein by reference to Exhibit
T-1.1 filed with Form T-1 Statement, Registration No.
22-21897.
<PAGE> 4
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to
Exhibit T-1.2 filed with Form T-1 Statement, Registration
No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise
corporate trust powers; incorporated herein by reference to
Exhibit T-1.3 filed with Form T-1 Statement, Registration
No. 22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas,
N.A., as amended to date; incorporated herein by reference
to Exhibit T-1.4 filed with Form T-1 Statement,
Registration No. 22-21897.
T-1.5 - The consent of the Trustee required by Section 321(b) of
the Trust Indenture Act of 1939.
T-1.6 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of June 11, 1997 the Trustee had 5,000 shares of Capital Stock outstanding,
all of which are owned by U.S. T.L.P.O. Corp. As of June 11, 1997 U.S.
T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all of which are
owned by U.S. Trust Corporation. U.S. Trust Corporation had outstanding
19,591,502 shares of $1 par value Common Stock as of June 11, 1997.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10
and 11, the answers to said Items are based upon incomplete information. Items
2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by
an amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the
Trustee disclaims responsibility for the accuracy or completeness of such
information.
------------
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee,
U.S Trust Company of Texas, N.A., a national banking association organized
under the laws of the United States of America, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
11h day of June, 1997.
U.S. Trust Company of Texas, N.A.,
Trustee
By:
---------------------
Bill Barber
Vice President
<PAGE> 6
Exhibit T-1.5
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue Packaged Ice, Inc.
$50,000,000 12% Senior Notes due 2004, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
U.S. Trust Company of Texas, N.A.,
By:
---------------------
Bill Barber
Vice President
<PAGE> 7
EXHIBIT 25.2
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
Federal Financial Institutions Examination Council OMB Number: 1557-0081
Expires March 31,1999
- -------------------------------------------------------------------------------------------------------------------------
Please Refer to Page i, (1)
Table of Contents, for
[LOGO] the required disclosure
of estimated burden
- -------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH
DOMESTIC OFFICES ONLY AND TOTAL ASSETS OF LESS THAN $100
MILLION - - FFIEC 034
(970331)
--------
REPORT AT THE CLOSE OF BUSINESS March 31,1997 (RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 This report form is to be filed by banks with domestic
(State member banks); 12 U.S.C. Section 1817 (State offices only. Banks with branches and consolidated
nonmember banks); and 12 U.S.C. Section 161 (National subsidiaries in U.S. territories and possessions, Edge or
banks). Agreement subsidiaries, foreign branches, consolidated
foreign subsidiaries, or International Banking Facilities
must file FFIEC 031.
- -------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by The Reports of Condition and Income are to be prepared in
an authorized officer and the Report of Condition must be accordance with Federal regulatory authority
attested to by not less than two directors (trustees) for instructions. NOTE: these instructions may in some
State nonmember banks and three directors for State member cases differ from generally accepted accounting
and National Banks. principles.
I, Alfred B. Childs, SVP & Cashier We, the undersigned directors (trustees), attest to the
-----------------------------------
Name and Title of Officer Authorized to Sign Report correctness of this Report of Condition (including the
supporting schedules) and declare that it has been
of the named bank do hereby declare that these Reports of examined by us and to the best of our knowledge and
Condition and Income (including the supporting schedules) belief has been prepared in conformance with the
have been prepared in conformance with the instructions instructions issued by the appropriate Federal regulatory
issued by the appropriate Federal regulatory authority and authority and is true and correct.
are true to the best of my knowledge and belief.
/s/ Stuart M. Pearman
-------------------------
/s/ Alfred B. Childs Director (Trustee)
- ----------------------------
Signature of Officer Authorized to Sign Report
/s/ J. T. Moore Jr.
------------------------
April 17,1997 Director (Trustee)
- ---------------
Date of Signature
/s/ Peter J. Denker
-------------------------
Director (Trustee)
- -------------------------------------------------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to NATIONAL BANKS: Return the original only in the special
the appropriate Federal Reserve District Bank. return address envelope provided. If express mail is used
in lieu of the special return address envelope, return the
STATE NONMEMBER BANKS: Return the original only in the original only to the FDIC, c/o Quality Data Systems, 2127
special return address envelope provided. If express mail Espey Court, Suite 204, Crofton, MD 21114.
is used in lieu of the special return address envelope,
return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
- -------------------------------------------------------------------------------------------------------------------------
FDIC Certificate Number ____________ 12-31-96
(RCRI 9050) Banks should affix the address label in this space.
U. S. Trust Company of Texas, National Association
--------------------------------------------------
Legal Title of Bank (TEXT 9010)
2001 Ross Avenue, Suite 2700
----------------------------
City (TEXT 9130)
Dallas, TX 75201
--------------------------------------------------
State Abbrev. (TEXT 9200) ZIP Code (TEXT 9220)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
U.S. TRUST COMPANY OF TEXAS, N.A. Call Date: 03/31/97 State #: 6797 FFIEC 034
2100 ROSS AVENUE, SUITE 2700 Vendor ID: D Cert #: 33217 Page RC-2
DALLAS, TX 75201 Transit #: 11101765
----------
9
----------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31,1997
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
SCHEDULE RC - BALANCE SHEET
C100
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balances due from depository institutions: RCON
----
a. Noninterest-bearing balances and currency and coin (1,2) 0081 1,255 1.a
----------- ------ -------
b. Interest bearing balances (3) 0071 629 1.b
-------------------------------------- ------ -------
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 0 2.a
--------- ------ -------
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 105,764 2 .b
------- ------ -------
3. Federal funds sold and securities purchased under agreements to
resell:
a. Federal funds sold (4) 0276 0 3.a
--------------------------------------------- ------ -------
b. Securities purchased under agreements to resell (5) 0277 0 3.b
---------------- ------ -------
4. Loans and lease financing receivables: RCON
---- -------
a. Loans and leases, net of unearned income (from Schedule RC-C) 2122 43,079 4.a
------ -------
b. LESS: Allowance for loan and lease losses 3123 511 4.b
------------------------- -------
c. LESS: Allocated transfer risk reserve 3128 0 4.c
----------------------------- -------
RCON
d. Loans and leases, net of unearned income, allowance, and reserve ----
(item 4.a minus 4.b and 4.c) 2125 42,568 4.d
--------------------------------------- ------ -------
5. Trading assets 3545 0 5.
--------------------------------------------------------- ------ -------
6. Premises and fixed assets (including capitalized leases 2145 752 6.
---------------- ------ -------
7. Other real estate owned (from Schedule RC-M) 2150 0 7.
--------------------------- ------ -------
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 0 8.
