<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from........to........
Commission file number 333-29357
PACKAGED ICE, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0316492
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8572 KATY FREEWAY, SUITE 101
HOUSTON, TEXAS 77024
(Address of principal executive offices)
(713) 464-9384
(Issuer's telephone number, including area code)
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date: The total number of shares of
Common Stock, par value $.01 per share, outstanding as of May 1, 1998 was
5,342,541.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2
<PAGE> 3
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 16,655,963 $ 14,825,259
Short-term cash investments 4,913,170 4,543,552
Accounts receivable:
Trade 5,207,014 4,038,582
Affiliates 62,150 64,727
Inventories 2,591,994 1,347,496
Prepaid expenses 748,541 321,492
------------- -------------
Total current assets 30,178,832 25,141,108
PROPERTY, net 64,259,193 43,297,449
OTHER ASSETS:
Goodwill, net 81,287,505 44,280,568
Debt issuance costs, net 6,636,687 6,297,712
Other assets 4,059,263 3,283,617
------------- -------------
TOTAL $ 186,421,480 $ 122,300,454
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $ -- $ --
Accounts payable 2,885,948 1,965,093
Payable to affiliates 353,413 1,309,083
Accrued expenses 3,060,674 1,461,030
Accrued interest 2,515,695 1,875,972
Notes payable -- 1,975,968
------------- -------------
Total current liabilities 8,815,730 8,587,146
LONG-TERM OBLIGATIONS 145,000,000 67,501,537
COMMITMENTS AND CONTINGENCIES
MANDITORILY REDEEMABLE PREFERRED STOCK Series C, 10%, Exchangeable - 250,000
shares issued and outstanding at March 31, 1998 and December 31, 1997,
liquidation preference of $100 per share 25,812,404
25,198,630
PREFERRED STOCK WITH PUT REDEMPTION OPTION:
Series A Convertible; 450,000 shares issued and outstanding at
March 31, 1998 and December 31, 1997 2,496,527 2,496,527
Series B Convertible; 124,831 shares issued and outstanding at
March 31, 1998 and December 31, 1997 726,226 726,226
COMMON STOCK WITH PUT REDEMPTION OPTION,
420,000 shares issued and outstanding at March 31, 1998 and
December 31, 1997 1,971,851 1,971,851
SHAREHOLDERS' EQUITY:
Preferred Stock, Series C, $.01 par value, 100 shares
authorized and outstanding -- --
Common stock, $.01 par value; 50,000,000 shares authorized;
shares issued of 4,922,541, at March 31, 1998, and 4,015,981
at December 31, 1997 49,225 40,160
Additional paid-in capital 38,753,968 28,804,811
Less 298,231 shares of treasury stock, at cost (1,491,155) (1,491,155)
Accumulated deficit (35,713,296) (11,535,279)
------------- -------------
Total shareholders' equity 1,598,742 (15,818,537)
------------- -------------
TOTAL $ 186,421,480 $ 122,300,454
============= =============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues $ 8,401,157 $ 845,732
Cost of sales 6,394,028 459,782
------------ ------------
Gross profit 2,007,129 385,950
Selling, general and administrative expense 3,853,916 571,700
Depreciation and amortization expense 2,071,065 478,835
------------ ------------
Loss from operations (3,917,852) (664,585)
Other income, net 699 157,707
Interest expense (including interest income) (2,873,971) (85,301)
------------ ------------
Loss before income taxes (6,791,124) (592,179)
Income taxes -- --
------------ ------------
Net loss before extraordinary items (6,791,124) (592,179)
Extraordinary loss on refinancing (17,386,893) --
------------ ------------
Net loss $(24,178,017) $ (592,179)
============ ============
Loss per share of common stock
- basic and diluted $ (5.64) $ (0.21)
============ ============
Weighted average common shares outstanding 4,395,175 2,827,571
============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------
NUMBER OF PAR PAID-IN TREASURY ACCUMULATED
SHARES VALUE CAPITAL STOCK DEFICIT TOTAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 4,015,981 $ 40,160 $ 28,804,811 $ (1,491,155) $(11,535,279) $ 15,818,539
Issuance of common stock 906,560 9,065 10,565,596 10,574,661
Accrued dividend on
preferred stock (616,439) (616,439)
Net loss (24,178,017) (24,178,017)
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 1998 4,922,541 $ 49,225 $ 38,753,968 $ (1,491,155) $(35,713,296) $ 1,598,742
============ ============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
PACKAGED ICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITY
Net loss $ (24,178,017) $ (592,179)
Adjustments to reconcile net loss to net cash
Provided by (used in)operating activities
(excluding working capital from acquisitions):
Depreciation and amortization 2,071,065 478,835
Amortization of debt discount 83,316 --
Gain from disposal of assets (3,356)
Extraordinary loss from refinancing 17,386,893 --
Changes in assets and liabilities:
Accounts receivable, inventory and prepaid expenses (895,256) (234,790)
Accounts payable and accrued expenses (1,485,167) 1,424,078
------------- -------------
Net cash provided by (used in) operating activities (7,017,166) 1,072,588
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property additions (4,025,788) (1,280,741)
Cost of acquisitions (45,287,072) --
Investment in short-term cash investments (369,268) --
Increase in other assets (962,424) (249,799)
------------- -------------
Net cash used in investing activities (50,644,902) (1,530,540)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common and preferred stock 37,473 771,226
Proceeds from debt issuance, net 138,392,799 302,407
Costs of refinancing (3,937,500) --
Borrowings from lines of credit 10,000,000 --
Repayment of lines of credit (10,000,000) --
Repayment of debt (75,000,000) (506,645)
------------- -------------
Net cash provided by financing activities 59,492,772 566,988
------------- -------------
NET INCREASE IN CASH AND EQUIVALENTS 1,830,704 109,036
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 14,825,259 169,535
------------- -------------
CASH AND EQUIVALENTS, END OF PERIOD $ 16,655,963 $ 278,571
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
- - Cash payments for interest $ 2,610,231 $ 97,176
============= =============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Common stock issued in consideration for business acquisitions $ 10,534,521 $ --
============= =============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
PACKAGED ICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Packaged Ice, Inc. and its wholly owned subsidiaries (the "Company") manufacture
and distribute packaged ice by traditional delivery methods and stand-alone
automated merchandising ice systems ("ice systems") installed primarily in
retail locations. The ice systems produce and package bags of cubed ice at the
customer's location. At March 31, 1998, the Company's customers were located
primarily in the southern half of the United States.
The consolidated financial statements presented herein at March 31, 1998 and for
the three-month periods ended March 31, 1998 and 1997, have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and 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, and recurring nature. Certain information and footnote disclosure
required by generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. 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 for
the full year.
2. RECENT EVENTS
On May 1, 1998, the Company purchased all of the outstanding capital stock of
Reddy Ice, a subsidiary of Suiza Foods Corporation, for $177.5 million in cash
(the "Reddy Acquisition"). As a part of the Reddy Acquisition, the Company
assumed obligations of approximately $5 million to fund three acquisitions which
have signed letters of intent with Reddy Ice and to complete the funding of the
construction of a new ice plant in Austin, Texas. The Reddy Acquisition will
be accounted for using the purchase method of accounting, and accordingly, the
purchase price will be preliminarily allocated to the assets and liabilities
acquired based on fair value at the date of the Reddy Acquisition. The Company
has not completed the assessment of the fair value of the net assets acquired
for the purpose of allocating the purchase price. The excess of the aggregate
purchase price over the fair market value of the net assets required will be
recognized as goodwill and will be amortized over forty years.
3. ACQUISITIONS
From January 1, 1998 through March 31, 1998, the Company has acquired certain
traditional ice businesses and certain assets (the "Acquisitions") to compliment
its core business for purchase prices totaling approximately $45.3 million in
cash and $10.5 million in common stock (900,260 shares) reflected
at the Company's valuation of $10 to $13 per share.
The Acquisitions have been accounted for using the purchase method of
accounting, and accordingly, the purchase price has been preliminarily allocated
to the assets and liabilities acquired based on fair value at the date of the
Acquisitions. As a result of the number of acquisitions and their proximity to
year-end, the Company has not completed the assessment of the fair value of the
net assets acquired for the purposes of allocating the purchase price. The
Acquisitions included at fair value current assets of $2.6 million, property
plant and equipment of $18.3, and current liabilities of $2.4 million. The
excess of aggregate purchase price over the fair market value of the net assets
acquired of approximately $37.3 million was recognized as goodwill and is being
amortized over 40 years. Amortization expense of Goodwill and Other Assets for
the three months ended March 31, 1998 and 1997 was $721,332 and $73,197,
respectively.
The operating results of the Acquisitions have been included in the Company's
consolidated financial statements from the date of their respective purchases.
The following unaudited pro forma information presents a summary of consolidated
results of operations as if the Acquisitions had occurred on January 1, 1998:
<TABLE>
<CAPTION>
Three Months Ended March 31
--------------------------------
1998 1997
------------- -------------
<S> <C>
Revenue $ 11,299,553 $ 5,703,254
Net loss 24,344,816 1,204,327
Loss per share (5.68) (0.43)
</TABLE>
4. LONG-TERM OBLIGATIONS
On January 28, 1998, the Company completed a private offering of $145,000,000
aggregate principal amount of its 9 3/4% Series A Senior Notes due 2005 (the
"New Senior Notes"). The New Senior Notes are general unsecured obligations of
the Company and are senior in right of payment to all existing and future
Subordinated Indebtedness of the Company and pari passu to all senior
indebtedness of the Company. The New Senior Notes will be effectively
7
<PAGE> 8
subordinated to the Existing Credit Facility and any future credit facility. The
New Senior Notes contain certain covenants that, among other things, limit the
ability of the Company and its restricted subsidiaries to pay any cash dividends
or make distributions with respect to the Company's capital stock, to incur
indebtedness or to create liens. Net proceeds from the sale of the New Senior
Notes was used for (i) repurchase of the Series B Notes and Series C Notes (see
Note 6), (ii) repayment of all outstanding obligations under the Existing Credit
Facility, (iii) funding of acquisitions of traditional ice companies and (iv)
working capital and general corporate purposes.
Simultaneous with the issuance of the New Senior Notes, the Company purchased
and retired the $75 million of 12% Senior Notes due 2004. The Company recorded
an extraordinary charge of $17.4 million for such debt extinguishment relating
to the write-off of debt discount, and associated redemption premiums and
issuance costs.
The Company's New Senior Notes are guaranteed, fully, jointly and severally, and
unconditionally, on a senior subordinated basis by each of the Company's current
and future wholly owned subsidiaries. (see Note 6).
On April 30, 1998 the Company issued an additional $125 million of New Senior
Notes (the "Tack-on-Notes") due February 1, 2005 in a "tack-on" offering. The
Tack-on-Notes were issued under the indenture (the "Indenture") dated as of
January 28, 1998, amended and restated as of April 30, 1998, by and among the
Company, the Subsidiary Guarantors, as defined in the Indenture, and U.S. Trust
Company of Texas, N. A., as Trustee. The Notes are of the same series as the
$145 million of New Senior Notes issued January 28, 1998.
The Company obtained the consent of a majority of the holders of the original
New Senior Notes issued under the Indenture to certain amendments to the
Indenture. The Company paid consent fees aggregating $1,397,600 to the
consenting holders. The principal amendments to the Indenture increase the
Permitted Indebtedness to allow the issuance of the Tack-on-Notes, and increase
the Permitted Indebtedness basket to permit the Company to enter the New Credit
Facility as discussed below.
Concurrently with the Reddy Acquisition, the Company entered into an $80 million
five year senior credit facility (the "New Credit Facility") with Antares
Leveraged Capital Corporation consisting of a revolving working capital facility
of $15 million and a revolving acquisition loan facility (the "Acquisition
Facility") of $65 million. The New Credit Facility replaces the Company's
previous credit facility executed in September, 1997 with Frost National Bank
and Zion's National Bank. The Company plans to use the New Credit Facility for
acquisition and working capital needs.
The outstanding principal balance under the New Credit Facility will bear
interest at the Company's option at a fluctuating rate equal to (i) LIBOR plus
two and three quarters percent (2.75%) per annum, or (ii) the "prime rate" plus
one percent (1.00%) with interest rates subject to a pricing grid. All amounts
outstanding under the Acquisition Facility on the second anniversary of the New
Credit Facility will amortize in 12 equal installments over the remaining term.
The New Credit Facility contains general and financial covenants and events of
default customary for credit facilities of this type. The New Credit Facility is
secured by substantially all of the Company's assets and the capital stock of
all of the Company's significant subsidiaries.
At March 31, 1998 and December 31,1997, long-term obligations consisted of the
following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Senior notes ................................ $145,000,000 $ 75,000,000
Less: unamortized debt discount
on detachable warrants issued ............... -- (7,498,463)
Bank credit facilities ...................... -- --
------------ ------------
Total ....................................... 145,000,000 67,501,537
Less: current maturities .................... -- --
------------ ------------
Long-term obligations, net .................. $145,000,000 $ 67,501,537
============ ============
</TABLE>
There are no principal maturities of long-term obligations for any of the next
five years as of March 31, 1998.
See Note 6 for information regarding subsidiary guarantors of long-term
obligations.
8
<PAGE> 9
5. CAPITAL STOCK
Preferred Stock -- On April 30, 1998 the Company entered into a Securities
Purchase Agreement (the "Securities Purchase Agreement") with Ares Leveraged
Investment Fund, L.P. ("Ares") and SV Capital Partners, L.P. ("SV") pursuant to
which Ares acquired 325,000 shares and SV acquired 75,000 shares of the 13%
Exchangeable Preferred Stock at $100 per share for an aggregate amount of $40
million. Holders of the 13% Exchangeable Preferred Stock shall have no voting
rights other than approval rights with respect to the issuance of parity or
senior securities. In addition, there are various situations in which the
Company may either elect or be required to redeem the 13% Exchangeable Preferred
Stock. The following summary regarding the 13% Exchangeable Preferred Stock and
the Warrants is qualified in its entirety by reference to and should be read in
conjunction with the Securities Purchase Agreement and all agreements ancillary
thereto.
Ares and SV entered into Warrant Agreements granting warrants to purchase an
aggregate of 975,752 shares of the Company's Common Stock with an exercise price
of $.01 per share. The Warrants are valid until May 31, 2005 but are exercisable
only under certain conditions, such as an initial public offering of Common
Stock, change of control, merger, asset sale, or default.
The 13% Exchangeable Preferred Stock bears a dividend rate of 13% per annum,
however, during the first twelve months following issuance the dividend rate
will be 11.5% and 12.25% during the second twelve months. Dividends shall be
fully cumulative and payable quarterly in cash, except that during the first
five years after issuance, dividends may be paid in kind by issuing additional
shares of 13% Exchangeable Preferred Stock. In the event the Company is unable
for any reason to pay dividends in cash after the fifth anniversary, or in the
event of a default, the holders of 13% Exchangeable Preferred Stock will have
the right to add up to two directors to the Board of Directors and the dividend
rate will be increased until the default is cured.
The Securities Purchase Agreement contains certain restrictive covenants and
requires a vote of two-thirds of the Board of Directors before the Company may
take certain significant actions. The Company may exchange the 13% Exchangeable
Preferred Stock for subordinated notes. Ares and SV were granted certain
registration rights under separate Registration Rights Agreements. The Company
intends to file a registration statement to offer to exchange the 13%
Exchangeable Preferred Stock for registered exchange shares with terms identical
to the 13% Exchangeable Preferred Stock.
6. SUBSIDIARY GUARANTORS
The Company's New Senior Notes are guaranteed, fully, jointly and severally, and
unconditionally, on a senior subordinated basis by all of the Company's current
and future, direct and indirect subsidiaries (the "Subsidiary Guarantors"), all
wholly owned. The following table sets forth the "summarized financial
information" of the Subsidiary Guarantors. Full financial statements of the
Subsidiary Guarantors are not presented because management believes they are not
material to the investors. There are currently no restrictions on the ability of
the subsidiary guarantors to transfer funds to the Company in the form of cash
dividends, loans or advances.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
Balance Sheet Data:
Current Assets $ 9,216,992 $ 6,591,604
Property and Equipment 53,022,646 32,622,152
Total Assets 132,207,220 71,381,168
Current Liabilities 4,488,509 3,904,149
Long-Term Debt -- --
Total Shareholder's Equity 20,448,572 16,707,700
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Operating Data:
Net Revenue $ 6,921,388 $ 554,149
Gross Profit 1,808,835 492,460
Net Loss (4,625,220) 310,981
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
During 1998, the Company entered into certain employment contracts with former
employees of the acquired companies with an aggregate annual commitment of
approximately $466,000.
The Company has leased certain facilities in Texas, Arizona and California.
Under these and other operating leases, minimum annual rentals at March 31, 1998
aggregate approximately $1,403,342 in 1998, $1,822,120 in 1999, $1,701,819 in
2000, $1,647,638 in 2001, $1,611,810 in 2002 and $8,845,260 thereafter.
The Company is 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.
8. NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, Reporting Comprehensive Income. Comprehensive income
is a more inclusive financial reporting methodology that includes disclosure of
certain financial information that historically has not been recognized in the
presentation of net income. SFAS No. 130 requires the reporting of comprehensive
income in addition to net income from operations. For the three months ended
March 31, 1998 and 1997, the Company had no items of comprehensive income, and
as a result the Company's reported net income was the same as comprehensive
income.
In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 132, Employer's Disclosures about Pensions and Other Post-retirement
Benefits, which revises certain disclosure requirements of the employer, and is
effective for fiscal years beginning after December 15, 1997. SFAS No. 132 will
have no impact to the Company as it provides no pension or other
post-retirement benefits to its employees.
In March 1998, the Accounting Standards Executive Committee ("AcSEC") of the
American Institute of Certified Public Accountants ("AICPA") reached a consensus
of Statement of Position ("SOP") No. 98-1, Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use, which provides guidance on
accounting for the costs of computer software. SOP No. 98-1 is effective for
fiscal years beginning after December 15, 1998. Management is evaluating what,
if any, impact this SOP will have on the Company upon implementation.
10
<PAGE> 11
In April 1998, the AcSEC of the AICPA reached a consensus on SOP No. 98-5,
Reporting on the Costs of Start-Up Activities, which provides that the costs of
such activities be expensed as incurred. SOP No. 98-5 is effective for fiscal
years beginning after December 15, 1998. Management is evaluating what, if any,
impact this SOP will have on the Company upon implementation.
In March 1998, the Emerging Issues Task Force ("EITF") of the FASB reached a
consensus on Issue No. 97-11, Accounting for the Internal Costs Relating to Real
Estate Property Acquisitions, which requires that internal costs of identifying
and acquiring operating properties be expensed as incurred. Management is
currently evaluating the impact this EITF, which was effective for transactions
on or after March 20, 1998, will have on the Company.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's Consolidated Financial Statements, and the notes thereto,
included in Item 1. of this Form 10-Q and Form 10-K previously filed.
This Form 10-Q contains forward looking statements that involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward looking statements. Such risks and
uncertainties, many of which are not within the control of the Company, may
cause the actual results to differ materially from the results discussed in the
forward looking statements, including, but not limited to, the Company's ability
to execute and implement its plans and strategies and/or control the economic
environment in which the Company operates.
OVERVIEW
The Company derives its revenues primarily from the sale of packaged
ice through Packaged Ice Systems, 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. The Company has historically sold ice primarily
through Packaged Ice Systems, but upon acquiring certain traditional ice
businesses and certain assets pursuant to the Acquisitions, now sells ice
through both distribution methods. Such combination of distribution methods 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 also provides other services including
cold storage rental, the manufacturing and sale of bottled water, and equipment
leasing.
The Company manufactures its ice in crushed, cubed, half-moon and
cylindrical forms and packages its ice primarily in six to 40 pound bags for
eventual sale to retail customers and sells block ice in 10 and 300 pound sizes
primarily to commercial and agricultural users. Seven or eight pound bags are
the most commonly purchased size in the industry. Packaged ice sold in 20 pound
and 40 pound bags is typically purchased by restaurants and other commercial
users. Block ice in 10 pound and 300 pound units is typically sold to customers
in the commercial and agricultural sectors.
Prices for packaged ice are generally stable with some price variation
between markets based on geography and customer base. The Company services over
45,000 customer locations in 17 states, with Texas, Arizona, California and
Florida the most significant markets. The Company services the significant
segments of the ice industry, including supermarket and convenience store
retailers, 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, weather, 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 costs 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 for both systems
also includes labor costs associated with manufacturing, delivery and
maintenance. 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.
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 operated by the various subsidiaries and at
Packaged Ice, which exclusively handles the Packaged Ice System. 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.
12
<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated selected
operating data and supplemental data for the Company expressed as a percentage
of total revenue.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
1998 1997
-------- --------
OPERATING DATA:
<S> <C> <C>
Revenues 100.0% 100.0%
Costs of goods sold 76.1 54.4
Gross profit 23.9 45.6
Selling, general and administrative (1) 45.9 67.6
Depreciation and Amortization 24.7 56.6
Interest expense 34.2 10.1
Other income 0.1 18.7
Net loss (80.8) (70.0)
</TABLE>
(1) Excludes depreciation and amortization.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
REVENUES: Revenues increased $7.6 million from $0.8 million for the
quarter ended March 31, 1997 to $8.4 million for the quarter ended March 31,
1998. Revenues increased $0.7 million due to the placement of additional
Packaged Ice Systems since the quarter ended March 31, 1997 and $6.9 million as
a result of revenue contributed by the Acquisitions.
GROSS PROFIT: Gross profit increased $1.6 million from $0.4 million for
the quarter ended March 31, 1997 to $2.0 million for the quarter ended March 31,
1998. As a percentage of revenues gross profit decreased 21.7 percentage points
from 45.6% at March 31, 1997 to 23.9% at March 31, 1998. Gross margins decreased
because of the higher cost of sales reflected in the traditional ice businesses
of the Acquisitions. Traditional ice companies experience significantly higher
costs of goods sold than the lower costs of on-site manufacturing and delivery
associated with the Packaged Ice Systems.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Operating expenses
increased $3.3 million from $0.6 million for the quarter ended March 31, 1997 to
$3.9 million for the quarter ended March 31, 1998. As a percentage of revenues,
operating expenses decreased 21.7 percentage points from 67.6% at March 31, 1997
to 45.9% at March 31, 1998. This decrease was due to greater efficiencies
realized by the Company as its general and administrative expenses were spread
over the larger base of sales enjoyed as a result of the Acquisitions.
DEPRECIATION AND AMORTIZATION EXPENSE: Depreciation and amortization
increased $1.6 million from $0.5 million for the quarter ended March 31, 1997 to
$2.1 million for the quarter ended March 31, 1998. As a percentage of sales,
deprecation and amortization decreased 31.9 percentage points from 56.6% to
24.7%. This decrease was due primarily to the lower historical depreciation and
amortization percentages of the businesses acquired pursuant to the
Acquisitions. These percentages reflect the longer estimated useful lives of
traditional ice plant and equipment as compared to Packaged Ice Systems. This
decrease more that offset the increase related to the amortization of goodwill
resulting from the Acquisitions.
OTHER INCOME: Other income decreased $0.2 million from $0.2 million for
the quarter ended March 31, 1997 to $699 for the quarter ended March 31, 1998.
This decrease was due primarily to the elimination in 1998 of intercompany
income, the management fee and equipment leasing income that was recognized in
1997 before the acquisitions began.
INTEREST EXPENSE: Interest expense increased $2.8 million from $0.1
million for the quarter ended March 31, 1997 to $2.9 million for the quarter
ended March 31, 1998. This increase was a result of higher levels of debt
associated
13
<PAGE> 14
with the Company borrowing $145 million from the issuance of the new 9 3/4%
Senior Notes.
NET LOSS: Net loss increased $6.2 million from $0.6 million for the
quarter ended March 31, 1997 to $6.8 million for the quarter ended March 31,
1998. The increase in the loss is due to the increases in selling, general and
administrative; depreciation and amortization and interest expense more than
offsetting the increased gross profit due to the Acquisitions.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
REVENUES: Revenues increased $0.2 million from $0.6 million for the
three months ended March 31, 1996 to $0.8 million for the three months ended
March 31, 1997. Revenues increased due to the increased number of Packaged Ice
Systems in service during the three months.
GROSS PROFIT: Gross profit increased $0.07 million from $.32 million
for the three months ended March 31, 1996 to $0.39 million for the three months
ended March 31, 1997. As a percentage of revenues, gross profit decreased 4.4
percentage points from 50.0% at March 31, 1996 to 45.6% at March 31, 1997. As
the Company expanded its machine base into new districts the overall profit
margin decreased due to the start-up nature of the new districts. In the new
districts, a higher percentage of the costs are of a fixed nature than in a
mature environment, and therefore, produce a disproportionately negative result
in periods of lower revenues (either due to start up or seasonality).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Operating expenses
increased $0.2 million from $0.4 million for the three months ended March 31,
1996 to $0.6 million for the three months ended March 31, 1997. As a percentage
of revenues operating expenses increased 7.7 percentage points from 59.9% at
March 31, 1996 to 67.6% at March 31, 1997. This increase was primarily due to
the build up of corporate infrastructure in anticipation of the acquisitions the
Company made during the last three quarters of 1997.
DEPRECIATION AND AMORTIZATION EXPENSES: Depreciation and amortization
increased $0.2 million from $0.3 million for the three months ended March 31,
1996 to $0.5 million for the three months ended March 31, 1997. As a percentage
of sales, deprecation and amortization increased 2.8 percentage points from
53.8% to 56.6%. This increase was due primarily to the increased depreciation
from the large number of new machined installed during 1996 being
disproportionate to the revenues generated from such new machines. Revenues are
effected by seasonality while depreciation is charged ratably over the entire
year.
OTHER INCOME: Other income increased $0.15 million from $0.01 million
for the three months ended March 31, 1996 to $0.16 million for the three months
ended March 31, 1997. This increase was due primarily to the receipt of lease
and management fee income.
INTEREST EXPENSE: Interest expense increased $0.08 million from $0.01
million for the three months ended March 31, 1996 to $0.09 million for the three
months ended March 31, 1997. This increase was a result of higher levels of
borrowing associated with the Company's credit facility.
NET LOSS: Net loss increased $0.2 million from $0.4 million for the
three months ended March 31, 1996 to $0.6 million for the three months ended
March 31, 1997. The increase in the loss is due to the increase in the cost of
corporate infrastructure and increased depreciation from a greater number of
machines more than offsetting the increased income from the leasing of machines
and management fees.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended March 31, 1998, the Company had net cash
used in operating activities of $10.9 million; net cash used in investing
activities of $50.3 million, consisting primarily of $45.2 million used to
complete the Acquisitions and $2.8 million used to purchase Packaged Ice
Systems; and net cash provided by financing activities of $63.4 million,
consisting of $138.4 million net from the issuance of the New Senior Notes,
which was offset by a $75.0 million repayment of debts; thus resulting in a net
increase in cash and equivalents of $2.2 million.
During the three months ended March 31, 1998, the Company acquired
certain traditional ice businesses and certain assets to complement its core
business primarily in the Southeast portion of the United States for purchase
prices
14
<PAGE> 15
totaling approximately $45.3 million cash and $10.5 of common stock valued at
$10-13 per share. Such cash expenditures were funded from the proceeds of the
sale of the New Senior Notes.
At March 31, 1998 the Company had cash on hand of $21.6 million to meet
its short-term liquidity requirements. Additionally, the Company had up to a
potential $20.0 million available to fund acquisitions under a credit facility
from Zion Bank N.A. and Frost National Bank. This credit facility was replaced
on April 30, 1998 by the New Credit Facility.
The Company expects to meet its short-term liquidity requirements and finance
the placement of additional Packaged Ice Systems, the acquisition of additional
traditional ice manufacturing companies, and capital expenditures to maintain
existing operations with cash provided by operations, proceeds of the New 9 3/4%
Senior Notes, proceeds of the borrowings under the New Credit Facility, and the
private issuance of equity securities.
The Company's Packaged Ice Systems are expected to range in cost from $11,500 to
$18,500 per installation and capital expenditures for such systems are expected
to be approximately $4.7 million in fiscal 1998. During the next two years, the
Company expects to continue acquiring traditional ice companies using a
combination of cash and Common Stock. 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 to maintain and expand traditional ice facilities are expected to
be approximately $5.0 million in fiscal 1998.
The Company intends to satisfy its obligations under the New Senior Notes, the
New Credit Facility as well as its future capital expenditures and working
capital requirements, primarily with cash flow from operations or equity
capital. The Company may also seek additional debt or equity capital. 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.
SUBSEQUENT EVENTS
On April 30, 1998, Packaged Ice, Inc. (the "Company") consummated the
purchase of all of the outstanding stock of Reddy Ice Corporation ("Reddy") from
Suiza Foods Corporation ("Suiza") for a total acquisition price of $177.5
million, all of which was paid in cash (the "Reddy Acquisition"). The
acquisition price was financed through the issuance of 13% Exchangeable
Preferred Stock ("13% Exchangeable Preferred Stock"), the Tack-on of Notes of
the Company, due February 1, 2005, a new credit facility ("New Credit Facility")
with Antares Leveraged Capital Corp., and the remainder was funded with cash on
hand. The Reddy Acquisition was accounted for using the purchase method of
accounting.
Reddy, a leading nationwide producer and distributor of packaged ice
products with 1997 revenues of $66.3 million, represented 4% of Suiza's total
sales in 1997. Reddy's assets consist of approximately 37 separate ice
manufacturing facilities along with property, plant, equipment and rolling
stock, all of which are used to manufacture and distribute ice products.
Principally, the Company intends to continue such use; however, some redundant
facilities are planned for closure.
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. Approximately 66% 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% of the Company's revenues occur
during the first fiscal quarter, and approximately 19% 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, and other weather
phenomenon such as "El Nino".
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time party to legal proceedings that arise
in the ordinary course of business. Management does not believe that the
resolution of any threatened or pending legal proceedings will have a material
adverse affect on the Company's financial position, results of operations or
liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the period January 1, 1998 through March 31, 1998, the Company
issued an aggregate of 900,260 shares of common stock as partial consideration
for several acquisitions completed during that period. Such stock was valued at
an average of $11.70 per share. The Company issued the stock in reliance upon
the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended. The investors represented to the Company that they acquired
the stock for their own account and not with a view to distribution. The
investors had available all material information concerning the Company. The
certificates evidencing the stock bear an appropriate restrictive legend under
the Securities Act of 1933, as amended.
An employee exercised options to purchase 6,300 shares of common stock
for cash at an average price of $6.37 per share.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The following is a list of exhibits filed as part of this Form 10-Q.
Where so indicated by footnote, exhibits which were previously filed are
incorporated by reference.
Exhibit No. Description
- ----------- -----------
2.1 Stock Purchase Agreement between Packaged Ice, Inc. and Suiza Foods
Corporation dated March 27, 1998 (Exhibit 2.1) (2).
2.2 Noncompetition Agreement by and among Packaged Ice, Inc. and Suiza Foods
Corporation dated April 30, 1998 (Exhibit 2.2) (2).