--------------------------------------------------- ------ -------
9. Customers' liability to this bank on acceptances outstanding 2155 0 9.
----------- ------ -------
10. Intangible assets (from Schedule RC-M) 2143 0 10.
--------------------------------- ------ -------
11. Other assets (from Schedule RC-F) 2160 1,933 11.
-------------------------------------- ------ -------
12. a. Total assets (sum of items 1 through 11) 2170 152,901 12.a
--------------------------- ------ -------
b. Losses deferred pursuant to U.S.C. 1823(j) 0306 0 12.b
------------------------- ------ -------
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 12.a and 12.b) 0307 152,901 12.c
------------------------------------- ------ -------
(1) Includes cash items in process of collection and unposed debits.
(2) The amount reported in this item must be greater than or equal to the sum of Schedule RC-M, items 3.a and 3.b.
(3) Includes time certificates of deposit not held for trading.
(4) Report 'term federal funds sold' in Schedule RC, item 4.a, 'Loans and leases, net of unearned income,' and in
Schedule RC-C, part 1.
(5) Report securities purchased under agreements to resell that involve the receipt of immediately available funds and
mature in one business day or roll over under a continuing contract in Schedule RC, item 3.a, 'Federal funds sold.'
</TABLE>
<PAGE> 9
<TABLE>
<S> <C>
U.S. TRUST COMPANY OF TEXAS, N.A. Call Date: 03/31/97 State #: 6797 FFIEC 034
2100 ROSS AVENUE, SUITE 2700 Vendor ID: D Cert #: 33217 Page RC-2
DALLAS, TX 75201 Transit #: 11101765
----------
10
----------
SCHEDULE RC - CONTINUED
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits: RCON
----
a. In domestic offices (sum of totals of
columns A and C from Schedule RC-E) RCON 2200 124,978 13.a
------------------------------ ----
(1) Noninterest-bearing (1) 6631 19,997 13.a.1
------------------------------------
(2) Interest-bearing 6636 104,981
-------------------------------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing
---------------------------------------
(2) Interest-bearing
------------------------------------------ RCON
14. Federal funds purchased and securities sold under agreements to ----
repurchase:
a. Federal funds purchased (2) 0278 0 14.a
-------------------------------------- ------ -------
b. Securities sold under agreements to repurchase (3) 0279 0 14.b
--------------- ------ -------
15. a. Demand notes issued to the U.S. Treasury 2840 0 15.a
------------------------- ------ -------
b. Trading liabilities 3548 0 15.b
---------------------------------------------- ------ -------
16. Other borrowed money:
a. WITH A REMAINING MATURITY OF ONE YEAR OR LESS 2332 1,000 16.a
-------------------- ------ -------
b. WITH A REMAINING MATURITY OF MORE THAN ONE YEAR 2333 5,000 16.b
------------------ ------ -------
17. Mortgage indebtedness and obligations under capitalized
leases 2910 0 17.
--------------------------------------------------------------- ------ -------
18. Bank's liability on acceptances executed and outstanding 29200 0 18.
------------- ------ -------
19. Subordinated notes and debentures 3200 0 19.
------------------------------------ ------ -------
20. Other liabilities (from Schedule RC-G) 2930 1,468 20.
------------------------------- ------ -------
21. Total liabilities (sum of items 13 through 20) 2948 132,446 21.
----------------------- ------ -------
22. Limited-life preferred stock and related surplus 3282 0 22.
--------------------- ------ -------
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus 3838 7,000 23.
------------------------- ------ ------
24. Common stock 3230 500 24.
---------------------------------------------------------- ------ ------
25. Surplus (exclude all surplus related to preferred stock) 2829 8,384 25.
-------------- ------ ------
26. a. Undivided profits and capital reserves 3632 4,711 26.a
---------------------------- ------ ------
b. Net unrealized holding gains (losses) on available-for-sale
securities 8434 (140) 26.b
-------------------------------------------------------- ------ ------
27. Cumulative foreign currency translation adjustments 3210
------------------- ------ ------
28. a. Total equity capital (sum of items 23 through 27) 3210 20,455 28.a
----------------- ------ ------
b. Losses deferred pursuant to 12 U.S.C. 1823) 0306 0 28.b
----------------------- ------ ------
c. Total equity capital and losses deferred pursuant to 12 U.S.C.
1823(j) (sum of items 28.a and 28.b) 3559 20,455 28.c
------------------------------ ------ ------
29. Total liabilities, limited-life preferred stock, equity capital, and
losses deferred pursuant to 12 U.S.C. 1823(j) (sum of items 21, 22,
and 28.c) 2257 152,901 29.
------------------------------------------------------------- ------ ------
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes RCON
the most comprehensive level of auditing work performed for the bank by independent ----
external auditors as of any date during 1995 6724 1 M.1
-------------------------------------------
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company (but external auditors
not on the bank separately) 7 = Other audit procedures (excluding tax preparation
3 = Directors' examination of the bank conducted in accordance work)
with generally accepted auditing standards by a certified 8 = No external audit work
public accounting firm (may be required by state chartering
authority)
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Report "term federal funds purchased" in Schedule RC, item 16, 'Other borrowed money.'
(3) Report securities sold under agreements to repurchase that involve the receipt of immediately available funds and
mature in one business day or roll over under a continuing contract in Schedule RC, item 14.a, 'Federal funds purchased.'
</TABLE>
<PAGE> 1
EXHIBIT 25.2
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
Federal Financial Institutions Examination Council OMB Number: 1557-0081
Expires March 31,1999
- -------------------------------------------------------------------------------------------------------------------------
Please Refer to Page i, (1)
Table of Contents, for
[LOGO] the required disclosure
of estimated burden
- -------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH
DOMESTIC OFFICES ONLY AND TOTAL ASSETS OF LESS THAN $100
MILLION - - FFIEC 034
(970331)
--------
REPORT AT THE CLOSE OF BUSINESS March 31,1997 (RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 This report form is to be filed by banks with domestic
(State member banks); 12 U.S.C. Section 1817 (State offices only. Banks with branches and consolidated
nonmember banks); and 12 U.S.C. Section 161 (National subsidiaries in U.S. territories and possessions, Edge or
banks). Agreement subsidiaries, foreign branches, consolidated
foreign subsidiaries, or International Banking Facilities
must file FFIEC 031.
- -------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by The Reports of Condition and Income are to be prepared in
an authorized officer and the Report of Condition must be accordance with Federal regulatory authority
attested to by not less than two directors (trustees) for instructions. NOTE: these instructions may in some
State nonmember banks and three directors for State member cases differ from generally accepted accounting
and National Banks. principles.