3.1 Articles of Amendment to Articles of Incorporation of Packaged Ice
Southeast, Inc. filed with the Secretary of State of the State of Texas on
February 5, 1998. (3)
3.2 Articles of Incorporation of Southern Bottled Water Company, Inc. filed
with the Secretary of State of the State of Texas on March 31, 1998. (3)
3.3 Bylaws for Southern Bottled Water Company, Inc. effective as of March 31,
1998. (3)
4.1 Indenture by and among Packaged Ice, Inc. as Issuer, the Subsidiary
Guarantors and U.S. Trust Company of Texas, N.A. as Trustee dated as of
January 28, 1998, Amended and Restated as of April 30, 1998. (Exhibit 4.1)
(2)
4.2 Purchase Agreement among the Company, its subsidiaries and Jefferies & Co.,
Inc. as Initial Purchaser ($125,000,000 Senior Notes Offering) dated April
23, 1998. (Exhibit 4.2) (2)
4.3 Registration Rights Agreement by and among Packaged Ice, Inc., the
Subsidiary Guarantors and Jefferies & Company, Inc. dated January 28, 1998
and Amended and Restated as of April 30, 1998. (Exhibit 4.3) (2)
16
<PAGE> 17
4.4 Securities Purchase Agreement dated April 30, 1998 by and among Packaged
Ice, Inc., Ares Leveraged Investment Fund, L.P., and SV Capital
Partners, L.P. (Exhibit 4.4) (2)
4.5 Warrant Agreement by and among Packaged Ice, Inc. and Ares Leveraged
Investment Fund, L.P. dated April 30, 1998. (Exhibit 4.5) (2)
4.6 Warrant Agreement by and among Packaged Ice, Inc. and SV Capital
Partners, L.P. dated April 30, 1998. (Exhibit 4.6) (2)
4.7 Exchange Offer Registration Rights Agreement dated April 30, 1998 by and
among Packaged Ice, Inc., Ares Leveraged Investment Fund, L.P. and SV
Capital Partners, L.P. (Exhibit 4.7) (2)
4.8 Registration Rights Agreement dated April 30, 1998 by and among Packaged
Ice, Inc. and Ares Leveraged Investment Fund, L.P. and SV Capital
Partners, L.P. (Exhibit 4.8) (2)
4.9 Registration Rights Agreement Dated April 30, 1998 by and among Packaged
Ice, Inc. and SV Capital Partners, L.P. (Exhibit 4.9) (2)
4.10 Preferred Stock Series Designation of Packaged Ice, Inc. dated April 29,
1998 providing for the issuance of 13% Exchangeable Preferred Stock
Series A. (Exhibit 4.10) (2)
4.11 Preferred Stock Series Designation of Packaged Ice, Inc. dated April 29,
1998 providing for the issuance of 13% Exchangeable Preferred Stock
Series B. (Exhibit 4.11) (2)
4.12 Amended and Restated Preferred Stock Series Designation of Packaged Ice,
Inc. dated April 29, 1998 providing for the issuance of 10% Exchangeable
Preferred Stock originally issued December 2, 1997. (Exhibit 4.12) (2)
4.13 Parallel Exit Agreement dated April 30, 1998 by and among Packaged Ice,
Inc., James F. Stuart, A.J. Lewis, III, Ares Leveraged Investment Fund,
L.P., and SV Capital Partners, L.P. (Exhibit 4.13) (2)
10.1 Asset Purchase Agreement by and among Golden Eagle Ice-Texas, Inc. and
Simmons Poultry Farms, Inc. dated December 31, 1997. (Exhibit 10.69)
First Closing occurred December 31, 1997 and Second Closing occurred
January 31, 1998. (1)
10.2 Asset Purchase Agreement by and among Southwestern Ice, Inc. and CICO,
Ltd. and Stock Purchase Agreement by and among Southwestern Ice, Inc.
and IDS, Inc. dated January 20, 1998. (3)
10.3 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.
and Scianna's Party Ice, Inc. dated February 13, 1998. (3)
10.4 Asset Purchase Agreement by and among Packaged Ice Southeast, Inc. and
Jennifer and Stanley Scianna dated February 13, 1998. (3)
10.5 Stock Purchase Agreement by and among Packaged Ice, Inc., John P.
Barkley and James M. Grimsley dated March 5, 1998. (3)
10.6 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.,
J.P. Albert Ice Co., and James P. Albert dated March 6, 1998. (3)
10.7 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.,
Artic Ice Corporation, Arthur Biggs, and Charlotte Biggs dated March 11,
1998. (3)
10.8 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.,
Artic Crystal Ice Corporation and Arthur Biggs, Arthur Biggs, III, and
William Biggs dated March 11, 1998. (3)
10.9 Agreement and Plan of Merger, by and among Packaged Ice Southeast, Inc.,
Dolphin Ice Co., Inc. and Arthur Biggs and First Union National Bank
dated March 11, 1998. (3)
17
<PAGE> 18
10.10 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.,
Anniston Ice & Coal Company, Inc. and Juliet Scarbrough, Wilkes
Scarbrough and Elaine Scarbrough dated March 24, 1998. (3)
10.11 Stock Purchase Agreement by and among Packaged Ice Southeast, Inc. and
Wilkes Scarbrough and Elaine Scarbrough dated March 24, 1998. (3)
10.12 Asset Purchase Agreement by and among Packaged Ice Southeast, Inc.,
Cumberland Gas and Ice, Inc., S. Keith Dixon and Annie Mae Dixon dated
March 26, 1998. (3)
11.1 Packaged Ice, Inc. and Subsidiaries Computation of Earnings Per Share.
27 Financial Data Schedule.
- ---------------------
(1) Filed as an Exhibit to the Company's Form 10-K dated December 31,
1997, filed with the SEC on March 30, 1998.
(2) Filed as an Exhibit to the Company's Form 8-K dated May 11, 1998,
filed with the SEC on May 12, 1998.
(3) Filed herewith.
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on February 9, 1998 regarding the
issuance of $145,000,000 Series A Senior Notes due 2005.
The Company filed a report on Form 8-K on April 1, 1998, regarding the
purchase of substantially all the issued and outstanding shares of stock of
Reddy Ice Corporation. See footnote (2) above.
The Company filed a report on Form 8-K/A on May 12, 1998 regarding the
purchase of substantially all the issued and outstanding shares of stock of
Reddy Ice Corporation. See footnote (3) above.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
PACKAGED ICE, INC.
Date: May 14, 1998 By: /s/ James F. Stuart
----------------------------------
James F. Stuart
Chief Executive Officer
Date: May 14, 1998 By: /s/ James C. Hazlewood
----------------------------------
James C. Hazlewood
Chief Financial and Accounting Officer
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Stock Purchase Agreement between Packaged Ice, Inc. and Suiza Foods
Corporation dated March 27, 1998 (Exhibit 2.1) (2).
2.2 Noncompetition Agreement by and among Packaged Ice, Inc. and Suiza Foods
Corporation dated April 30, 1998 (Exhibit 2.2) (2).
3.1 Articles of Amendment to Articles of Incorporation of Packaged Ice
Southeast, Inc. filed with the Secretary of State of the State of Texas on
February 5, 1998. (3)
3.2 Articles of Incorporation of Southern Bottled Water Company, Inc. filed
with the Secretary of State of the State of Texas on March 31, 1998. (3)
3.3 Bylaws for Southern Bottled Water Company, Inc. effective as of March 31,
1998. (3)
4.1 Indenture by and among Packaged Ice, Inc. as Issuer, the Subsidiary
Guarantors and U.S. Trust Company of Texas, N.A. as Trustee dated as of
January 28, 1998, Amended and Restated as of April 30, 1998. (Exhibit 4.1)
(2)
4.2 Purchase Agreement among the Company, its subsidiaries and Jefferies & Co.,
Inc. as Initial Purchaser ($125,000,000 Senior Notes Offering) dated April
23, 1998. (Exhibit 4.2) (2)
4.3 Registration Rights Agreement by and among Packaged Ice, Inc., the
Subsidiary Guarantors and Jefferies & Company, Inc. dated January 28, 1998
and Amended and Restated as of April 30, 1998. (Exhibit 4.3) (2)
4.4 Securities Purchase Agreement dated April 30, 1998 by and among Packaged
Ice, Inc., Ares Leveraged Investment Fund, L.P., and SV Capital Partners,
L.P. (Exhibit 4.4) (2)
4.5 Warrant Agreement by and among Packaged Ice, Inc. and Ares Leveraged
Investment Fund, L.P. dated April 30, 1998. (Exhibit 4.5) (2)
4.6 Warrant Agreement by and among Packaged Ice, Inc. and SV Capital Partners,
L.P. dated April 30, 1998. (Exhibit 4.6) (2)
4.7 Exchange Offer Registration Rights Agreement dated April 30, 1998 by and
among Packaged Ice, Inc., Ares Leveraged Investment Fund, L.P. and SV
Capital Partners, L.P. (Exhibit 4.7) (2)
4.8 Registration Rights Agreement dated April 30, 1998 by and among Packaged
Ice, Inc. and Ares Leveraged Investment Fund, L.P. and SV Capital Partners,
L.P. (Exhibit 4.8) (2)
4.9 Registration Rights Agreement Dated April 30, 1998 by and among Packaged
Ice, Inc. and SV Capital Partners, L.P. (Exhibit 4.9) (2)
4.10 Preferred Stock Series Designation of Packaged Ice, Inc. dated April 29,
1998 providing for the issuance of 13% Exchangeable Preferred Stock Series
A. (Exhibit 4.10) (2)
4.11 Preferred Stock Series Designation of Packaged Ice, Inc. dated April 29,
1998 providing for the issuance of 13% Exchangeable Preferred Stock Series
B. (Exhibit 4.11) (2)
4.12 Amended and Restated Preferred Stock Series Designation of Packaged Ice,
Inc. dated April 29, 1998 providing for the issuance of 10% Exchangeable
Preferred Stock originally issued December 2, 1997. (Exhibit 4.12) (2)
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C>
4.13 Parallel Exit Agreement dated April 30, 1998 by and among Packaged Ice,
Inc., James F. Stuart, A.J. Lewis, III, Ares Leveraged Investment Fund,
L.P., and SV Capital Partners, L.P. (Exhibit 4.13) (2)
10.1 Asset Purchase Agreement by and among Golden Eagle Ice-Texas, Inc. and
Simmons Poultry Farms, Inc. dated December 31, 1997. (Exhibit 10.69)
First Closing occurred December 31, 1997 and Second Closing occurred
January 31, 1998. (1)
10.2 Asset Purchase Agreement by and among Southwestern Ice, Inc. and CICO,
Ltd. and Stock Purchase Agreement by and among Southwestern Ice, Inc.
and IDS, Inc. dated January 20, 1998. (3)
10.3 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.
and Scianna's Party Ice, Inc. dated February 13, 1998. (3)
10.4 Asset Purchase Agreement by and among Packaged Ice Southeast, Inc. and
Jennifer and Stanley Scianna dated February 13, 1998. (3)
10.5 Stock Purchase Agreement by and among Packaged Ice, Inc., John P.
Barkley and James M. Grimsley dated March 5, 1998. (3)
10.6 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.,
J.P. Albert Ice Co., and James P. Albert dated March 6, 1998. (3)
10.7 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.,
Artic Ice Corporation, Arthur Biggs, and Charlotte Biggs dated March 11,
1998. (3)
10.8 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.,
Artic Crystal Ice Corporation and Arthur Biggs, Arthur Biggs, III, and
William Biggs dated March 11, 1998. (3)
10.9 Agreement and Plan of Merger, by and among Packaged Ice Southeast, Inc.,
Dolphin Ice Co., Inc. and Arthur Biggs and First Union National Bank
dated March 11, 1998. (3)
10.10 Agreement and Plan of Merger by and among Packaged Ice Southeast, Inc.,
Anniston Ice & Coal Company, Inc. and Juliet Scarbrough, Wilkes
Scarbrough and Elaine Scarbrough dated March 24, 1998. (3)
10.11 Stock Purchase Agreement by and among Packaged Ice Southeast, Inc. and
Wilkes Scarbrough and Elaine Scarbrough dated March 24, 1998. (3)
10.12 Asset Purchase Agreement by and among Packaged Ice Southeast, Inc.,
Cumberland Gas and Ice, Inc., S. Keith Dixon and Annie Mae Dixon dated
March 26, 1998. (3)
11.1 Packaged Ice, Inc. and Subsidiaries Computation of Earnings Per Share.
27 Financial Data Schedule.
</TABLE>
- ---------------------
(1) Filed as an Exhibit to the Company's Form 10-K dated December 31,
1997, filed with the SEC on March 30, 1998.
(2) Filed as an Exhibit to the Company's Form 8-K dated May 11, 1998,
filed with the SEC on May 12, 1998.
(3) Filed herewith.
21
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
CENTRAL ARKANSAS COLD STORAGE-TEXAS, INC.
(Originally incorporated on October 20, 1997)
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, CENTRAL ARKANSAS COLD STORAGE-TEXAS, INC. (the "Corporation")
hereby adopts Articles of Amendment to the Articles of Incorporation which
amend the Articles of Incorporation and all amendments thereto that are in
effect to date as hereafter set forth and which contain no other change in any
provision thereof.
ARTICLE ONE
The name of the Corporation is Central Arkansas Cold Storage-Texas,
Inc.
ARTICLE TWO
The following amendment to the Articles of Incorporation has been
adopted in conformity with the provisions of the Texas Business Corporation Act
and such amendment was duly adopted by the sole shareholder of the Corporation
on the 3rd day of February 1998.
The amendment alters or changes Article One of the original Articles
of Incorporation and the full text in its entirety of the new Article One, as
amended, is as follows:
"ARTICLE ONE
The name of the corporation is PACKAGED ICE SOUTHEAST, INC.
(the "Corporation")."
ARTICLE THREE
The number of shares outstanding at the time of such adoption was One
Thousand (1,000); the number of shares entitled to vote on the Amendment to the
Articles of Incorporation was One Thousand (1000).
<PAGE> 2
ARTICLE FOUR
The holder of all of the shares outstanding and entitled to vote on
said amendment has signed a consent in writing pursuant to Article 9.10 of the
Texas Business Corporation Act adopting said amendment and any written notice
required by Article 9.10 of the Texas Business Corporation Act has been given.
IN WITNESS WHEREOF, these Articles of Amendment to the Articles of
Incorporation, which amends certain provisions of the Articles of Incorporation
of the Corporation, having been duly adopted in accordance with Article 4.04 of
the Texas Business Corporation Act, has been duly executed by its President
this 4th day of February 1998.
CENTRAL ARKANSAS COLD STORAGE-TEXAS, INC.
----------------------------------------
By: A.J. Lewis, III, President
2
<PAGE> 1
EXHIBIT 3.2
ARTICLES OF INCORPORATION
OF
SOUTHERN BOTTLED WATER COMPANY, INC.
* * *
ARTICLE ONE
The name of the Corporation is SOUTHERN BOTTLED WATER COMPANY, 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
and 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.
<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 seven (7) 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:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
James F. Stuart 8572 Katy Freeway
Suite 101
Houston, Texas 77024
A.J. Lewis, III 1106 E. Durango
San Antonio, Texas 78210
Steven P. Rosenberg 11220 Grader Street, Suite 100
Dallas, Texas 75238
Stephen R. Sefton 222 S. Ninth Street, Suite 2800
Minneapolis, Minnesota 55402-3388
Richard Coonrod 5720 Smetana Drive, Suite 300
Minnetonka, Minnesota 55343
Robert G. Miller 8385 Miramar Road
San Diego, California 92121
Rod J. Sands 5121 Broadway
San Antonio, Texas 78209
</TABLE>
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.
2
<PAGE> 3
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:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
James F. Stuart 8572 Katy Freeway
Suite 101
Houston, Texas 77024
</TABLE>
3
<PAGE> 4
ARTICLE ELEVEN
The name and address of the incorporator is:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Alan Schoenbaum Akin, Gump, Strauss, Hauer & Feld L.L.P.
300 Convent Street, Suite 1500
San Antonio, Texas 78205
</TABLE>
Dated this 30th day of March 1998.
INCORPORATOR:
--------------------------------
Alan Schoenbaum
4
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
SOUTHERN BOTTLED WATER COMPANY, 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 ten percent (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, 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
<PAGE> 2
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 or her 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
2
<PAGE> 3
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.
3
<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 Meetings. 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 same place, unless such
place or time is changed by a majority vote of the directors then elected and
serving.
4
<PAGE> 5
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 upon 24 hours' notice to each
director, personally or by mail, telegram or 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 the director shall file his or her 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.
5
<PAGE> 6
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.
6
<PAGE> 7
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, as
the case may be, at his or her 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.
ARTICLE VI.
OFFICERS, EMPLOYEES AND AGENTS:
POWERS AND DUTIES
Section 1. Appointment of Officers. The Board of Directors
shall appoint as officers of the Corporation a President and a Secretary. The
Board of Directors may appoint a Treasurer, one or more Vice Presidents and
such other officers (including assistant officers) as the Board of Directors
deems necessary or appropriate. Additionally, unless expressly prohibited by
the Board of Directors, the President may appoint such assistant officers as
the President deems necessary.
7
<PAGE> 8
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. 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 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 7. 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 8. Vice Presidents. Each Vice President shall generally
assist the President and shall have such powers and perform such duties and
services as shall from time to time be prescribed or delegated to such Vice
President by the President or the Board of Directors, and shall have such other
powers and perform such duties and services as usually appertain to the
8
<PAGE> 9
office of Vice President of a corporation and which are not inconsistent with
the powers, duties and services prescribed or delegated by the President or the
Board of Directors.
Section 9. Secretary. The Secretary shall see that notice is
given of all meetings of the shareholders and special meetings of the Board of
Directors and shall keep and attest true records of all proceedings at all
meetings of the shareholders and the Board of Directors. The Secretary shall
have charge of the corporate seal and have authority to attest any and all
instruments or writings to which the same may be affixed. The Secretary shall
keep and account for all books, documents, papers and records of the
Corporation except those for which some other officer or agent is properly
accountable. The Secretary shall have authority to sign stock certificates and
shall generally perform all the duties usually appertaining to the office of
secretary of a corporation. In the absence or disability of the Secretary, the
Secretary's duties shall be performed and the Secretary's powers may be
exercised by the Assistant Secretaries in the order of their seniority, unless
otherwise determined by the Secretary, the President or the Board of Directors.
Section 10. Assistant Secretaries. Each Assistant Secretary
shall generally assist the Secretary and shall have such powers and perform
such duties and services as shall from time to time be prescribed or delegated
to such Assistant Secretary by the Secretary, the President or the Board of
Directors.