I, Alfred B. Childs, SVP & Cashier We, the undersigned directors (trustees), attest to the
-----------------------------------
Name and Title of Officer Authorized to Sign Report correctness of this Report of Condition (including the
supporting schedules) and declare that it has been
of the named bank do hereby declare that these Reports of examined by us and to the best of our knowledge and
Condition and Income (including the supporting schedules) belief has been prepared in conformance with the
have been prepared in conformance with the instructions instructions issued by the appropriate Federal regulatory
issued by the appropriate Federal regulatory authority and authority and is true and correct.
are true to the best of my knowledge and belief.
/s/ Stuart M. Pearman
-------------------------
/s/ Alfred B. Childs Director (Trustee)
- ----------------------------
Signature of Officer Authorized to Sign Report
/s/ J. T. Moore Jr.
------------------------
April 17,1997 Director (Trustee)
- ---------------
Date of Signature
/s/ Peter J. Denker
-------------------------
Director (Trustee)
- -------------------------------------------------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to NATIONAL BANKS: Return the original only in the special
the appropriate Federal Reserve District Bank. return address envelope provided. If express mail is used
in lieu of the special return address envelope, return the
STATE NONMEMBER BANKS: Return the original only in the original only to the FDIC, c/o Quality Data Systems, 2127
special return address envelope provided. If express mail Espey Court, Suite 204, Crofton, MD 21114.
is used in lieu of the special return address envelope,
return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
- -------------------------------------------------------------------------------------------------------------------------
FDIC Certificate Number ____________ 12-31-96
(RCRI 9050) Banks should affix the address label in this space.
U. S. Trust Company of Texas, National Association
--------------------------------------------------
Legal Title of Bank (TEXT 9010)
2001 Ross Avenue, Suite 2700
----------------------------
City (TEXT 9130)
Dallas, TX 75201
--------------------------------------------------
State Abbrev. (TEXT 9200) ZIP Code (TEXT 9220)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
U.S. TRUST COMPANY OF TEXAS, N.A. Call Date: 03/31/97 State #: 6797 FFIEC 034
2100 ROSS AVENUE, SUITE 2700 Vendor ID: D Cert #: 33217 Page RC-2
DALLAS, TX 75201 Transit #: 11101765
----------
9
----------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31,1997
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
SCHEDULE RC - BALANCE SHEET
C100
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balances due from depository institutions: RCON
----
a. Noninterest-bearing balances and currency and coin (1,2) 0081 1,255 1.a
----------- ------ -------
b. Interest bearing balances (3) 0071 629 1.b
-------------------------------------- ------ -------
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 0 2.a
--------- ------ -------
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 105,764 2 .b
------- ------ -------
3. Federal funds sold and securities purchased under agreements to
resell:
a. Federal funds sold (4) 0276 0 3.a
--------------------------------------------- ------ -------
b. Securities purchased under agreements to resell (5) 0277 0 3.b
---------------- ------ -------
4. Loans and lease financing receivables: RCON
---- -------
a. Loans and leases, net of unearned income (from Schedule RC-C) 2122 43,079 4.a
------ -------
b. LESS: Allowance for loan and lease losses 3123 511 4.b
------------------------- -------
c. LESS: Allocated transfer risk reserve 3128 0 4.c
----------------------------- -------
RCON
d. Loans and leases, net of unearned income, allowance, and reserve ----
(item 4.a minus 4.b and 4.c) 2125 42,568 4.d
--------------------------------------- ------ -------
5. Trading assets 3545 0 5.
--------------------------------------------------------- ------ -------
6. Premises and fixed assets (including capitalized leases 2145 752 6.
---------------- ------ -------
7. Other real estate owned (from Schedule RC-M) 2150 0 7.
--------------------------- ------ -------
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 0 8.
--------------------------------------------------- ------ -------
9. Customers' liability to this bank on acceptances outstanding 2155 0 9.
----------- ------ -------
10. Intangible assets (from Schedule RC-M) 2143 0 10.
--------------------------------- ------ -------
11. Other assets (from Schedule RC-F) 2160 1,933 11.
-------------------------------------- ------ -------
12. a. Total assets (sum of items 1 through 11) 2170 152,901 12.a
--------------------------- ------ -------
b. Losses deferred pursuant to U.S.C. 1823(j) 0306 0 12.b
------------------------- ------ -------
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 12.a and 12.b) 0307 152,901 12.c
------------------------------------- ------ -------
(1) Includes cash items in process of collection and unposed debits.
(2) The amount reported in this item must be greater than or equal to the sum of Schedule RC-M, items 3.a and 3.b.
(3) Includes time certificates of deposit not held for trading.
(4) Report 'term federal funds sold' in Schedule RC, item 4.a, 'Loans and leases, net of unearned income,' and in
Schedule RC-C, part 1.
(5) Report securities purchased under agreements to resell that involve the receipt of immediately available funds and
mature in one business day or roll over under a continuing contract in Schedule RC, item 3.a, 'Federal funds sold.'
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
U.S. TRUST COMPANY OF TEXAS, N.A. Call Date: 03/31/97 State #: 6797 FFIEC 034
2100 ROSS AVENUE, SUITE 2700 Vendor ID: D Cert #: 33217 Page RC-2
DALLAS, TX 75201 Transit #: 11101765
----------
10
----------
SCHEDULE RC - CONTINUED
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits: RCON
----
a. In domestic offices (sum of totals of
columns A and C from Schedule RC-E) RCON 2200 124,978 13.a
------------------------------ ----
(1) Noninterest-bearing (1) 6631 19,997 13.a.1
------------------------------------
(2) Interest-bearing 6636 104,981
-------------------------------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing
---------------------------------------
(2) Interest-bearing
------------------------------------------ RCON
14. Federal funds purchased and securities sold under agreements to ----
repurchase:
a. Federal funds purchased (2) 0278 0 14.a
-------------------------------------- ------ -------
b. Securities sold under agreements to repurchase (3) 0279 0 14.b
--------------- ------ -------
15. a. Demand notes issued to the U.S. Treasury 2840 0 15.a
------------------------- ------ -------
b. Trading liabilities 3548 0 15.b
---------------------------------------------- ------ -------
16. Other borrowed money:
a. WITH A REMAINING MATURITY OF ONE YEAR OR LESS 2332 1,000 16.a
-------------------- ------ -------
b. WITH A REMAINING MATURITY OF MORE THAN ONE YEAR 2333 5,000 16.b
------------------ ------ -------
17. Mortgage indebtedness and obligations under capitalized
leases 2910 0 17.