Section 11. Treasurer. The Treasurer shall be the chief
accounting and financial officer of the Corporation and shall have active
control of and shall be responsible for all matters pertaining to the accounts
and finances of the Corporation. The Treasurer shall audit all payrolls and
vouchers of the Corporation and shall direct the manner of certifying the same;
shall receive, audit and consolidate all operating and financial statements of
the Corporation and its various departments; shall have supervision of the
books of account of the Corporation, their arrangement and classification;
shall supervise the accounting and auditing practices of the Corporation; and
shall have charge of all matters relating to taxation. The Treasurer shall
have the care and custody of all monies, funds and securities of the
Corporation; shall deposit or cause to be deposited all such funds in and with
such depositories as the Board of Directors shall from time to time direct or
as shall be selected in accordance with procedures established by the Board of
Directors; shall advise upon all terms of credit granted by the Corporation;
and shall be responsible for the collection of all its accounts and shall cause
to be kept full and accurate accounts of all receipts and disbursements of the
Corporation. The Treasurer shall have the powers to endorse for deposit or
collection or otherwise all checks, drafts, notes, bills of exchange or other
commercial papers payable to the Corporation and to give proper receipts or
discharges for all payments to the Corporation. The Treasurer shall generally
perform all the duties usually appertaining to the office of treasurer of a
corporation. In the absence or disability of the Treasurer his or her duties
shall be performed and his or her powers may be exercised by the Assistant
Treasurers in the order of their seniority, unless otherwise determined by the
Treasurer, the President or the Board of Directors.
Section 12. Assistant Treasurers. Each Assistant Treasurer shall
generally assist the Treasurer and shall have such powers and perform such
duties and services as shall from time to
9
<PAGE> 10
time be prescribed or delegated to such Assistant Treasurer by the Treasurer,
the President or the Board of Directors.
Section 13. 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 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 any tangible or intangible benefit to the
Corporation, including cash, promissory notes, services performed, contracts
for services to be performed, or other securities of the Corporation. 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 their 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
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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 their 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 or her legal representative, to advertise the same in such
manner as the Board of Directors, the President or such other officer shall
require and/or give the Corporation a bond in such form, in such sum, and with
such surety or sureties, as they 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 at the direction of the
registered holder thereof or by such holder's 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.
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 Corporation or 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.
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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 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.
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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.
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 the votes of such director, officer
or security holder 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;
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(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, 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.
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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 Secretary of Southern Bottled
Water Company, 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 31st day of
March 1998.
/s/ A.J. Lewis, III
-----------------------------------
A.J. Lewis, III, Secretary
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EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
January 20, 1998, by and among Southwestern Ice, Inc. ("Buyer"), a Texas
corporation and wholly owned subsidiary of Packaged Ice, Inc., CICO, LTD., a
Colorado Limited PartnerShip ("Seller"), CICO Investments, Inc., the General
Partner of Seller and the shareholders of General Partner ("Shareholders").
PRELIMINARY STATEMENTS
Seller is engaged in the manufacture, transportation and distribution
of packaged ice products (such business being herein referred to here in as
"Seller's Business" or "Business"); and
Seller operates the Business under the name of "City Ice;" and
Seller is desirous of selling to Buyer and Buyer is desirous of
purchasing certain assets of Seller's Business, upon the terms and conditions
hereafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties hereafter set forth, the
parties hereby agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"Assets" shall mean those assets of the Seller which are more fully
described in Section 2.1 and Schedule 2.1 of this Agreement. The Assets shall
not include the Excluded Assets (defined hereinbelow).
"Bill of Sale" shall refer to the Bill of Sale conveying title to the
Assets from Seller to Buyer attached to this Agreement as Exhibit A.
"Closing" shall mean the consummation of this Agreement.
"Closing Date" shall mean the date on which this Agreement will be
consummated.
"Excluded Assets" shall have the meaning set forth in Section 2.3 of
this Agreement.
"Financial Statements" shall have the meaning set forth in Section
3.3 of this Agreement.
<PAGE> 2
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets of and only of the Business
(together with all pending applications, continuations-in-part and extensions
for any of the above).
"Seller's Disclosure Memorandum" shall mean a memorandum prepared by
Seller and delivered to Buyer that lists all disclosures by Seller concerning
the Assets and the Business which are the subject of this Agreement.
"Taxes" shall mean all federal and state income and franchise tax, all
excise, added value, sales, use, real and personal property, occupancy,
business and occupation, mercantile, real estate, or other tax (including
interest and penalties thereon and including estimated taxes thereof).
II. PURCHASE AND SALE
2.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and
conditions of this Agreement, Seller agrees to sell, convey, assign, transfer
and deliver to Buyer, and Buyer agrees to purchase, at the Closing, the
personal property, intangible assets, contracts and rights of Seller related to
the Seller's Business which are described on Schedule 2.1 attached hereto and
incorporated herein by reference, and all of the goodwill of Seller's Business
associated therewith (collectively the "Assets").
2.2 PURCHASE PRICE. The Purchase Price of the Assets shall be
$10,216,700 which shall be paid to Seller in the form of a bank cashier's check
or wire transfer. The Purchase Price shall be paid to Seller less any amounts
to be paid directly to creditors of Seller that are required to discharge any
liens or other encumbrances against the Assets and less $785,900 of the earnest
money that was previously paid to the Land Title Guarantee Company as escrow
agent which is to be applied to the Purchase Price at Closing.
2.3 EXCLUDED ASSETS. The Assets shall not include and Buyer shall
not acquire the assets and properties described in Schedule 2.3 attached hereto
(the "Excluded Assets").
2.4 ASSUMPTION OF LIABILITIES. It is hereby agreed and understood
that Buyer is assuming no liabilities whatsoever of Seller. Seller shall be
responsible for all employment related expenses occurring before Closing Date,
including salaries, wages, accrued vacation pay, sick pay or leave,
unemployment compensation, income tax withholding, social security taxes.
2.5 PRORATION. The parties shall prorate at the Closing the
current year's ad valorem taxes and vehicle license fees on the property
comprising the Assets, based on the latest available statements from taxing
authorities, whether for the current tax year or the preceding tax year.
Seller's pro rata share of such taxes and vehicle license fees, if any, shall
be the portion attributable to the period through the day preceding the Closing
Date, prorated by days. The prorated amounts shall be payable in the manner
set forth below:
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(a) If a prorated amount is payable by Buyer and
determinable at the Closing, it shall be added to the amount payable
by Buyer at the Closing.
(b) If a prorated amount is payable by Buyer and not
determinable at the Closing, it shall be billed by Seller when
determinable and promptly paid by Buyer to Seller.
(c) If a prorated amount is payable by Seller and
determinable at the Closing, it shall be deducted from the amount
otherwise payable by Buyer at the Closing.
(d) If a prorated amount is payable by Seller and not
determinable at the Closing, it shall be billed by Buyer when
determinable and promptly paid by Seller to Buyer.
2.6 ALLOCATION. The parties hereto agree and acknowledge that the
Purchase Price shall be allocated as set forth in Schedule 2.6 attached hereto,
and Seller and Buyer agree to file all Tax returns or reports including,
without limitation, IRS Form 8594, for their respective taxable years in which
the Closing occurs and to reflect the allocation of the Purchase Price on any
such return or report and agree not to take any position inconsistent therewith
before any governmental agency charged with the collection of any Tax or in any
administrative proceeding.
2.7 PURCHASE PRICE ADJUSTMENT. The cash amount of the Purchase
Price (the "Cash Amount") shall be reduced by the sum of the following and paid
directly to Seller's creditors:
(a) the Closing Date payoff amounts of all current and
long term debt that relate to the Assets and current and long term
Capital Leases that relate to the Assets (including any unpaid
interest and prepayment penalties);
(b) intercompany and affiliated accounts and notes
payable.
III. REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise disclosed in Seller's Disclosure Memorandum,
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION. Seller is a Colorado limited partnership doing
business in the State of Colorado and is known to do business as City Ice.
Seller has all requisite power and authority to own, lease and operate the
Business as presently conducted and to enter into this Agreement and to perform
its obligations hereunder.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. The
execution, delivery and performance by Seller of this Agreement and the
consummation of it by the transactions contemplated hereby have been duly
authorized by all necessary action. This Agreement has been duly executed and
delivered by Seller and constitutes the valid and binding obligation of
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Seller, enforceable against Seller, in accordance with its terms. The
execution, delivery and performance of this Agreement by Seller will not, with
or without the giving of notice, the passage of time, or both, violate,
conflict with, result in a default, breach or loss of rights under, or result
in the creation of any lien, claim or encumbrance pursuant to, any lien,
encumbrance, instrument, agreement, or understanding, or any law, regulation,
rule, order, judgment or decree, to which Seller is a party or by which it is
bound or affected, respectively.
3.3 FINANCIAL STATEMENTS. Seller has previously caused to be
furnished to Buyer the Business' audited balance sheet as of December 31, 1994,
December 31, 1995 and December 31, 1996, and the related statements of income
and statements of cash flow for the years then ended, and the unaudited balance
sheet of the Business as of September 30, 1997 and the related unaudited
statement of income and statement of cash flow for the 9-month period ending
September 30, 1997 (such balance sheets and related statements are collectively
referred to herein as the "Financial Statements"). The Financial Statements
taken as a whole present fairly the financial position of Seller as of December
31, 1994, December 31, 1995, December 31, 1996 and September 30, 1997,
respectively, in accordance with generally accepted accounting principles,
consistently applied.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by Seller in Seller's Disclosure
Memorandum and except for liabilities arising in the ordinary course of
business and consistent with past practice since the date of Seller's September
30, 1997 Balance Sheet, Seller has operated the Business in the ordinary course
and has incurred no material liabilities which would be required to be
reflected in accordance with the generally accepted accounting principles on a
balance sheet as of the date hereof or disclosed in the notes thereto. Since
December 31, 1996, there has not been any material adverse change in the
business, operations, properties, prospects, assets or condition of Seller, and
no event has occurred or circumstance exists that may result in such a material
adverse change.
3.4 ENCUMBRANCES ON THE ASSETS. Except as set forth on Seller's
Disclosure Memorandum, there are no debts, liabilities, mortgages, liens,
security interests, charges, pledges, conditional sale agreements, or adverse
claims or restrictions, transfers or any other encumbrances (hereinafter
"Encumbrances") whatsoever against the Assets.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. Seller
acknowledges that Buyer is purchasing the Assets for the express purpose of
operating a packaged ice manufacturing and distribution business. All items
comprising the Assets have been continuously used by Seller in Seller's
Business and are now in serviceable condition unless expressly disclosed to the
contrary by Seller in Seller's Disclosure Memorandum.
3.6 TITLE TO PERSONAL PROPERTY. Except as set forth in Seller's
Disclosure Memorandum, Seller has good, legal and marketable title to all of
the personal property comprising the Assets; at the Closing, Seller shall
deliver to Buyer good, legal and marketable title to the Assets free from all
Encumbrances.
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3.7 LITIGATION. Except as set forth in Seller's Disclosure
Memorandum, there is no pending claim, action, suit, proceeding or
investigation (judicial, governmental or otherwise), nor any order, decree or
judgment in effect or, to the best of Seller's knowledge, threatened, against
or relating to Seller or the Assets, or the transactions contemplated by this
Agreement, and no event has occurred or circumstances exist that will, or is
reasonably likely to, give rise to or serve as a basis for the commencement of
any claim, action, suit, proceeding or investigation.
3.8 COMPLIANCE WITH LAWS. To the best of Seller's knowledge,
Seller has complied with all laws, rules, regulations, ordinances, orders,
judgments and decrees relating to the Assets. The ownership and use of the
Assets and the conduct of the Business as it specifically relates to the Assets
does not conflict with the rights of any other person.
3.9 TAXES. All returns, including estimated tax returns, required
to be filed after the Closing Date by or with respect to Seller with respect to
Taxes, that, if unpaid, might result in a lien upon any of the Assets, will be
duly filed and will be true, correct and complete, and all Taxes payable
pursuant thereto will be paid except such Taxes, if any, as may be contested in
good faith. No deficiency or adjustment in respect to any Taxes that have been
assessed against or with respect to Seller that, if unpaid, might result in a
lien upon any of the Assets remains unpaid.
All Taxes that relate to the Assets and that are payable by or
accruable by Seller or as to which Seller has any liability with respect to
events occurring on or before the Closing Date have been paid in full or have
been adequately provided for in the reserve for taxes on the books of Seller on
or before the Closing Date, except for income, franchise, if any, or capital
stock taxes, if any, and transfer, sales and other taxes arising in connection
with the transactions contemplated by this Agreement.
3.10 ENVIRONMENTAL. To the best of Seller's knowledge, Seller has
complied in all 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 Seller and its subsidiaries concerning
pollution or protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes into ambient air, surface
water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply.
Without limiting the generality of the preceding sentence, Seller has
obtained and been in material 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.
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3.11 EMPLOYEE BENEFITS. All employee benefit plans (whether or not
covered by ERISA), deferred compensation or executive compensation plans for
employees, directors or independent contractors, and all other employee or
independent contractor arrangements or programs that are maintained or
contributed to by the Seller (collectively, the "Company Plans") have been
administered and operated in all material respects in compliance with their
terms, ERISA, if applicable, the Code and other applicable law. All Company
Plans that are intended to be qualified under Section 401(a) of the Code are,
to the knowledge of Seller, so qualified under a favorable IRS determination
letter exists for each such plan which covers the amendments required by the
Tax Reform Act of 1986. All funded Company Plans are fully funded according
to their terms and applicable law. To the knowledge of the Seller, no
prohibited transaction or breach of fiduciary duty under ERISA has been
committed by any fiduciary, disqualified person or party in interest of any
Company Plan. The Seller has no liability, contingent or otherwise, under
Title IV of ERISA.
3.12 CONSENTS. Except as set forth in Seller's Disclosure
Memorandum, no consent or approval of any public body or authority and no
consents or waivers from other parties to material licenses, franchises,
permits, agreements or other instruments are required to be obtained by Seller
as a result of the transfer of the Assets contemplated by this Agreement to (i)
avoid the loss of any material license, franchise, permit or other instrument
or the creation of any lien or other claim on any Asset pursuant to the terms
of any law, regulation, order, agreement or other legal requirement binding
upon Seller relating to the Business or to which any such Asset may be subject,
or (ii) to enable Buyer to continue the operation of the Business substantially
as conducted prior to the Closing.
3.13 CONTRACTS. Seller is not a party to any contracts relating to
the Business or the Assets that are not terminable at will, other than those
contracts of Seller relating to the Business listed and described in Seller's
Disclosure Memorandum.
3.14 INSURANCE AND WARRANTIES.
(a) Insurance. Seller has in force all policies of
insurance described in Section 3.14(a) of Seller's Disclosure Memorandum
insuring it (including descriptions of whether such policies and binders are
"claims made" or "occurrences" policies, and the respective issuers and
expiration dates thereof). Seller has not been advised (i) of any risks or any
fact or matter which might render such policies void or voidable, or (ii) any
cancellations of insurance coverage, or material increases in premium, or other
costs related to insurance, to take effect, or that are proposed, or that may
or will occur, following the Closing. To the best of Seller's knowledge, all
such policies are underwritten by reputable insurers, and there is no basis to
believe the insurers are or are likely to become financially unsound. Seller
has not been refused insurance or been notified of any cancellation or
involuntary reduction or other limitation of insurance during the past three
years. Section 3.14(a) of Seller's Disclosure Memorandum lists all claims made
or dues to be made by Seller, and all matters for which a claim could
reasonably have been but was not made, against an insurer on account of events
occurring since December 31, 1996.
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(b) Warranties. Except as described in Section 3.14(b)
of Seller's Disclosure Memorandum, (i) Seller has not agreed to become
responsible for consequential damages or made any express warranties to third
parties with respect to any products distributed or sold by Seller and (ii)
there are no warranties (express or implied) outstanding with respect to any
products other than any such implied by law. A copy of each standard warranty
of Seller with respect to such product is included in Section 3.14(b) of
Seller's Disclosure Memorandum.
3.15 INVENTORIES.
(a) All inventories shown on the September 30, 1997
Balance Sheet consisted of, and all inventories thereafter acquired will
consist of, items of good and merchantable quality and quantity usable or
salable in the ordinary and regular course of Seller's Business except for
obsolete items and items below standard quality, all of which have been written
off, or written down to net realizable value on the September 30, 1997 Balance
Sheet. Each inventory or class was priced at the lower of cost or market on
the first-in, first-out basis and, as to the classes of items inventoried and
methods of counting and pricing, such inventories were determined in a manner
consistent with prior years. Except to the extent, if any, disclosed in
Section 3.15 of Seller's Disclosure Memorandum, Seller has neither sold any of
its inventory under agreements with an express right of return, nor consigned
any inventory, and Seller has no knowledge of any pending returns of inventory
in any material quantity.
(b) There have been no material changes in the
inventories reflected in the September 30, 1997 Balance Sheet and there will be
no further changes in any such inventories except those changes resulting from
write down or write offs, purchases in the ordinary and regular course of
business and sale of merchandise inventory in the ordinary and regular course
of business.
3.16 SUPPLIERS AND CUSTOMERS. Except as set forth in Section 3.16
of Seller's Disclosure Memorandum and to Seller's actual knowledge, no customer
of Seller has communicated to Seller in any manner his or its intention to
cease to do business with or trade with Seller, or materially alter, modify or
amend the terms with which it has conducted business with Seller whether as a
result of, or in contemplated of, the consummation of the transactions
contemplated by this Agreement.
3.17 COMPLETE AND ACCURATE DISCLOSURE. No representation or
warranty made to Buyer in this Agreement or in connection with this
transaction, to include all previous negotiations between Buyer and Seller,
contains or will contain an untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make such representation or
warranty not misleading or necessary to enable a prospective purchaser of
Seller's Business or the Assets to make a fully informed decision. All
documents and information which have been or will be delivered to Buyer or its
representatives by or on behalf of Seller are and will be true, correct and
complete copies of the documents they purport to represent. There have been no
material changes in Seller's Business from the commencement of negotiations
between Buyer and Seller and the Closing of this transaction.
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<PAGE> 8
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Buyer is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas and is qualified to do business in the State of
Colorado.
4.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. The
execution, delivery and performance by Buyer of this Agreement and the
consummation of it by the transactions contemplated hereby have been duly
authorized by all necessary action. This Agreement has been duly executed and
delivered by Buyer and constitutes the valid and binding obligation of Buyer,
enforceable against Buyer, in accordance with its terms. The execution,
delivery and performance of this Agreement by Buyer will not, with or without
the giving of notice, the passage of time, or both, violate, conflict with,
result in a default, breach or loss of rights under, or result in the creation
of any lien, claim or encumbrance pursuant to, any lien, encumbrance,
instrument, agreement, or understanding, or any law, regulation, rule, order,
judgment or decree, to which Buyer is a party or by which it is bound or
affected, respectively.
V. COVENANTS OF SELLER
Seller hereby covenants and agrees as follows:
5.1 CONDUCT OF BUSINESS. Between the date hereof and the Closing
Date, Seller shall operate the Business in the ordinary course and continue
normal capital expenditures and maintenance in connection with the Assets prior
to the Closing Date, except (i) as may be permitted by this Agreement or (ii)
as necessary to consummate the transactions contemplated hereby.
5.2 INVESTIGATION BY BUYER.
(a) Between the date hereof and the Closing Date, Seller
shall (i) give Buyer and its authorized representatives and advisors access, at
reasonable times and on reasonable notice, to all items of personal property
comprising the Assets, books and records, personnel, offices, and other
facilities of the Assets, (ii) permit Buyer to make such inspections thereof as
Buyer may reasonably require, and (iii) cause its employees, and its advisors
to furnish to Buyer and its authorized representatives and advisors such
financial and operating data and other information with respect to the Business
prepared in the ordinary course of the Business as Buyer or its agent shall
from time to time reasonably request.
(b) Seller agrees that, subsequent to the Closing Date,
Buyer and its agents and accountants will be permitted reasonable access,
during normal business hours, and as often as Buyer may reasonably request,
consistent with reasonable requirements of Seller, to the books and records of
Seller and its affiliates, insofar as such books and records contain
information or data pertaining to the Assets prior to the Closing Date to the
extent such information is not
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<PAGE> 9
otherwise available at the offices or other facilities of the Buyer, and Buyer
shall have the right to make copies thereof and excerpts therefrom.
5.3 CLOSING CONDITIONS. Seller will, to the extent within its
control, use its best efforts to cause the conditions set forth in Article VII
to be satisfied by the Closing Date.
5.4 CONFIDENTIALITY. From and after the date hereof, Seller will,
and will cause its officers, employees, principals; affiliates,
representatives, consultants and advisors, to hold in confidence all
confidential information in the possession of Seller, its officers, employees,
principles, affiliates, representatives, consultants and advisors concerning
the Assets. Seller will not release or disclose any such information to any
person other than Buyer and its authorized representatives. Notwithstanding the
foregoing, the confidentiality obligations of this Section shall not apply to
information:
(a) which Seller is compelled to disclose by judicial or
administrative process, or, in the reasonable opinion of counsel, by
other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to Seller by
a third party who obtained such information other than as a result of
a breach of a confidential relationship.
5.5 PUBLIC ANNOUNCEMENT. Seller and Buyer will cooperate in the
public announcement of the transactions contemplated by this Agreement, and,
other than as may be required by applicable law, no such announcement will be
made by either party without the consent of the other party, which consent
shall not be unreasonably withheld.
5.6 NO SHOPPING. Seller shall not solicit, initiate or
participate, directly or indirectly, or cause any other person to solicit,
initiate or participate, directly or indirectly, in discussions or negotiations
with, or provide any information to, any other person (other than the Buyer)
concerning, or enter into any agreement providing for (other than in the
ordinary course of business) the acquisition of the Assets or part thereof
(whether by merger, purchase of stock or assets or other similar transaction),
other than the acquisition contemplated by this Agreement. Seller shall not be
bound by this Section 5.6 in the event that the Closing has not occurred by
February 28, 1998 or until this Agreement is terminated in accordance with the
provisions of Article X herein.
5.7 FURTHER ASSURANCES. Seller will use its best efforts to
implement the provisions of this Agreement, and for such purpose Seller, at the
request of Buyer, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Buyer such deeds, assignments, bills of sale, consents, documents
evidencing title and other instruments in addition to those required by this
Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably
deem necessary or desirable to implement any provision of this Agreement.
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<PAGE> 10
5.8 INSURANCE. Seller shall maintain insurance through the
Closing Date with financially sound and reputable insurers unaffiliated with
Seller in such amounts and against such risks as are adequate to protect the
Assets and the Business.
5.9 NONCOMPETITION AGREEMENT. At the Closing, Seller and the
shareholders of the General Partner of Seller will enter into and deliver to
Buyer noncompetition agreements in the form attached hereto as Exhibit 5.9 (the
"Noncompetition Agreement").
5.10 CESSATION OF BUSINESS/CHANGE OF NAME. Seller will cease to
conduct any business constituting the manufacturing, packaging, distribution
and/or storage of packaged ice products under the name of "City Ice" or "CICO,
Ltd."
5.11 OPINION OF LEGAL COUNSEL. At the Closing, Seller shall
deliver to Buyer a Legal Opinion of Seller's counsel in the form attached
hereto as Exhibit 5.11.
5.12 DISCHARGE OF SELLER'S DEBTS. Seller hereby agrees and
acknowledges that Buyer is not assuming any debts of Seller's debts and that
Seller remains responsible for and will discharge all debts that relate to the
Business (excluding those debts relating to the Excluded Assets) and were
incurred by Seller prior to the Closing.
VI. COVENANTS OF BUYER
6.1 ANCILLARY AGREEMENTS. At the Closing, Buyer will pay the
purchase price and enter into the Noncompetition Agreement and all other
ancillary documents required and deliver its Buyer's Opinion of Counsel to
Seller.
VII. CLOSING
7.1 TIME AND PLACE. The consummation of the sale and purchase of
the Assets and the execution of the Noncompetition Agreement (the "Closing")
shall take place at a mutually agreeable time and in a mutually agreeable
manner to include, but not limited to, the exchange of facsimile signature page
counterparts that have been signed by the appropriate parties to this
Agreement. The date of the Closing shall herein be referred to as the "Closing
Date" and shall take place no later than January 27, 1998.
7.2 SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall
execute, acknowledge (where appropriate) and deliver to Buyer in form
reasonably satisfactory to Buyer:
(a) An assignment or assignments assigning to Buyer the
use and possession of all that property comprising the Assets.
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<PAGE> 11
(b) copies of all certificates of occupancy, licenses,
permits, authorizations, and approvals required by law and issued by
all governmental authorities having jurisdiction, if any, and the
original of each bill for current real estate and personal property
taxes, together with proof of payment thereof (if any of the same have
been paid);
(c) Bills of Sale, assignments or other suitable transfer
documents transferring to Buyer, the Assets, free and clear of all
liens and encumbrances, in form reasonably satisfactory to counsel for
Buyer which includes the form UCC-3 or other appropriate form
indicating release of liens by any secured party and that no action of
redress or reclamation shall be sought by any secured party against
Buyer or the Assets;
(d) the Noncompetition Agreement;
(e) a Certificate of Compliance, in form and substance
satisfactory to Buyer, from Seller indicating that Seller has
materially complied with its obligations contained in this Agreement,
that all representations and warranties contained in this Agreement or
in any certificate required to be delivered in connection with this
Agreement shall be accurate at and as of the Closing with the same
force and effect as though made at Closing, and no material adverse
change with respect to the Seller has occurred.
(f) Seller shall deliver a copy of Seller's Opinion of
Counsel to Buyer.
7.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer will:
(a) deliver to Seller $10,216,700 by check or wire
transfer (to include $785,900 from the $1,000,000 previously paid to
Seller as earnest money) less amounts needed to discharge
Encumbrances;
(b) deliver to the holders of any Encumbrances the
amounts necessary to discharge the Encumbrances against the Assets
(excluding the Excluded Assets), which shall not exceed $1,148,240;
(c) deliver to Seller and the shareholders of General
Partner executed counterparts of the Noncompetition Agreement and all
other ancillary documents required hereunder;
(d) a Certificate of Compliance from an officer of Buyer
indicating that Buyer has materially complied with its obligations,
representations and warranties contained in this Agreement;
(e) instruct the Land Title Guarantee Company to release
the $785,900 in earnest money being held by the Land Title Guarantee
Company to Seller as escrow agent; and
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(f) deliver Buyer's Opinion of Counsel to Seller.
VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to complete the transactions contemplated at the Closing shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of Seller
to be performed on or before the Closing Date shall have been duly
performed in all material respects;
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Seller
contained herein or in any certificate required to be delivered in
connection with this Agreement shall have been accurate on the date
hereof and shall be accurate at and as of the Closing and since the
date hereof there shall have occurred no material adverse change in
the business operations, properties, prospects, Assets or condition of
Seller;
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Buyer from
consummating the transactions contemplated hereby;
(d) Third Party Creditors. All third party creditors of
the Business will be paid in full and have released all liens or
claims against the Assets (excluding the Excluded Assets), or Seller
shall provide to Buyer documentation from all third party creditors
indicating that the third party creditors have released their liens
against the Assets and consented to Seller's conveyance of the Assets
to Buyer free and clear of all liens or other Encumbrances;
(e) Noncompetition Agreement. Seller and the
shareholders of General Partner shall have entered into the
Noncompetition Agreement;
(f) Stock Purchase Agreement. Buyer and Ice Delivery
Systems, LLC shall have consummated the Stock Purchase Agreement among
Buyer, and the transferee of all of the assets of Ice Delivery
Systems, LLC, Ice Delivery Systems, LLC, and the members of Ice
Delivery Systems, LLC dated ___________________, 1998;
(g) Opinion of Counsel. Seller shall have delivered an
Opinion of Counsel as described in Section 5.11 herein to Buyer; and
8.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of Seller
to complete the transactions contemplated at the Closing shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
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<PAGE> 13
(a) Performance. Each agreement of Buyer to be performed
on or before the Closing Date shall have been duly performed in all
material respects;
(b) Representations and Warranties True. The
representations and warranties of Buyer contained herein shall have
been true in all material respects;
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Seller from
consummating the transactions contemplated hereby; and
(d) Stock Purchase Agreement. Buyer and the transferee
of the assets of Ice Delivery Systems, LLC shall have consummated the
Stock Purchase Agreement among Buyer, the transferee of the assets of
Ice Delivery Systems, LLC, Ice Delivery Systems, LLC, and the members
of Ice Delivery Systems, LLC dated __________, 1998.
(e) Buyer's Opinion of Counsel. Buyer has delivered an
Opinion of Counsel to Seller in a form that is reasonably satisfactory
to Seller.
IX. INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER BY SELLER. Seller agrees to
indemnify, defend and hold harmless Buyer and Buyer's employees, agents, heirs,
legal representatives, parent company, assigns and affiliates from and against
any and all claims, suits, losses, expenses (legal, accounting, investigation
and otherwise), damages and liabilities, including, without limitation, tax
liabilities (hereinafter, collectively "Damages"), arising out of or relating
to (i) any liability or obligation of Seller, (ii) any inaccuracy of any
representation or warranty set forth in this Agreement or the breach of any
covenant made by Seller in or pursuant to this Agreement, or (iii) the conduct
of, or conditions existing with respect to the Assets prior to Closing,.
9.2 INDEMNIFICATION OF SELLER BY BUYER. Buyer agrees to
indemnify, defend and hold harmless Seller from and against only those Damages
arising out of or relating to any inaccuracy or any representation or warranty
of Buyer set forth in this Agreement or the breach of any covenant made by
Buyer in or pursuant to this Agreement.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the
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Indemnifying Party prejudices the rights of the Indemnifying Party. Any claim
of Buyer against Seller for any Damages shall be in accordance with the
provisions set forth in Section 9.6 herein.
9.4 RIGHT TO DEFEND. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within forty-five (45) days after receipt of the Notice of
Claim that the Indemnifying Party intends to assume the defense of such claim
and acknowledges its liability to indemnify the Indemnified Party for any
losses resulting from such claim; provided, however, that if the Indemnifying
Party does not elect to assume the defense of any claim, then (a) the
Indemnifying Party shall have the right to participate in the defense of such
claim or demand at its expense through counsel of its own choosing, provided
the Indemnified Party shall control the defense of such claim, (b) the
Indemnified Party may settle any such claim without the consent of the
Indemnifying Party, however, the Indemnifying Party may not settle any such
claim without the prior written consent of the Indemnified Party; and (c)
Section 9.5 hereof shall be inapplicable. Whether or not the Indemnifying
Party does choose to so defend such claim, the parties hereto shall cooperate
in the defense thereof and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be requested in connection therewith. To the extent Seller
is the Indemnified Parties for any actual or threatened claim or demand by any
third party, Seller shall have the right to control the prosecution of any
counterclaim or right related to such a claim or demand, provided that Seller
agrees to reasonably cooperate with Buyer with respect to the prosecution of
such counterclaim or right.
9.5 SETTLEMENT. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.6 LIMITATION OF WARRANTIES AND REPRESENTATIONS. The warranties
and representations that are set forth in Article III shall survive the Closing
for a period of one year, except for the warranties and representations of that
are set forth in Sections 3.1, 3.2, 3.4, 3.6, 3.9 and 3.10 which shall survive
the Closing for the applicable statute of limitations.
Buyer and Seller agree and acknowledge that contemporaneously with the
execution of this Agreement, Buyer and CICO, Ltd. have executed and delivered,
to each other, a Commercial Lease Agreement by which Buyer agrees to lease
certain real property (hereinafter the "Leased Premises" as that real property
is known in the Commercial Lease Agreement) from CICO, Ltd.
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<PAGE> 15
and by which both parties have respective options requiring or enabling,
respectively, Buyer to purchase the Leased Premises from CICO, Ltd.
In the event that Buyer suffers or incurs any Damages (as that term is
defined in Section 9.1, herein and for which indemnity is required by Article
IX herein) in accordance with the terms set forth in this Agreement, Buyer
shall be entitled to off set the amount of such Damages against the purchase
price for the Leased Premises upon the execution of either party's respective
option as set forth in the Commercial Lease Agreement.
9.7 EFFECT OF TERMINATION. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
X. TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of Seller
and Buyer;
(b) Misrepresentation or Breach. By Seller or by Buyer,
if there has been a material misrepresentation or a material breach of
a warranty or covenant herein or in any agreement required to be
delivered pursuant hereto on the part of the other party hereto;
(c) Failure of Condition to Buyer's Obligations. By
Buyer, if all of the conditions set forth in Section 8.1 have not been
satisfied;
(d) Failure of Condition to Seller's Obligations. By
Seller, if all of the conditions set forth in Section 8.2 have not
been satisfied;
(e) Court Order. By Seller or Buyer if consummation of
the transactions contemplated hereby shall violate any nonappealable
final order, decree or judgment of any court or governmental body
having competent jurisdiction;
(f) Material Adverse Change. By Buyer if any event has
occurred after the date hereof which is, or will result in a material
adverse change in the prospects, business or condition of the Assets.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of Seller and Buyer under
this Agreement shall terminate without further liability of Seller or Buyer.
If Seller fails to consummate the transactions contemplated on its
part to occur on or before February 28, 1998, in circumstances whereby all
conditions of the Closing set forth in Section 8.2 have been satisfied in all
material respects or waived, Buyer shall be entitled to
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<PAGE> 16
receive back $785,900 of the $1,000,000 paid to the Land Title Guaranty Company
as earnest money for this transaction, and, additionally, Buyer shall be
entitled to (i) to require Seller to consummate and specifically perform the
transactions contemplated hereby, in accordance with the terms of this
Agreement, and to obtain from Seller 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.