--------------------------------------------------------------- ------ -------
18. Bank's liability on acceptances executed and outstanding 29200 0 18.
------------- ------ -------
19. Subordinated notes and debentures 3200 0 19.
------------------------------------ ------ -------
20. Other liabilities (from Schedule RC-G) 2930 1,468 20.
------------------------------- ------ -------
21. Total liabilities (sum of items 13 through 20) 2948 132,446 21.
----------------------- ------ -------
22. Limited-life preferred stock and related surplus 3282 0 22.
--------------------- ------ -------
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus 3838 7,000 23.
------------------------- ------ ------
24. Common stock 3230 500 24.
---------------------------------------------------------- ------ ------
25. Surplus (exclude all surplus related to preferred stock) 2829 8,384 25.
-------------- ------ ------
26. a. Undivided profits and capital reserves 3632 4,711 26.a
---------------------------- ------ ------
b. Net unrealized holding gains (losses) on available-for-sale
securities 8434 (140) 26.b
-------------------------------------------------------- ------ ------
27. Cumulative foreign currency translation adjustments 3210
------------------- ------ ------
28. a. Total equity capital (sum of items 23 through 27) 3210 20,455 28.a
----------------- ------ ------
b. Losses deferred pursuant to 12 U.S.C. 1823) 0306 0 28.b
----------------------- ------ ------
c. Total equity capital and losses deferred pursuant to 12 U.S.C.
1823(j) (sum of items 28.a and 28.b) 3559 20,455 28.c
------------------------------ ------ ------
29. Total liabilities, limited-life preferred stock, equity capital, and
losses deferred pursuant to 12 U.S.C. 1823(j) (sum of items 21, 22,
and 28.c) 2257 152,901 29.
------------------------------------------------------------- ------ ------
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes RCON
the most comprehensive level of auditing work performed for the bank by independent ----
external auditors as of any date during 1995 6724 1 M.1
-------------------------------------------
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company (but external auditors
not on the bank separately) 7 = Other audit procedures (excluding tax preparation
3 = Directors' examination of the bank conducted in accordance work)
with generally accepted auditing standards by a certified 8 = No external audit work
public accounting firm (may be required by state chartering
authority)
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Report "term federal funds purchased" in Schedule RC, item 16, 'Other borrowed money.'
(3) Report securities sold under agreements to repurchase that involve the receipt of immediately available funds and
mature in one business day or roll over under a continuing contract in Schedule RC, item 14.a, 'Federal funds purchased.'
</TABLE>
<PAGE> 4
[ARTICLE] 5
<TABLE>
<S> <C> <C> <C> <C>
[PERIOD-TYPE] 3-MOS YEAR YEAR YEAR
[FISCAL-YEAR-END] DEC-31-1997 DEC-31-1996 DEC-31-1995 DEC-31-1994
[PERIOD-END] MAR-31-1997 DEC-31-1996 DEC-31-1995 DEC-31-1994
[CASH] 278,571 169,535 1,032,811 0
[SECURITIES] 0 0 0 0
[RECEIVABLES] 584,785 333,287 351,135 0
[ALLOWANCES] 0 0 0 0
[INVENTORY] 98,550 115,825 79,604 0
[CURRENT-ASSETS] 29,877 29,309 21,493 0
[PP&E] 13,055,435 11,774,692 6,181,132 0
[DEPRECIATION] (2,292,646) (1,887,005) (739,652) 0
[TOTAL-ASSETS] 12,921,676 11,522,788 8,049,786 0
[CURRENT-LIABILITIES] 3,602,219 1,875,733 788,553 0
[BONDS] 3,075,310 3,581,955 210,500 0
[PREFERRED-MANDATORY] 0 0 0 0
[PREFERRED] 5,748 4,500 4,500 0
[COMMON] 28,324 28,264 28,264 0
[OTHER-SE] 6,210,075 6,032,336 7,017,969 0
[TOTAL-LIABILITY-AND-EQUITY] 12,921,676 11,522,788 8,049,786 0
[SALES] 845,732 4,426,860 2,830,493 783,670
[TOTAL-REVENUES] 845,732 4,426,860 2,830,493 783,670
[CGS] 459,780 2,034,828 1,251,527 352,126
[TOTAL-COSTS] 459,780 2,034,828 1,251,527 352,126
[OTHER-EXPENSES] 0 0 0 0
[LOSS-PROVISION] 0 0 0 0
[INTEREST-EXPENSE] 85,302 130,475 76,929 24,522
[INCOME-PRETAX] (592,179) (990,432) (688,482) (721,913)
[INCOME-TAX] 0 0 0 0
[INCOME-CONTINUING] (592,179) (990,432) (688,482) (721,913)
[DISCONTINUED] 0 0 0 0
[EXTRAORDINARY] 0 0 0 0
[CHANGES] 0 0 0 0
[NET-INCOME] (592,179) (990,432) (688,482) (721,913)
[EPS-PRIMARY] (.21) (.35) (.26) (.28)
[EPS-DILUTED] (.21) (.35) (.26) (.28)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995 DEC-31-1994
<PERIOD-END> MAR-31-1997 DEC-31-1996 DEC-31-1995 DEC-31-1994
<CASH> 278,571 169,535 1,032,811 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 584,785 333,287 351,135 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 98,550 115,825 79,604 0
<CURRENT-ASSETS> 29,877 29,309 21,493 0
<PP&E> 13,055,435 11,774,692 6,181,132 0
<DEPRECIATION> (2,292,646) (1,887,005) (739,652) 0
<TOTAL-ASSETS> 12,921,676 11,522,788 8,049,786 0
<CURRENT-LIABILITIES> 3,602,219 1,875,733 788,553 0
<BONDS> 3,075,310 3,581,955 210,500 0
0 0 0 0
5,748 4,500 4,500 0
<COMMON> 28,324 28,264 28,264 0
<OTHER-SE> 6,210,075 6,032,336 7,017,969 0
<TOTAL-LIABILITY-AND-EQUITY> 12,921,676 11,522,788 8,049,786 0
<SALES> 845,732 4,426,860 2,830,493 783,670
<TOTAL-REVENUES> 845,732 4,426,860 2,830,493 783,670
<CGS> 459,780 2,034,828 1,251,527 352,126
<TOTAL-COSTS> 459,780 2,034,828 1,251,527 352,126
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 85,302 130,475 76,929 24,522
<INCOME-PRETAX> (592,179) (990,432) (688,482) (721,913)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (592,179) (990,432) (688,482) (721,913)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (592,179) (990,432) (688,482) (721,913)
<EPS-PRIMARY> (.21) (.35) (.26) (.28)
<EPS-DILUTED> (.21) (.35) (.26) (.28)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
PACKAGED ICE, INC.
OFFER TO EXCHANGE ITS
12% SENIOR NOTES DUE 2004, SERIES B FOR
ANY AND ALL OF ITS 12% SENIOR NOTES DUE 2004, SERIES A
PURSUANT TO THE PROSPECTUS, DATE _______________________, 1997.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ________________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON EXPIRATION DATE.
- --------------------------------------------------------------------------------
Delivery to: U.S. Trust Company of Texas, N.A., Exchange Agent
2001 Ross Avenue, 27th Floor
Dallas, Texas 75201
Attention: Corporate Trust Department
By Mail or By Hand:
By Facsimile:
(214) 754-1255
Confirm by Telephone:
(214) 754-1303
------------------------
Delivery of this Instrument to an address other than as set forth
above, or transmission of instructions via facsimile other than as set forth
above, will not constitute a valid delivery.
The undersigned acknowledges that he or she has received and reviewed
the Prospectus, dated _________________, 1997 (the "Prospectus"), of Packaged
Ice, Inc., a Texas corporation (the "Company"), and this Letter of Transmittal
(this "Letter"), which together constitute the Company's offer (the "Exchange
Offer") to exchange an aggregate principal amount at maturity of up to
$50,000,000 of 12% Senior Notes due 2004, Series B (the "Series B Notes") of
the Company for a like principal amount of the issued and outstanding 12%
Senior Notes due 2004, Series A (the "Series A Notes")) of the Company from the
Holders thereof.
This Letter is to be completed by a Holder of Series A Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Series A Notes, if available, is to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer -- Book-Entry Transfer" section of the Prospectus and an Agent's
Message is not delivered. Tenders by book-entry transfer may also be made by
delivering an Agent's Message in lieu of this Letter. The term "Agent's
Message" means a message, transmitted by the Book- Entry Transfer Facility to
and received by the Exchange Agent and forming a part of a Book-Entry
Confirmation (as defined below), which states that the Book- Entry Transfer
Facility has received an express acknowledgment from the tendering participant,
which acknowledgment states that such participant has received and agrees to be
bound by this Letter and that the Company may enforce this Letter against such
participant. Holders of Series A Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Series A Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter to the Exchange Agent on or prior to the
Expiration Date, must tender their Series
<PAGE> 2
A Notes according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent. The undersigned has completed
the appropriate boxes below and signed this Letter to indicate the action the
undersigned desires to take with respect to the Exchange Offer.
2
<PAGE> 3
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
DESCRIPTION OF 12% SENIOR NOTES DUE 2004, SENIOR NOTES (Series A Notes)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Name(s) and Principal Amount
Address(es) of Aggregate Principal Tendered (must be in
Registered Holder(s) Certificate Amount Represented integral multiples of
(Please fill in, if blank) Number(s) by Certificate(s) $1,000)(a)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------------------------------------
(a) Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Series A Notes will be deemed to have tendered the
entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the list to this
Letter of Transmittal.
The minimum permitted is $1,000 in principal amount of Series A Notes. All
other tenders must be integral multiples of $1,000
</TABLE>
3
<PAGE> 4
<TABLE>
- ------------------------------------------------- ------------------------------------------------
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 5) (See Instruction 5)
To be completed ONLY if certificates for Series To be completed ONLY if certificates for Series
A Notes in a principal amount not tendered or A Notes in a principal amount not tendered or
not purchased, or Series B Notes issued in not purchased, or Series B Notes issued in
exchange for Series A Notes accepted for exchange for Series A Notes accepted for
exchange are to be issued in the name of someone exchange are to be sent to someone other than
other than the undersigned. that shown below.
Issue Certificate to: Mail Certificate to:
Name: Name:
------------------------------------------- ------------------------------------------
(Please Print) (Please Print)
Address: Address:
---------------------------------------- ---------------------------------------
- ------------------------------------------------- ------------------------------------------------
(Include Zip Code) (Include Zip Code)
- ------------------------------------------------- ------------------------------------------------
(Tax Identification or Social Security No.) (Tax Identification or Social Security No.)
- ------------------------------------------------- ------------------------------------------------
</TABLE>
4
<PAGE> 5
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Series A
Notes indicated above. Subject to and effective upon the acceptance for
exchange of the principal amount of Series A Notes tendered in accordance with
this Letter of Transmittal, the undersigned sells, assigns and transfers to, or
upon the order of, the Company all right, title and interest in and to the
Series A Notes tendered hereby. The undersigned hereby irrevocably constitutes
and appoints the Exchange Agent its agent and attorney- in-fact (with full
knowledge that the Exchange Agent also acts as the agent of the Company) with
respect to the tendered Series A Notes with full power of substitution to (i)
deliver certificates for such Series A Notes to the Company and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company and (ii) present such Series A Notes for transfer on the books of
the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Series A Notes, all in accordance with the terms
of the Exchange Offer. The power of attorney granted in this paragraph shall
be deemed irrevocable and coupled with an interest.
The name(s) and address(es) of the registered Holder(s) should be
printed herein under "Description of 12% Senior Notes Due 2004, Series A"
(unless a label setting forth such information appears thereunder), exactly as
they appear on the Series A Notes tendered hereby. The certificate number(s)
and the principal amount of Series A Notes to which this Letter of Transmittal
relates, together with the principal amount of such Series A Notes that the
undersigned wishes to tender, should be indicated in the appropriate boxes
herein under "Description of 12% Senior Notes Due 2004, Series A."
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Series A Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim, when the same are acquired by the
Company. The undersigned hereby further represents that any Series B Notes
acquired in exchange for Series A Notes tendered hereby will have been acquired
in the ordinary course of business of the Holder receiving such Series B Notes,
that neither the Holder nor any such other person has an arrangement with any
person to participate in the distribution of such Series B Notes and that
neither the Holder nor any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company or any of its affiliates.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Series A
Notes tendered hereby.
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Series B Notes. If the undersigned is a broker-dealer that will receive Series
B Notes for its own account in exchange for Series A Notes that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Series B Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Series A Notes, when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
If any tendered Series A Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Series
A Notes will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Payment Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Series A Notes pursuant to
the procedures described under the caption "The Exchange Offer -- Procedures
for Tendering" in the Prospectus and in the instructions hereto will constitute
a binding
5
<PAGE> 6
agreement between the undersigned and the Company upon the terms and subject to
the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the Series B Notes issued in exchange for
the Series A Notes accepted for exchange and return any Series A Notes not
tendered or not exchanged in the name(s) of the undersigned. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please send the
certificates representing the Series B Notes issued in exchange for the Series
A Notes accepted for exchange and any certificates for Series A Notes not
tendered or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the
Series B Notes issued in exchange for the Series A Notes accepted for exchange
and return any Series A Notes not tendered or not exchanged in the name(s) of,
and send said certificates to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation pursuant to the "Special Payment
Instructions" and "Special Delivery Instructions" to transfer any Series A
Notes from the name of the registered Holder(s) thereof if the Company does not
accept for exchange any of the Series A Notes so tendered.