If Buyer fails 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 8.1 have been satisfied in all material respects
or waived, Seller's sole remedy shall be to receive the earnest money deposit
that Buyer has deposited with the Land Title Guaranty Company of Denver,
Colorado as an earnest money deposit for this transaction.
10.3 RIGHT TO PROCEED. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or 8.2 has not been
satisfied, Seller or Buyer, in addition to any other rights which may be
available to it, shall have the right to waive any such condition that is for
its benefit and to require the other party hereto to proceed with the Closing.
XI. MISCELLANEOUS
11.1 EXPENSES. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing, except where limited by Section 9.6.
11.3 INUREMENT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
11.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules
and Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
11.5 SEVERABILITY. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the remaining provisions
hereof and without affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
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11.6 INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
11.7 CAPTIONS AND HEADINGS; USE OF TERM "PERSON". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection
cross-references are to articles, sections and subsections within this
Agreement. As used herein, the term "person" shall mean any corporation,
partnership, venture, proprietorship, trust, benefit plan or other entity or
enterprise.
11.8 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO.
11.9 NOTICE. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to Seller: CICO, LTD.
2101 31st Street
Denver, Colorado
80216
to General Partner: CICO Investments, Inc.
2101 31st Street
Denver, Colorado
80216
Attn: Charles P. Woods
with a copy to: John Birkeland
Lentz, Evans & King, P.C.
2900 Lincoln Center Building
1660 Lincoln Street
Denver, Colorado 80264
to Buyer: Southwestern Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis III, President
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with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St.
Suite 1500
San Antonio, Texas 78205
Attn: Alan Schoenbaum, P.C.
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
11.10 AGENTS OR BROKERS. Seller and Buyer mutually represent and
agree with each other that no agents or brokers have been utilized in the
solicitation or negotiation of the sale of the Business and no fees,
commissions or expenses of any type shall be due or payable out of the proceeds
of the purchase price by either party to this Agreement.
11.11 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement, and all time limitations shall be strictly construed and rigidly
enforced. The failure or delay in the enforcement of any rights or interests
granted herein shall not constitute a waiver of any such right or interest or
be considered as a basis for estoppel.
11.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
11.13 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 Rules of the American Arbitration
Association by a single arbitrator to be located in San Antonio, Bexar County,
Texas, and judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof, and shall not be appealable.
[CICO, LTD. ASSET PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS]
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[CICO, LTD. ASSET PURCHASE AGREEMENT SIGNATURE PAGE]
Executed on the date first written above.
SOUTHWESTERN ICE, INC.:
By:
-------------------------------------
Print Name: James F. Stuart
Print Title: Chief Executive Officer
CICO, LTD., A COLORADO LIMITED PARTNERSHIP:
By: CICO INVESTMENTS, INC., ITS GENERAL
PARTNER
By:
-------------------------------------
Print Name:
--------------------------
Print Title:
-------------------------
SHAREHOLDERS OF CICO INVESTMENTS, INC.:
----------------------------------------
CHARLES P. WOODS
----------------------------------------
ALFRED DIETSCH
----------------------------------------
MICHAEL GREGOIRE
----------------------------------------
STEVEN R. FLANDERS
<PAGE> 20
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
Exhibit A Bill of Sale
<S> <C>
Schedule 2.1 Assets
Schedule 2.3 Excluded Assets
Schedule 2.6 Allocation of Purchase Price
Exhibit 5.9 Noncompetition Agreement
Exhibit 5.11 Opinion of Counsel
Seller's Disclosure Memorandum
</TABLE>
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<PAGE> 1
EXHIBIT 10.3
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as
of February 12, 1998, by and among Packaged Ice, Inc., a Texas corporation
("Parent"), Packaged Ice Southeast, Inc., a Texas corporation wholly owned by
Parent ("the Surviving Corporation"), Scianna's Party Ice, Inc., a Louisiana
corporation (the "Company") and John Stanley Scianna and Jennifer Scianna who
collectively own all of the outstanding shares of capital stock of the Company
(collectively the "Shareholders").
PRELIMINARY STATEMENTS
The respective Boards of Directors of Parent, the Surviving
Corporation and the Company have each approved the merger of the Company with
and into the Surviving Corporation, 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:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Article I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and the plural forms of any of the
terms herein defined.
"Acquisition Price" shall have the meaning set forth in Section 2.7(d)
of this Agreement.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible which shall include, but not be limited to,
those items described more fully in Exhibit A attached hereto.
"Business" shall mean all of the operations of Company including the
production, storage, distribution and sale of packaged ice products and other
items.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business which are used in the direct manufacturing,
distribution and sale of packaged ice products which shall include, but not be
limited to, those items more fully described in Exhibit B, attached hereto.
The equipment comprising the Capital Leases shall be free and clear of the
Capital Leases, liens, claims and other Encumbrances at the Closing.
Shareholders hereby agree to ensure that title to the assets that are subject
to Capital Leases shall be conveyed to the Surviving Corporation as a result of
this Agreement.
"Closing Date" shall mean the date on which this Agreement is
consummated.
<PAGE> 2
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, or adverse claim or
restriction on transfer of any nature whatsoever other than those held by
Parent or the Surviving Corporation or granted by the Company at Parent's or
the Surviving Corporation's request.
"Escrow Agreement" shall have the meaning set forth in Section 5.10 of
this Agreement.
"Escrow Agent" shall mean Metropolitan National Bank.
"Financial Statements" shall have the meaning set forth in Section 3.3
of this Agreement.
"Financing Statements" shall have the meaning as set forth in Section
5.11 of this Agreement.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Investment Letter" shall have the meaning set forth in Section 5.9 of
this Agreement.
"Merger" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Personal Property" shall have the meaning set forth in Section 3.13
of this Agreement.
"Real Property" shall have the meaning set forth in Section 3.12 of
this Agreement.
"Shareholders' Disclosure Memorandum" shall mean that schedule
attached hereto and incorporated herein by reference that lists and describes
all disclosures by
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Shareholders and Company concerning the Assets and the Business which are the
subject of this Agreement.
"Shareholder Documents" shall mean the Amended and Restated
Shareholders Agreement (September 20, 1995); the Amendment No. 1 to Amended and
Restated Shareholders Agreement (dated as of January 17, 1997); Amendment No. 2
to Amended and Restated Shareholders Agreement (dated as of March 14, 1997);
Amended and Restated Voting Agreement (dated September 20, 1995); Amendment
No. 1 to Amended and Restated Voting Agreement (dated as of January 17, 1997);
Amendment No. 2 to Amended and Restated Voting Agreement (dated as of March 14,
1997); Amendment No. 3 to Amended and Restated Voting Agreement (dated as of
November 4, 1997); and Culligan Voting Agreement (dated December 2, 1997).
"Shares" shall mean all of the capital stock of Company outstanding on
the Closing Date.
"Taxes" shall have the meaning set forth in Section 11.1 hereof.
II. THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the corporation laws of Texas and Louisiana, the
Company shall be merged (the "Merger") with and into the Surviving Corporation
and the Surviving Corporation shall be 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 Section 368(a)(1)(A) and (a)(2)(D) of the Internal
Revenue Code (the "Code").
2.2 Continuing Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of the Surviving
Corporation, with all its purposes, powers, franchises, privileges, rights and
immunities, shall continue unaffected and unimpaired by the Merger. 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 the Surviving Corporation, and the Surviving
Corporation shall be vested fully therewith and the separate corporate
existence and identity of the Company shall cease except to the extent
continued by statute.
2.3 Effective Date. The Merger shall become effective upon the
occurrence of the issuance of certificates of merger (the "Effective Date") by
the Secretary of State of the State of Texas and the Secretary of State of
Louisiana upon filing on the Closing Date of articles of merger with the
Secretary of the State of Texas pursuant to Article 5.04 of the Texas Business
Corporation Act ("TBCA") and the Secretary of State of Louisiana pursuant to
applicable Louisiana law.
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<PAGE> 4
2.4 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of the Surviving Corporation as in effect on the
Effective Date shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation following the Merger.
2.5 Directors. The members of the Board of Directors of the
Surviving Corporation at the Effective Date shall be the directors of the
Surviving Corporation immediately following the Merger.
2.6 Officers. The officers of the Surviving Corporation at the
Effective Date shall be the officers of the Surviving Corporation immediately
following the Merger.
2.7 Conversion of Shares.
(a) Each share of the Company's $50.00 par value common
stock ("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 automatically
into the right to receive the Share Price (as hereinafter defined)
which shall be payable, without interest thereon, upon the surrender
of the certificates formerly representing such Share, in accordance
with Section 2.7(g).
(b) Each Share shall, by virtue of the Merger and without
any action on the part of the holder, be canceled and retired and
cease to exist.
(c) The "Share Price" for each Share will be (x)/(y)
where (x) is the Acquisition Price (as defined in Section 2.7(d)) and
(y) is the total number of outstanding Shares.
(d) The acquisition price ("Acquisition Price") shall be
$4,373,800, which shall consist of $1,925,796 in cash, less
adjustments as set forth in Section 2.11 of this Agreement (the "Cash
Amount"), and 188,308 shares of Parent's common stock, par value $0.01
per share ("Parent's Stock") valued at $13 per share (rounded up to
the nearest $13) and issued directly to the Shareholders (the 188,308
shares of Parent Stock being the "Stock Amount").
(e) Each share of the Company's common stock held in the
treasury of the Company immediately prior to the Effective Date 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.
(f) All of the Parent's Stock, when delivered pursuant to
the provisions of this Agreement, shall be validly issued, fully paid
and nonassessable.
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<PAGE> 5
(g) At Closing, Parent will pay to Shareholders and other
holders of Shares, the total sum of the Acquisition Price, less
$400,000 of the Cash Amount which will be placed in escrow with the
Escrow Agent for a period of twelve (12) months in accordance with the
Escrow Agreement (the "Escrow Amount"). At 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
the Share Price for each Share surrendered.
(h) 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.
(i) No fractional shares of Parent Stock and no
certificates or scrip therefor shall be issued.
(j) At the Closing, John Stanley Scianna and Jennifer
Scianna will be paid $1,925,796.80 from the Cash Amount (less the
Escrow Amount) based on their pro rata ownership of the Shares and
$2,448,004 from the Stock Amount. The remaining amount of the
acquisition price comprising the Escrow Amount will be paid on a
pro rata basis to Shareholders based on the amount of capital stock
that each owned in the Company at the termination of the Escrow
Agreement.
2.8 Filing of Articles of Merger. Upon the terms and subject to
the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII hereof, the Company and the
Surviving Corporation shall execute and file a certificate of merger in the
manner required by the TBCA and the parties hereto shall take all such other
and further actions as may be required by law to make the Merger effective.
Prior to the filings referred to in this Section, the foregoing will be
confirmed at the Closing.
2.9 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 the Surviving Corporation
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
the Surviving Corporation shall be allocated to the Surviving
Corporation, and the Surviving Corporation shall be the primary
obligor therefor and, except as otherwise
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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.
2.10 Proration. The parties shall prorate at the Closing the
current year's ad valorem taxes and prepaid expenses, based on the latest
available statements from taxing authorities, whether for the current tax year
or the preceding tax year. The Shareholders' pro rata share of such taxes
shall be the portion attributable to the period through the day preceding the
Effective Date, prorated by days. Any adjustments to the Purchase Price shall
be payable in the same ratio of Parent Stock to Cash as the Purchase Price.
The prorated amounts shall be adjustments to the cash portion of the
Acquisition Price and shall be payable in the manner set forth below:
(a) If a prorated amount is payable by Parent or the
Surviving Corporation and determinable at the Closing, it shall be
added to the amount payable by Parent or the Surviving Corporation at
the Closing.
(b) If a prorated amount is payable by Parent or the
Surviving Corporation and not determinable at the Closing, it shall
be billed by Shareholders when determinable and promptly paid by
Parent or the Surviving Corporation to Shareholders.
(c) If a prorated amount is payable by Shareholders and
determinable at the Closing, it shall be deducted from the amount
otherwise payable by Parent or the Surviving Corporation at the
Closing.
(d) If a prorated amount is payable by Shareholders and
not determinable at the Closing, it shall be billed by Parent or the
Surviving Corporation when determinable and promptly paid by
Shareholders to Parent.
2.11 Adjustment to Purchase Price. The Cash Amount shall be
reduced by the sum of the following (the "Adjustment Amount"):
(a) the Closing Date payoff amounts of all current and
long term interest bearing debt and current and long term Capital
Leases (including any unpaid interest and prepayment penalties);
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<PAGE> 7
(b) intercompany and affiliated accounts and notes
payable;
(c) if the Company's ratio of current assets to current
liabilities is less than 1:1 at the Closing Date, an amount equal to
the difference between the current liabilities minus current assets.
The Adjustment Amount will be estimated by the parties based on an
estimated Closing Date balance sheet to be prepared by the Company and
delivered to the parties at least one business day prior to the Closing Date
for purposes of determining the Cash Amount to be paid at Closing (the
"Estimated Adjustment Amount"). The Adjusted Amount will be finally determined
after the Closing based on an audited balance sheet (the "Closing Balance
Sheet") of the Company as of the Closing Date. If the actual Adjustment Amount
is greater than the Estimated Adjustment Amount, the Shareholders shall
promptly pay the difference to Parent. If the actual Adjustment Amount is less
than the Estimated Adjustment Amount, Parent or Surviving Corporation shall
promptly pay the difference to the Shareholders. Any adjustments to the
Purchase Price shall be payable in the same ratio of Parent Stock to Cash as
the Purchase Price. The Closing Date Balance Sheet and its accompanying
information relating to income and cash flow, dated as of the Closing Date,
shall be provided to Parent and Surviving Corporation no later than 30 days
after the Closing Date.
III. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent and
warrant to Parent and the Surviving Corporation as follows:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Louisiana
and is in good standing and is duly qualified to do business in any foreign
jurisdiction in which it is currently conducting business operations. The
Company has full corporate power and authority to own or use the properties and
assets that it purports to own or use, and to perform all of its obligations
hereunder. All outstanding shares of stock of the Company are validly issued,
fully paid, nonassessable and owned, both beneficially and of record, solely by
Shareholders. Other than this Agreement, there is no subscription, option,
warrant, call, right, agreement or commitment relating to the issuance, sale,
delivery, repurchase or transfer by Shareholders or the Company (including any
right of conversion or exchange under any outstanding security or other
instrument) of any of its capital stock or other securities. There are no
voting trusts, proxies or any other agreements or understandings with respect
to the voting of the Shares.
3.2 Execution, Delivery and Performance of Agreement. This
Agreement has been duly executed and delivered by the Company and Shareholders
and constitutes the legal, valid and binding obligation of the Company and
Shareholders, enforceable against them in accordance with its terms. Upon the
execution and delivery by Shareholders of
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<PAGE> 8
the Escrow Agreement, Noncompetition Agreement and any other ancillary document
required hereunder (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 perform
their respective obligations under this Agreement and the Shareholders' Closing
Documents. The Shareholders and the Company have held a Shareholders meeting
(or have executed a consent) and all resolutions required by law to approve the
Merger have been duly adopted in accordance with Louisiana law. Except as set
forth on Section 3.2 of Shareholders' Disclosure Memorandum, the execution,
delivery and performance of this Agreement by the Company and Shareholders and
the consummation of the transactions contemplated hereby will not require the
consent, approval or authorization of any person or governmental authority, and
will not, with or without the giving of notice, the passage of time, or both,
violate, conflict with, result in a default, breach or loss of rights under, or
result in the creation of any lien, claim or encumbrance pursuant to, any lien,
encumbrance, instrument, agreement, or understanding, or any law, regulation,
rule, order, judgment or decree, to which Shareholders or the Company are a
party or by which they are bound or affected.
3.3 Financial Statements. The Company has previously caused to be
furnished to Parent:
(a) the Company's unaudited balance sheet as at December
31, 1996 and the related unaudited statement of income and statement
of cash flow for the 12-month period then ended.
(b) the Company's unaudited balance sheet as at December
31, 1997 and the related unaudited statement of income and statement
of cash flow for the 12-month period then ended (all such balance
sheets and related statements referenced to in this Section 3.3 are
collectively referred to herein as the "Financial Statements").
The Financial Statements taken as a whole present fairly the financial
position, results of operations, changes in shareholders' equity, and cash flow
of the Company as the respective dates of and for the periods referred to in
such Financial Statements, all in accordance with GAAP.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by the Company in the Shareholders'
Disclosure Memorandum and except for liabilities arising in the ordinary course
of business and consistent with past practice since the date of the Company's
December 31, 1997 Balance Sheet, the Company has operated the Business in the
ordinary course and has incurred no
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<PAGE> 9
liabilities which would be required to be reflected in accordance with GAAP, on
a balance sheet as of the date hereof or disclosed in the notes thereto.
Since November 30, 1997 there has not been any adverse change in the
business, operations, properties, prospects, assets or condition of the
Business, and no event has occurred, nor does a circumstance currently exist,
that may result in such an adverse change. The Shareholders further warrant and
represent that the actual sales made and expenses incurred by the Company
during 1997 are accurately and truly reflected on the December 31, 1997
Financial Statements. As of the Closing Date, the total amount of the Company's
current liabilities does not exceed the total amount of the Company's current
assets.
3.4 Shareholders' Debt. Shareholders warrant that there are no
Encumbrances held by Shareholders whatsoever against the Company or the Assets.
3.5 Business Operations and Condition of Assets. All items
comprising the Assets have been continuously used by the Company in connection
with the Business and are now in serviceable condition and 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, unless
expressly disclosed to the contrary by the Company and Shareholders in Section
3.5 of Shareholders' Disclosure Memorandum.
3.6 Title to Personal Property. Except as set forth in Section
3.6 of Shareholders' Disclosure Memorandum, the Company has good, legal and
marketable title to all of the personal property comprising the Assets, free
and clear of Encumbrances.
3.7 Litigation. Except as set forth on Section 3.7 of
Shareholders' Disclosure Memorandum, there is no pending claim, action, suit,
proceeding or investigation (judicial, governmental or otherwise), nor any
order, decree or judgment in effect, or threatened, against or relating to
Shareholders, the Company, the Business, the Assets or the transactions
contemplated by this Agreement.
3.8 Compliance with Laws. Shareholders and the Company have
complied with all laws, rules, regulations, ordinances, orders, judgments and
decrees relating to the Company, the Shares, the Assets, and the Business.
3.9 Taxes.
(a) Except as set forth in Section 3.9 of Shareholders'
Disclosure Memorandum, the Company has, within the time and manner
prescribed by law, filed all returns, declarations, reports and
statements required to be filed by it (collectively, "Returns") in
respect of any Taxes and each such Return has been prepared in
compliance in all respects with all applicable laws and regulations
and is true and correct in all respects, and the Company has, within
the time and in the
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manner prescribed by applicable law, paid all Taxes that are shown to
be due and payable with respect to the periods covered thereby.
(b) Except as set forth in Section 3.9 of Shareholders'
Disclosure Memorandum (i) the Company has not requested or been
granted an extension of the time for filing any Return which has not
yet been filed; (ii) the Company has not consented to extend to a date
later than the date hereof the time in which any Tax may be assessed
or collected by any taxing authority; (iii) no deficiency or proposed
adjustment which has not been settled or otherwise resolved for any
amount of Tax has been proposed, asserted or assessed by any taxing
authority against the Company; (iv) there is no action, suit, taxing
authority proceeding, or audit now in progress, pending or threatened
against or with respect to the Company; (v) no claim has been made by
a taxing authority in a jurisdiction where the Company does not file
Tax Returns that the Company is subject to Taxes assessed by such
jurisdiction; (vi) there are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the Assets; (vii) the
Company will not be required to include any amount in taxable income
or exclude any item of deduction or loss from taxable income for any
taxable period (or a portion thereof) ending after the Closing Date as
a result of any of the following: (A) a change in method of accounting
for a taxable period ending on or prior to the Closing Date, (B) any
"closing agreement," as described in Code Section 7121 (or any
corresponding provision of state, local or foreign income Tax law)
entered into on or prior to the Closing Date, (C) any sale reported on
the installment method where such sale occurred on or prior to the
Closing Date, and (D) any prepaid amount received on or prior to the
Closing Date; and (viii) the Company does not have any obligation or
liability for the payment of Taxes of any other person as a result
from any expressed obligation to indemnify another person, or as a
result of such Company assuming or succeeding to the Tax liability of
any other person as successor, transferee or otherwise.
(c) The charges, accruals, and reserves with respect to
Taxes on the books of the Company are adequate and are at least equal
to the Company's liability for Taxes. There exists no proposed tax
assessment against the company except as disclosed in Section 3.9 of
the Shareholders' Disclosure Memorandum. No consent to the
application of Section 341(f)(2) of the Code 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 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 Code with respect to any transaction contemplated
hereby. The Company has not been a member of any affiliated group (as
defined in Code Section 1504(a)) or consolidated, combined or unitary
group for purposes of any other Taxes. None of the 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.
(e) There is no plan or intention by the 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) The Surviving Corporation 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 the
Surviving Corporation 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, the Surviving Corporation, the Company and
the Shareholders will pay their respective expenses, if any, incurred
in connection with the Merger.
(i) There is no intercompany indebtedness existing
between Parent and the Company or between the Surviving Corporation
and the Company that was issued, acquired, or will be settled at a
discount.
(j) 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 Code.
(k) The fair market value of the assets of the Company
transferred to the Surviving Corporation will equal or exceed the sum
of the liabilities assumed
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by the Surviving Corporation, plus the amount of liabilities, if any,
to which the transferred assets are subject.
(l) The Company is not an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.10 Environmental. The Company has complied in all 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 concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including, without limitation, laws
relating to occupational safety and health, good manufacturing practices for
food products, 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, the Company 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 respects, with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in such laws.
3.11 Insurance. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Business. The Company has not been refused any insurance with respect to
its assets or operations, and its coverage has not been limited, terminated or
canceled by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, during the last three (3)
years. Section 3.11 of Shareholders' Disclosure Memorandum lists all claims,
which (including related claims which in the aggregate) exceed $5,000 which
have been made by the Company or against any policy of the Company in the last
three years under any workers' compensation, general liability, property or
other insurance policy applicable to Company, any Assets of the Company or the
Business. Except as set forth on Section 3.11 of Shareholders' Disclosure
Memorandum, there are no pending or threatened claims under any insurance
policy. Such claim information includes the following information with respect
to each accident, loss, or other event: (a) the identity of the claimant; (b)
the nature of the claim; (c) the date of the occurrence; (d) the status as of
the report date and (e) the amounts paid or expected to be paid or recovered.
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3.12 Real Property.
(a) Section 3.12 of Shareholders' Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel
of real property owned by, leased to or used by the Company (the "Real
Property") and (ii) a complete and accurate list of all current
leases, lease amendments, subleases, assignments, licenses and other
agreements to which the Real Property is subject (collectively, the
"Leases"), together with the name and address of each tenant, the
commencement and expiration date of each lease, the monthly rent and
additional rent payable under each lease and the date to which such
rent has been paid, the amount of any deposits, security or otherwise
made under such lease and whether the consent of any party to the
lease (or their mortgage) is required to consummate the transactions
contemplated hereby. The Company has delivered to Parent and the
Surviving Corporation true and complete copies of the Leases.
(b) Except as disclosed in Section 3.12 of Shareholders'
Disclosure Memorandum (i) each of the Leases is in full force and
effect and has not been amended or modified; (ii) neither the Company,
nor any other party thereto, is in default thereunder, nor is there
any event which with notice or lapse of time, or both, would
constitute a default thereunder; (iii) the Company has received no
notice that any party to any Lease intends to cancel, terminate or
refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder; and (iv) no rental under the Leases
has been paid more than one month in advance.
(c) The Company owns good and marketable title to the
Real Property, and the corresponding interest in the leases in which
the Company is the landlord. The Company is fully authorized to
convey the Real Property pursuant to this Agreement, and, at Closing,
the Company shall convey the Real Property to the Surviving
Corporation free and clear of all Encumbrances or other restrictions
which would materially affect the us for which it is currently held by
the Company.
(d) There are no pending or threatened condemnation or
similar proceedings or assessments affecting the Real Property,
lawsuits by adjoining landowners or others, nor is there any belief by
the Company or Shareholders that any such lawsuit is contemplated by
any person, nor is any condemnation or assessment contemplated by any
governmental entity.
(e) At the time of Closing the Real Property will not in
whole or in part be under lease, other than the Leases described
above.
(f) The Company has not and will not enter into any
written contracts, agreements, or listings, or be a party to any oral
understandings or agreements
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affecting the Real Property or the Lease which may become binding upon
Surviving Corporation.
(g) Shareholders have complied with all applicable laws,
ordinances, regulations, statutes and rules relating to the Real
Property or any part thereof.
(h) During the period that the Company has owned the
Property, there has been no storage, production, transportation,
disposal, treatment or release of any solid waste, hazardous waste,
toxic substance, or any other pollutants or contaminants (hereinafter
collectively referred to as "Pollutants") on or in the Real Property,
and the Company has complied with all applicable local, state or
federal environmental laws and regulations. There are no underground
storage tanks, covered surface impoundments or other sources of
environmental Pollutants or contaminants on the Real Property.
Prior to the company's acquisition of the Real
Property, there was no storage, production, transportation, disposal,
treatment or release of any Pollutants on or in the Real Property.
There have been no Pollutants on or in the neighboring properties
which, through soil or groundwater migration, could have moved to the
Real Property. Shareholders shall indemnify, defend, and hold the
Surviving Corporation and Parent harmless from any claims, damages,
and/or liability of every kind, including all expenses of litigation
and attorneys' fees, arising from the Company's or Shareholders'
breach of the warranties contained herein.
(i) The Company shall not and the Shareholders shall
cause the Company to not change or make alterations to the Real
Property between the date of this Agreement and the Closing. Such
prohibited changes shall include, but shall not be limited to, removal
or relocation of site improvements, buildings and landscaping.
(j) The zoning of each parcel of the Real Property
permits the improvements located thereon and the continuation of
business presently being conducted thereon. The Real Property is
served by utilities and services necessary for the normal and
continued operation of the business presently conducted thereon. None
of the real property constituting the Real Property or Owned Real
Property is subject to any zoning or historical preservation rulings
or ordinances that will prohibit the Surviving Corporation from
continuing its intended use as an ice manufacturing and/or
distribution facility.
3.13 Personal Property.
(a) Section 3.13 of Shareholders' Disclosure Memorandum
is a complete and accurate schedule as of the Closing Date describing,
and specifying the location of, all inventory, motor vehicles,
machinery, fixtures, equipment,
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furniture, supplies, tools, Intangible Assets, and all other tangible
or intangible personal property owned by, in the possession of, or
used by the Company (the "Personal Property").
(b) Each lease, license, rental agreement, contract of
sale or other agreement applicable to any Personal Property is listed
in Section 3.14 of Shareholders' Disclosure Memorandum and is in full
force and effect; neither the Company nor any other party thereto is
in default thereunder, nor is there any event which with notice or
lapse of time, or both, would constitute a default thereunder. The
Company has received no notice that any party to any such lease,
license, rental agreement, contract of sale or other agreement intends
to cancel, terminate or refuse to renew the same or to exercise or
decline to exercise any option or other right thereunder. No Personal
Property is subject to any lease, license, contract of sale or other
agreement that is adverse to the Business, Assets or financial
condition of the Company.
(c) The inventory of the Company as reflected by the
Financial Statements and as described in Section 3.13 of Shareholders'
Disclosure Memorandum consisted and consists of items substantially
all of which were and will be of the usual quality and quantity
necessary for the normal conduct of the Company and reasonably
expected to be usable or salable within a reasonable period of time in
the ordinary course of business of the Company, except items of
inventory which have been written down to realizable market value or
written off completely, and damaged or broken items in an amount which
does not affect the value of the inventory as reflected on the
Financial Statements. With respect to inventory in the hands of
suppliers for which the Company is committed as of the date hereof,
such inventory is reasonably expected to be usable in the ordinary
course of business of the Company as presently being conducted.
3.14 Contracts. Section 3.14 of Shareholders' Disclosure Memorandum
contains a complete and accurate list of all presently effective contracts,
leases and other agreements ("Contracts") to which the Company is a party and
which affect or are applicable to the Assets or the Company, true and complete
copies (or summaries in the case of oral contracts) of each of which have been
delivered to Parent and the Surviving Corporation by the Company, including,
without limitation, any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any
such obligation for the borrowing of money;
(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either
within or outside the United
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States relating to sharing of present or future commissions, fees or
other income or profits;
(d) lease, license, rental agreement, contract of sale or
other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract; or
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts
and/or rebates).
Except as disclosed in Section 3.14 of Shareholders' Disclosure
Memorandum, each of the Contracts is in full force and effect and has not been
amended or modified and neither the Company, nor any other party thereto, is in
default thereunder, nor is there any event which with notice or lapse of time,
or both, would constitute a default thereunder. The Company has received no
notice that any party intends to cancel, terminate or refuse to renew any such
Contract or to exercise or decline to exercise any option or other right
thereunder.
3.15 Labor Matters. There are no controversies pending or
threatened between the Company and any employees of the Company. The Company
has complied with all laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining,
immigration, safety and the payment of withholding and social security and
similar taxes, and the Company has no liability for any arrears of wages or
taxes or penalties for failure to comply with any of the foregoing.
3.16 Absence of Sensitive Payments. The Company has not made or
maintained (i) any contributions, payments or gifts of its funds or property to
any official, employee or agent of any vendor, customer or supplier, or of any
governmental entity, where either the payment or the purpose of such
contribution, payment or gift was or is illegal under the laws of the United
States or any state thereof, or any other jurisdiction (foreign or domestic);
or (ii) any contribution, or reimbursement of any political gift or
contribution made by any other person, to candidates for public office, whether
federal, state, local or foreign, where such contributions by the Company or
Shareholders were or would be a violation of applicable law.
3.17 Employee Benefits. All employee benefit plans including, but
not limited to health benefit plans, (whether or not covered by ERISA),
deferred compensation or executive compensation plans for employees, directors
or independent contractors, and all
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other employee or independent contractor arrangements or programs that are
maintained or contributed to by the Company (collectively, the "Company Plans")
have been administered and operated in all material respects in compliance with
their terms, ERISA, if applicable, the Code and other applicable law. All
Company Plans that are intended to be qualified under Section 401(a) of the
Code are so qualified and a current favorable IRS determination letter exists
for each such plan and covers the amendments required by the Tax Reform Act of
1986. All funded Company Plans are fully funded according to their terms and
applicable law. No prohibited transaction or breach of fiduciary duty under
ERISA has been committed by any fiduciary, disqualified person or party in
interest of any Company Plan. The Company has no liability, contingent or
otherwise, under Title IV of ERISA.
3.18 Capital Improvements. Section 3.18 of Shareholders'
Disclosure Memorandum describes all of the capital improvements or purchases or
other capital expenditures (as determined in accordance with GAAP) which the
Company has committed to or contracted for which have not been completed prior
to the date hereof and the cost and expense reasonably estimated to complete
such work and purchases.
3.19 No Undisclosed Liabilities. Except as set forth in Section
3.19 of the Shareholders' Disclosure Memorandum and obligations and liabilities
arising under the contracts disclosed in Section 3.14 of the Shareholders'
Disclosure Memorandum, 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 Financial Statements and current liabilities incurred
in the ordinary course of business since the respective dates thereof.
3.20 Complete and Accurate Disclosure. No representation or
warranty made to Parent or the Surviving Corporation in this Agreement or in
connection with this transaction contains or will contain an untrue statement
of a fact, or omits or will omit to state a fact necessary to make such
representation or warranty not misleading or necessary to enable Parent and the
Surviving Corporation to make a fully informed decision with respect to the
Merger of the Company into the Surviving Corporation. All documents and
information which have been or will be delivered to Parent and the Surviving
Corporation or its representatives by or on behalf of the Company or
Shareholders are and will be true, correct and complete copies of the documents
they purport to represent.
3.21 No Adverse Change. There has not been any adverse change in
the Business, operations, properties, prospects, assets or condition of the
Company, and no event has occurred or circumstance exists that will, or is
reasonably likely to, result in such an adverse change.
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IV. REPRESENTATIONS AND WARRANTIES
OF THE SURVIVING CORPORATION AND PARENT
4.1 Corporate Existence; Good Standing; Capitalization. Parent
and the Surviving Corporation are corporations duly organized, validly
existing, and in good standing under the laws of the State of Texas. All
outstanding shares of stock of Parent are validly issued, fully paid and
nonassessable.
4.2 Power and Authority. Parent and the Surviving Corporation
have the requisite corporate power and authority, and have been duly
authorized, to enter into this Agreement and to perform all of its obligations
hereunder.