6
<PAGE> 7
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
X , 1997
--------------------------------------- ---------------------------
X , 1997
--------------------------------------- ---------------------------
Signature(s) of Owner Date
Area code and Telephone Number
--------------------------------------------------
If a Holder is tendering any Series A Notes, this Letter must be signed by
the registered Holder(s) as the name(s) appear(s) on the certificate(s) for the
Series A Notes or by any person(s) authorized to become registered Holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a
fiduciary or representative capacity, please et forth full title. See
Instruction 4.
Name(s):
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Type or Print)
Capacity:
----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 4)
Signature(s) Guaranteed by an Eligible Institution:
----------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name and Firm)
Dated: , 1997
--------------------------
7
<PAGE> 8
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer of 12% Senior
Notes due 2004, Series B for any and all of the
12% Senior Notes due 2004, Series A of Packaged Ice, Inc.
1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures.
This letter is to be completed by Holders either if certificates are to
be forwarded herewith or if tenders are to be made pursuant to the procedures
for delivery by book-entry transfers set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus and an Agent's Message is
not delivered. Tenders by book-entry transfer may also be made by delivering an
Agent's Message in lieu of this Letter of Transmittal. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility to
and received by the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that the Book-Entry Transfer Facility has received
an express acknowledgment from the tendering participant, which acknowledgment
states that such participant has received and agrees to be bound by, and makes
the representations and warranties contained in, the Letter of Transmittal and
that the Company may enforce the Letter of Transmittal against such
participant. Certificates for all physically tendered Series A Notes, or
Book-Entry confirmation, as the case may be, as well as a properly completed
and duly executed Letter (or manually signed facsimile hereof or Agent's
Message in lieu thereof) and any other documents required by this Letter, must
be received by the Exchange Agent at the address set forth herein on or prior
to the Expiration Date, or the tendering Holder must comply with the guaranteed
delivery procedures set forth below.
Holders whose certificates for Series A Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Series A Notes pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through
an Eligible Institution, (ii) prior to 5:00 P.M. New York City time on the
Expiration Date, the Exchange Agent must receive from such Eligible Institution
a properly completed and duly executed Letter (or facsimile thereof or Agent's
Message in lieu thereof) and Notice of Guaranteed Delivery, substantially in
the form provided by the Company (by telegram, telex, facsimile transmission,
mail or hand delivery), setting forth the name and address of the Holder of
Series A Notes and the amount of Series A Notes tendered, stating that the
tender is being made thereby and guaranteeing that within five business days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Series A Notes, or a Book-Entry
Confirmation, and any other documents required by the Letter will be deposited
by the Eligible Institution with the Exchange Agent, and (iii) the certificates
for all physically tendered Series A Notes, in proper form for transfer, or
Book-Entry Confirmation, as the case may be, and all other documents required
by this Letter are received by the Exchange Agent within five business days
after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Series A Notes and all other
required documents is at the election and risk of the tendering Holders, but
the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Series A Notes are sent by mail, it is suggested that
the mailing be made by overnight or hand delivery services sufficiently in
advance of the Expiration Date to permit delivery to the Exchange Agent prior
to 5:00 P.M., New York City time, on the Expiration Date, No Letter, Notice of
Guaranteed Delivery or Series A Notes should be sent to the Company.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Series A Notes and withdrawal of tendered
Series A Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the right to
waive any defects or irregularities or conditions of tender as to the Exchange
Offer and/or particular Series A Notes. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in this
Letter) shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Series A Notes must be cured
within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty
8
<PAGE> 9
to give notification of defects or irregularities with respect to tenders of
Series A Notes, nor shall any of them incur any liability for failure to give
such notification. Tenders of Series A Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any
Series A Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived
will be returned by the Exchange Agent to the tendering Holders of Series A
Notes, unless otherwise provided in this Letter, as soon as practicable
following the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. TENDER BY HOLDER.
Only a Holder of Series A Notes may tender such Series A Notes in the
Exchange Offer. Any beneficial Holder of Series A Notes who is not the
registered Holder and who wishes to tender should arrange with the registered
Holder to execute and deliver this Letter on his or her behalf or must, prior
to completing and executing this Letter and delivering his or her Series A
Notes, either make appropriate arrangements to register ownership of the Series
A Notes in such Holder's name or obtain a properly completed bond power form
the registered Holder.
3. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER).
If less than all of the Series A Notes evidenced by a submitted
certificate are to be tendered, the tendering Holder(s) should fill in the
aggregate principal amount of Series A Notes to be tendered in the box above
entitled "Description of Series A Notes -- Principal Amount Tendered." A
reissued certificate representing the balance of nontendered Series A Notes
will be sent to such tendering Holder, unless otherwise provided in the
appropriate box on this Letter, promptly after the Expiration Date. ALL of the
Series A Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
4. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES
If this Letter is signed by the registered Holder of the Series A Notes
tendered hereby, the signature must correspond exactly with the name as written
on the fact of the certificates without any change whatsoever.
If any tendered Series A Notes are owned by record by two or more joint
owners, all such owners must sign this letter.
If any tendered Series A Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this letter is signed by the registered Holder or Holders of the
Series A Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Series B
Notes are to be issued, or any untendered Series A Notes are to reissued, to a
person other than the registered Holder, then endorsements of any certificates
transmitted hereby or separate bond powers are required. Signature on such
certificate(s) must be guaranteed by an Eligible Institution.
If this letter is signed by a person other than the registered Holder or
Holders of any certificate specified herein, such certificate(s) must be
endorsed or accompanies by appropriate bond powers, in either case signed
exactly as the name or names of the registered Holder or Holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should indicate when signing, and, unless waived by Company, proper
evidence satisfactory to the Company of their authority to so act must be
submitted.
9
<PAGE> 10
Endorsements on certificates for Series A Notes or signatures on bond
powers required by this Instruction 4 must be guaranteed by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust
company having an office or correspondent in the United States (an "Eligible
Institution").
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Series A Notes are tendered; (i) by a registered
Holder of Series A Notes (which term, for purposes of the Exchange Offer,
includes any participant in the Book-Entry Transfer Facility system whose name
appears on a security position listing as the Holder of such Series A Notes)
tendered who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions," on this Letter, or (ii) for the account of
an Eligible Institution.
5. SPECIAL ISSUANCE AND DELIVER INSTRUCTIONS.
Tendering Holders of Series A Notes should indicate in the applicable
box the name and address to which Series B Notes issues pursuant to the
Exchange Offer and/or substitute certificates evidencing Series A Notes not
exchanges are to be issued or sent, if different from the name or address of
the person signing this Letter. In the case of issuance in a different name,
the employer identification or social security number of the person named must
also be indicated. Noteholders tendering Series A Notes by book-entry transfer
may request that Series A Notes not exchanged be credited to such account
maintained at the Book-Entry Transfer Facility as such noteholder may designate
hereon. If no such instructions are given, such Series A Notes not exchanged
will be returned to the name or address of the person signing this Letter.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Series A Notes to it or its order pursuant to the Exchange Offer.
If, however, Series B Notes and/or substitute Series A Notes are exchanged are
to be delivered to, or are to be registered or issued in the name of any person
other than the registered Holder of the Series A Notes tendered hereby, or if
tendered Series A Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer of Series A Notes to the Company or its order pursuant
to the Exchange Offer, the amount of any such transfer taxes (whether imposed
on the registered Holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payments of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Series A Notes specified in this
Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to amend, waive satisfaction of
or modify any or all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders of Series A Notes, by execution of this Letter
or an Agent's Message in lieu thereof, shall waive any right to receive notice
of the acceptance of their Series A Notes for exchange.
9. MUTILATED, LOST, STOLEN OR DESTROYED SERIES A NOTES.
Any Holder whose Series A Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10
<PAGE> 11
10. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent at the address and telephone number indicated above.
11
<PAGE> 12
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a registered Holder of Series A Notes or
Series B Notes is required to provide the Trustee (as payer) with such Holder's
correct Tax Identification Number ("TIN") on Substitute Form W-9 below or
otherwise establish a basis for exemption from backup withholding. If such
Holder is an individual, the TIN is his or her social security number. If the
Trustee is not provided with the correct TIN, a $50 penalty may be imposed by
the Internal Revenue Service, and payments made to such Holder with respect to
the Series A Notes or Series B Notes may be subject to backup withholding.
Certain Holders (including among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W- 9. A foreign person may qualify as an exempt recipient by submitting
to the Trustee a properly completed Internal Revenue Service Form W-8, signed
under penalties of perjury, attesting to that Holder's exempt status. A Form
W-8 can be obtained from the Trustee.
If backup withholding applies, the Trustee is required to withhold 20%
of any payments made to the Holder or other payee. Backup withholding is not
an additional Federal income tax. Rather, the Federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Series A
Notes or Series B Notes, the Holder is required to provide the Trustee with:
(i) the Holder's correct TIN by completing the form below, certifying that the
TIN provided on Substitute W-9 is correct (or that such Holder is awaiting a
TIN) and that (A) such Holder is exempt from backup withholding, (B) the Holder
has not been notified by the Internal Revenue Service that the Holder is
subject to backup withholding as a result of failure to report all interest or
dividends, or (C) Internal Revenue Service has notified the Holder that the
Holder is no longer subject to backup withholding; and (ii) if applicable, an
adequate basis for exemption.
12
<PAGE> 13
PAYER'S NAME:
-----------------------------------------------------------------
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX
Form W-9 AT RIGHT AND CERTIFY BY SIGNING AND --------------------------------------------
DATING. Social Security Number
Department of the or
Treasury--Internal
Revenue Service --------------------------------------------
Employer Identification Number
-------------------------------------------------------------------------------------------
Part 2--Certification--Under penalties of Part 3--Awaiting TIN [ ]
perjury, I certify that:
(1) The number shown on this form is
my correct Taxpayer Identification
Number (or I am waiting for a
number to be issued to me) and
(2) I am not subject to backup
withholding because (i) I am
exempt from backup withholding,
(ii) I have not been notified by
the Internal Revenue Service
("IRS") that I am subject to
backup withholding as a result of
failure to report all interest or
dividends, or (iii) the IRS has
notified me that I am no longer
subject to backup withholding.
-------------------------------------------------------------------------------------------
Payee's Request for taxpayer Certificate instructions-- You must cross our Item (2) in Part 2 above if
Identification Number you have been notified by the IRS that you are subject to backup withholding
("TIN") because of under reporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to backup
withholding you receive another certification from the IRS stating that you
are no longer subject to withholding, do not cross out item (2).
SIGNATURE DATE , 1997
--------------------------------------------------- ----------------
------------------------------------------------------------------------------------------
Name (Please Print)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 20% OF
ANY PAYMENTS MADE TO YOU UNDER THE Series A Notes OR THE Series B Notes
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
13
<PAGE> 14
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within 60
days, 20% of all reportable payments made to me thereafter will be withheld
until I provide a number.
- -------------------------------------------
Signature Date , 1997
--------------------
- -------------------------------------------
Name (Please Print)
- --------------------------------------------------------------------------------
OFFER TO EXCHANGE ITS
12% SENIOR NOTES DUE 2004, SERIES B
FOR
ANY AND ALL OF ITS 12% SENIOR NOTES DUE 2004, SERIES A
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Packaged Ice, Inc.. (the "Company") is offering, upon and subject to the
terms and conditions set forth in the Prospectus, dated ______________________,
1997 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its 12% Senior Notes due
2004, Series B (the " Series B Notes") for any and all of its outstanding 12%
Senior Notes due 2004, Series A (the " Series A Notes"). The Exchange Offer is
being made in order to satisfy certain obligations of the Company contained in
the Registration Rights Agreement dated April 17, 1997, among the Company and
the other signatories thereto.
We are requesting that you contact your clients for whom you hold Series
A Notes regarding the Exchange Offer. For your information and for forwarding
to your clients for whom you hold Series A Notes registered in your name or in
the name of your nominee, or who hold Series A Notes registered in their own
names, we are enclosing the following documents:
1. Prospectus dated __________________________________, 1996;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Series A Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to the
Expiration date (as defined below) or if the procedure for book-entry transfers
cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Series A Notes registered in your name or the name of your nominee,
with space provided for obtaining such clients' instructions with regard to the
Exchange Offer; and
14
<PAGE> 15
5. Return envelopes addressed to U.S. Trust Company of Texas, N.A., the
Exchange Agent for the Series A Notes.
Your prompt action is requested. The Exchange Offer will expire at 5:00
P.M., New York City time, on __________, 1997, unless extended by the Company
(the "Expiration Date"). The Series A Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Series A Notes should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus.
If Holders of Series A Notes wish to tender, but it is impracticable for
them to forward their certificates for Series A Notes prior to the expiration
of the Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effect by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures."
The Company will upon request reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarded the Prospectus and related documents to the
beneficial owners of Series A Notes held by me as nominee or in a fiduciary
capacity, the Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Series A Notes pursuant to the Exchange Offer,
except as set forth in Instruction 6 of the Letter of Transmittal.
The terms of the Series B Notes and the Series A Notes are substantially
identical in all material respects, except that the Series B Notes will not
contain terms with respect to transfer restrictions.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed to
U.S. Trust Company of Texas, N.A., the Exchange Agent for the Series A Notes,
at its address and telephone number set forth on the front of the Letter of
Transmittal.
Very truly yours,
Packaged Ice, Inc.
___________________________________
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER
OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY
MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
15
<PAGE> 16
NOTICE OF GUARANTEED DELIVERY FOR
PACKAGED ICE, INC.
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Packaged Ice, Inc. (the "Company") made pursuant to the
Prospectus, dated ___________________________, 1996 (the "Prospectus"), if
certificates for Series A Notes of the Company are not immediately available or
if the procedure for book-entry transfer cannot be completed on a timely basis
or time will not permit all required documents to reach the Company prior to
5:00 P.M., New York City time, on the Expiration Date of the Exchange Offer.
Such form may be delivered or transmitted by telegram, telex, facsimile
transmission, mail or hand delivery to U.S. Trust Company of Texas, N.A., (the
"Exchange Agent") as set forth below. In addition, in order to utilize the
guaranteed delivery procedure to tender Series A Notes pursuant to the Exchange
Offer, a completed signed and dated Letter of Transmittal (or facsimile
thereof) must also be received by the Exchange Agent prior to 5:00 P.M., New
York City time, on the Expiration Date. Capitalized terms not defined herein
are defined in the Prospectus.
Delivery to: U.S. Trust Company of Texas, N.A., Exchange Agent
By Mail or By Hand:
2001 Ross Avenue, 27th Floor
Dallas, Texas 75201
Attention: Corporate Trust Department
By Facsimile:
(214) 754-1255
Confirm by Telephone:
(214) 754-1303
________________________
Delivery of this Instrument to an address other than as set forth above,
or transmission of instructions via facsimile other than as set forth above,
will not constitute a valid delivery.
16
<PAGE> 17
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount at maturity of Series A Notes set forth below,
pursuant to the guaranteed delivery procedure described in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus.
Principal Amount of Series A Notes Tendered:
$
-------------------------------------------
Certificate Nos. (if available):
- --------------------------------------------
Total Principal Amount Represented by Old
Notes Certificate(s):
$
-------------------------------------------
If Series A Notes will be delivered by book-entry
transfer to The Depository Trust Company,
provide account number.
Account Number
-------------------------
17
<PAGE> 18
PACKAGED ICE, INC.
OFFER TO EXCHANGE ITS
12% SENIOR NOTES DUE 2004, SERIES B
FOR
ANY AND ALL OF ITS 12% SENIOR NOTES DUE 2004, SERIES A
To Our Clients:
Enclosed for your consideration are a Prospectus, dated
___________________________ (the "Prospectus") and a Letter of Transmittal
("Letter of Transmittal") relating to an offer (the "Exchange Offer") by
Packaged Ice, Inc. (the "Company") to exchange its 12% Senior Notes due 2004,
Series B (the " Series B Notes") for any and all of its 12% Senior Notes due
2004, Series A (the "Series A Notes").
This material is being forwarded to you as the beneficial owner of
Series A Notes carried by us in your account but not registered in your name.
Accordingly, we request instructions as to whether you wish us to tender
any or all such Series A Notes held by us for your account pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letters of
Transmittal. We urge you to read these documents carefully before conveying
your instructions to us.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender your Series A Notes on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
5:00 P.M., New York City time, on ________________________, unless extended by
the Company (the "Expiration Date"). The Series A Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time before the Expiration Date.
If you wish to have us tender any or all of your Series A Notes on your
behalf, please so instruct us by completing, executing, detaching and returning
to us the attached instruction form. The accompanying copy of the Letter of
Transmittal have been furnished to you for your information only and may not be
used by you to tender your Series A Notes for exchange.
The Exchange Offer is not being made to, nor will tenders be accepted
from Holders of Series A Notes in any jurisdiction in which making of the
Exchange Offer or acceptance thereof would not be in compliance with the laws
of such jurisdiction.
18
<PAGE> 19
Instructions
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer with respect to
Series A Notes. _________________________________
This will instruct you whether to tender the principal amount of the
Series A Notes indicated below held by you for the account of the undersigned
and/or consent to the amendments and waivers, pursuant to the terms and
conditions set forth in the Prospectus and the related Letters of Transmittal.
[Check the appropriate box.]
Box 1 [ ] Please TENDER $___________ principal amount of Series A Notes
held by you for my account on the Letter of Transmittal.
Box 2 [ ] Please do NOT TENDER any Series A Notes at this time.
Date:
-------------------------------
- ------------------------------------
Signature(s)
- ------------------------------------
- ------------------------------------
Please type or print name(s) here
Tenders of Old Securities will be accepted only in principal amounts
equal to $1,000 or integral multiples thereof.
19
<PAGE> 20
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
PLEASE SIGN HERE
X
--------------------------------------------- -----------------------
X
--------------------------------------------- -----------------------
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:
------------------------
Must be signed by the Holder(s) of Series A Notes as their name(s)
appear(s) on certificates for Series A Notes or on a security position listing,
or by person(s) authorized to become registered Holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in fiduciary or representative capacity, such person must
set forth his or her full title below.
Please print name(s) and address(es)
Name(s):
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Capacity:
---------------------------------------------------------------------
Address(es)
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
20
<PAGE> 21
GUARANTEE
The undersigned, a member of a registered national securities exchange,
or a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the
United States, hereby guarantees that the certificates representing the
principal amount at maturity of Series A Notes tendered hereby in proper form
for transfer, or timely confirmation of the book-entry transfer of such Series
A Notes into the Exchange Agent's account at The Depository Trust Company
pursuant to the procedures set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus, together with a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with any required signature guarantee and any other
documents required by the Letter of Transmittal, will be received by the
Exchange Agent at the address set forth above, no later than five business days
after the date of execution hereof.
- ------------------------------------- ----------------------------------
Name of Firm Authorized Signature
- ------------------------------------- ----------------------------------
Address Title
Name:
- ------------------------------------- -----------------------------
Zip Code (Please Type or Print)
Area Code and Tel. No. Dated:
--------------- ----------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SERIES A NOTES WITH THIS FORM, CERTIFICATES
FOR SERIES A NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
21