V. COVENANTS OF THE COMPANY AND SHAREHOLDERS
Shareholders and the Company hereby, jointly and severally, covenant
and agree as follows:
5.1 Conduct of the Business Pending the Closing Date. The
Shareholders and the Company hereby agree that, from the date hereof to the
Closing Date, they will:
(a) maintain the Assets in good repair, order and
condition, and make such capital expenditures as necessary to maintain
the Business, in accordance with past practices and sound business
judgment;
(b) maintain insurance upon all of its properties and
with respect to the conduct of the Business in such amounts and of
such kinds to adequately safeguard and protect the Assets and the
Business;
(c) not issue or agree to issue any additional shares of
common stock or of any other voting security or any rights to acquire
any such additional common stock or voting security which would cause
a change of control of Shareholders;
(d) use its best efforts to comply with all laws and
contractual obligations applicable to it and to the conduct of the
Business;
(e) not (i) mortgage, pledge or, except in the ordinary
course of business, subject to any lien, charge, security interest or
other encumbrance any of the Assets (whether tangible or intangible),
(ii) sell, assign, transfer, convey, lease or otherwise dispose of, or
agree to sell, assign, transfer, convey, lease or otherwise dispose
of, any of the Assets outside the ordinary course of business other
than that expressly disclosed in the Shareholders' Disclosure
Memorandum;
(f) not authorize or consummate any dividends or
distributions of assets to its stockholders, any consolidation or
merger, purchase of all or substantially all of the assets of any
entity, or any other extraordinary corporate transaction other than
expressly disclosed in the Shareholders' Disclosure Memorandum;
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<PAGE> 19
(g) conduct its business in its usual and ordinary
manner;
(h) pay all taxes that may be accrued to either party as
a result of the consummation of this transaction.
5.2 Investigation by Parent and the Surviving Corporation. Prior
to the Closing Date, the Company shall (i) give Parent and its authorized
representatives and advisors access, at reasonable times and on reasonable
notice, to all items of Real and Personal Property, books and records,
personnel, offices, and other facilities of the Company, (ii) permit Parent or
the Surviving Corporation to make such inspections thereof as Parent or the
Surviving Corporation may reasonably require, and (iii) cause its employees,
and its advisors to furnish to Parent and its authorized representatives and
advisors such financial and operating data and other information with respect
to the Business prepared in the ordinary course of the Business as Parent or
its agent shall from time to time reasonably request.
5.3 Closing Conditions. Shareholders and the Company will, to the
extent within their control, use their best efforts to cause the conditions set
forth in Section 8.1 to be satisfied by the Closing Date.
5.4 Confidentiality. From and after the date hereof, Shareholders
will, and will cause the Company and its officers, employees, representatives,
consultants and advisors to hold in confidence all confidential information in
the possession of the Company, its affiliates or its financial advisor
concerning Parent, the Surviving Corporation or the Company. Shareholders and
the Company will not release or disclose any such information to any person
other than Parent and its authorized representatives. Notwithstanding the
foregoing, the confidentiality obligations of this Section shall not apply to
information:
(a) which the Shareholders or the Company are compelled
to disclose by judicial or administrative process, or, in the
reasonable opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to the
Company or Shareholders by a third party who obtained such information
other than as a result of a breach of a confidential relationship.
5.5 Public Announcement. The Company, Shareholders, the Surviving
Corporation and Parent will cooperate in the public announcement of the
transactions contemplated by this Agreement, and, other than as may be required
by applicable law,
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no such announcement will be made by either party without the consent of the
other party, which consent shall not be unreasonably withheld.
5.6 No Shopping. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither the Company nor Shareholders shall (and the Company and Shareholders
shall cause their respective affiliates, officers, directors, employees,
representatives and agents not to) directly or indirectly, solicit, initiate or
participate in discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group (other than
Parent or an affiliate or an associate of Parent) concerning, or enter into any
agreement providing for, any merger, sale of material assets, sale of stock or
similar transactions involving the Company or the Assets.
5.7 Further Assurances. The Shareholders and the Company will use
their best efforts to implement the provisions of this Agreement, and for such
purpose the Shareholders or the Company, at the request of Parent or the
Surviving Corporation, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Parent and the Surviving Corporation such deeds, assignments,
bills of sale, consents, documents evidencing title and other instruments in
addition to those required by this Agreement, in form and substance
satisfactory to Parent and the Surviving Corporation, as Parent and the
Surviving Corporation may reasonably deem necessary or desirable to implement
any provision of this Agreement.
5.8 Insurance. Shareholders shall cause the Company to continue
to maintain insurance through the Closing Date with financially sound and
reputable insurers unaffiliated with the Company or Shareholders in such
amounts and against such risks as are adequate to protect the Assets and the
Business.
5.9 Investment Letter. At the Closing, Shareholders shall execute
and deliver to Parent the investment letter in the form attached hereto as
Exhibit 5.9 (the "Investment Letter").
5.10 Escrow Agreement. At the Closing, Shareholders shall execute
and deliver to Parent and the Surviving Corporation the escrow agreement in the
form attached hereto as Exhibit 5.10 (the "Escrow Agreement").
5.11 Title Reports. Within ten (10) days after the date hereof,
Shareholders, at Shareholders' sole cost and expense, shall provide a title
report(s) for all real property owned by the Company ("Owned Real Property")
and current reports of searches made of the Uniform Commercial Code Records of
the County and State where each parcel of Owned Real Property is located (the
"Financing Statements") setting forth the state of liens affecting the title to
the personal property and real property to be conveyed hereunder. The title
report shall form the basis for a title insurance policy, issued by a
nationally known title policy issuer, to be delivered to Parent and the
Surviving
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Corporation, at Shareholders' sole expense, at the Closing in an amount equal
to $470,000. At the Closing, the Owned Real Property shall be subject to no
liens, charges, encumbrances, exceptions, or reservations of any kind or
character other than those specifically approved by Parent and the Surviving
Corporation in writing (the "Permitted Exceptions").
5.12 Noncompetition Agreement. At the Closing, John Stanley
Scianna and Jennifer Scianna will enter into the Noncompetition Agreement
attached hereto as Exhibit 5.12.
5.13 Employment Agreement. At the Closing, John Stanley Scianna
and Jennifer Scianna will enter into the respective Employment Agreement
attached hereto as Exhibit 5.13.
5.14 Shareholder Documents. At the Closing, Shareholders shall
execute and deliver the Shareholder Documents attached hereto as Exhibit 5.14
to Parent.
VI. COVENANTS OF PARENT AND THE SURVIVING CORPORATION
6.1 Closing Conditions. Parent and the Surviving Corporation
will, to the extent within their control, use reasonable efforts to cause the
conditions set forth in Section 8.2 to be satisfied by the Closing Date.
6.2 Ancillary Agreements. At the Closing, Parent and the
Surviving Corporation will enter into the Noncompetition Agreement, the Escrow
Agreement, and all other ancillary documents required hereunder.
VII. THE CLOSING
7.1 The Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at a mutually
agreeable time and date. The date of the closing shall herein be referred to
as the "Closing Date." Subject to the provisions of Article X, failure to
consummate the transaction set forth in this Agreement on the date and time and
place determined by this Section 7.1 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this
Agreement.
7.2 Closing Obligations. At the Closing, subject to the terms,
covenants and conditions contained herein:
(a) Shareholders will deliver to Parent and the Surviving
Corporation:
(i) certificates representing the Shares, to be
surrendered to the Surviving Corporation or Parent;
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(ii) a certificate executed by Shareholders
representing and warranting to Parent and the Surviving
Corporation that Shareholders' and the Company's
representations and warranties in this Agreement are accurate
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 Memorandum which was delivered by
Shareholders to Parent and the Surviving Corporation prior to
the Closing Date); and
(iii) investment letter executed by Shareholders
receiving Packaged Ice, Inc. common stock in the form attached
hereto as Exhibit 5.9, (the "Investment Letter").
(iv) an escrow agreement (the "Escrow Agreement"
as set forth in Exhibit 5.10).
(v) an opinion of counsel as referred to in
Section 8.1(f);
(vi) letters of resignation of the officers and
directors of the Company;
(vii) executed counterparts of all other documents,
including the Shareholder Documents, and certificates required
to be delivered to Parent and the Surviving Corporation
pursuant to this Agreement including, but not limited to the
Undertaking Agreement, the Noncompetition Agreement,
satisfactory evidence that all third party creditors of the
Company have been satisfied and the title insurance policy in
the amount of $470,000.
(b) Parent and the Surviving Corporation will deliver to
Shareholders:
(i) certificates evidencing the Stock Amount,
issued to Shareholders;
(ii) the Cash Amount (less the Estimated
Adjustment Amount, and less the amount to be placed in escrow,
pursuant to the Escrow Agreement) by bank, cashier's or
certified check payable to the order of Shareholders or wire
transfer in immediately available funds to an account
designated by Shareholders, as may be selected by
Shareholders;
(iii) a certificate executed by Parent and the
Surviving Corporation to the effect that, except as otherwise
stated in such certificate, each of Parent and the Surviving
Corporation's representations and warranties in this Agreement
is accurate in all respect as of the
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Closing Date as if made on the Closing Date ("Parent and the
Surviving Corporation's Certificate"); and
(c) The Surviving Corporation and the Company will
execute articles of merger and file the same with the Secretaries of
State of the State of Texas and the State of Louisiana.
(d) Parent will place $400,000 of the Cash Amount into
escrow to be held pursuant to the Escrow Agreement.
VIII. CONDITIONS TO CLOSING
8.1 Conditions to Obligations of Parent and the Surviving
Corporation. The obligations of Parent and the Surviving Corporation to
complete the transactions contemplated at the Closing shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of
Shareholders or the Company to be performed or complied with on or
before the Closing Date shall have been duly performed or complied
with in all respects and Shareholders shall deliver to Parent and the
Surviving Corporation a certificate signed by Shareholders and an
officer of the Company to such effect.
(b) Representations and Warranties True; No Adverse
Change. The representations and warranties of Shareholders and the
Company contained herein shall be true and correct, in all respects,
on the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date, and
since the date hereof there shall have occurred no adverse change in
the Business, and Shareholders shall deliver to Parent and the
Surviving Corporation a certificate signed by Shareholders and an
officer of the Company to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Parent and the
Surviving Corporation from consummating the transactions contemplated
hereby.
(d) Third Party Creditors. All third party creditors of
the Business will be paid in full, and all Encumbrances against the
Stock, Assets and the Business will be paid or discharged.
(e) Capital Leases. All Capital Leases shall be paid in
full and the personal property subject thereto shall be conveyed to
the Company free and clear of Encumbrances.
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(f) Opinion of Counsel for Shareholders and the Company.
Shareholders shall have received the opinion of John Gallaspy, Esq.,
dated as of the Closing Date, in form and substance satisfactory to
the Surviving Corporation's and Parent's counsel, subject to
reasonable qualifications and exceptions, as set forth on Exhibit
8.1(f).
(g) Due Diligence. Parent and the Surviving Corporation
shall have completed and be satisfied with their due diligence
investigation of the Company.
(i) Ancillary Agreements. Shareholders have executed the
Noncompetition Agreement, the Employment Agreement, the Escrow
Agreement, the Shareholder Documents, and all other ancillary
documents required hereunder.
(j) Asset Purchase Agreement. The contemplated asset
purchase agreement whereby John Stanley and Jennifer Scianna will sell
all of their ice storage and delivery assets that formerly belonged to
All American Ice, Inc., an involuntarily dissolved Mississippi
corporation, will have occurred contemporaneously with the execution
of this Agreement.
(k) Funding of Transaction. The obligation of Parent and
Surviving Corporation to fund this transaction will occur upon the
filing and approval of each respective articles of merger to be filed
with the Texas and Louisiana Secretaries of State.
8.2 Conditions to Obligations of the Company and Shareholders.
The obligation of the Company and Shareholders to complete the transactions
contemplated at the Closing shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of Parent
and the Surviving Corporation to be performed or complied with on or
before the Closing Date shall have been duly performed or complied
with in all material respects and Parent and the Surviving Corporation
shall deliver to Shareholders a certificate signed by an officer of
Parent and the Surviving Corporation to such effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Parent and the
Surviving Corporation contained herein shall be true and correct on
the Closing Date with the same force and effect as though such
representations and covenants had been made on the Closing Date, and
Parent and the Surviving Corporation shall deliver to Shareholders a
certificate signed by an officer of Parent and the Surviving
Corporation to such effect.
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(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining the Company from
consummating the transactions contemplated hereby.
IX. IDEMNIFICATION
9.1 Indemnification of Parent and the Surviving Corporation by the Company
and Shareholders. The Company and Shareholders agree, jointly and severally,
to indemnify, defend and hold harmless Parent and the Surviving Corporation and
Parent's and the Surviving Corporation's employees, agents, heirs, legal
representatives, and assigns from and against any and all claims, suits,
losses, expenses (legal, accounting, investigation and otherwise), damages and
liabilities, including, without limitation, tax liabilities (hereinafter,
collectively "Damages"), arising out of or relating to (i) any inaccuracy of
any representation or warranty of the Company or the Shareholders set forth in
this Agreement or in any document or certificate furnished or required to be
furnished to Parent or the Surviving Corporation or the breach of any covenant
made by the Company in or pursuant to this Agreement; or (ii) any claim or
cause of action arising with respect to the conduct or condition of the
Business or Assets prior to the Closing, whether or not disclosed to Parent or
the Surviving Corporation. The obligation of the Shareholders to indemnify
Parent and Surviving Corporation shall continue notwithstanding either Parent's
or Surviving Corporation's knowledge of the inaccuracy of any representation or
warranty of the Company or the Shareholders set forth in this Agreement or in
any document or certificate furnished or required to be furnished pursuant to
this Agreement.
9.2 Indemnification of the Company and Shareholders by Parent and
the Surviving Corporation. Parent and the Surviving Corporation agree to
indemnify, defend and hold harmless the Company and Shareholders from and
against any and all Damages arising out of or relating to any inaccuracy or any
representation or warranty set forth in this Agreement or the breach of any
covenant made by Parent or the Surviving Corporation in or pursuant to this
Agreement.
9.3 Claims for Indemnification. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party. In addition to all other
remedies provided hereunder or by law, Parent and the Surviving
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Corporation shall have the right to make a claim against the Escrow Amount for
any of Parent's or the Surviving Corporation's Damages.
9.4 Right to Defend. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within forty-five (45) days after receipt of the Notice of
Claim that the Indemnifying Party intends to assume the defense of such claim
and acknowledges its liability to indemnify the Indemnified Party for any
losses resulting from such claim; provided, however, that if the Indemnifying
Party does not elect to assume the defense of any claim, then (a) the
Indemnifying Party shall have the right to participate in the defense of such
claim or demand at its expense through counsel of its own choosing, provided
the Indemnified Party shall control the defense of such claim, (b) the
Indemnified Party may settle any such claim without the consent of the
Indemnifying Party, however, the Indemnifying Party may not settle any such
claim without the prior written consent of the Indemnified Party; and (c)
Section 9.5 hereof shall be inapplicable. Whether or not the Indemnifying
Party does choose to so defend such claim, the parties hereto shall cooperate
in the defense thereof and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be requested in connection therewith. To the extent Parent
or the Surviving Corporation is the Indemnified Party for any actual or
threatened claim or demand by any third party, Parent and the Surviving
Corporation shall have the right to control the prosecution of any counterclaim
or right related to such a claim or demand, provided that Parent and the
Surviving Corporation agree to reasonably cooperate with the Company or
Shareholders with respect to the prosecution of such counterclaim or right.
9.5 Settlement. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.6 Effect of Termination. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
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X. TERMINATION
10.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of the
Shareholders, Company, Parent and the Surviving Corporation;
(b) Misrepresentation or Breach. By the Company or
Shareholders if there has been a material misrepresentation or a
material breach of a warranty or covenant herein or in any agreement
required to be delivered pursuant hereto on the part of the Surviving
Corporation or Parent;
(c) Misrepresentation or Breach. By Parent or the
Surviving Corporation, if there has been a misrepresentation or a
breach of a warranty or covenant herein or in any agreement required
to be delivered pursuant hereto on the part of the Company or
Shareholders;
(d) Failure of Condition to Parent's and the Surviving
Corporation's Obligations. By Parent and the Surviving Corporation,
if all of the conditions set forth in Section 8.1 have not been
satisfied;
(e) Failure of Condition to the Company's and
Shareholders' Obligations. By the Company or Shareholders, if all of
the conditions set forth in Section 8.2 have not been satisfied;
(f) Court Order. By the Company and Shareholders or
Parent and the Surviving Corporation, if consummation of the
transactions contemplated hereby shall violate any non-appealable
final order, decree or judgment of any court or governmental body
having competent jurisdiction;
(g) Adverse Change. By Parent and the Surviving
Corporation if any event has occurred after the date hereof which is,
or will result in an adverse change in the prospects, business or
condition of the Assets;
(h) Due Diligence Inspection. By Parent and the
Surviving Corporation if Parent and the Surviving Corporation are not
satisfied with their due diligence inspection of the Company and
Shareholders.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of the Company,
Shareholders and Parent and the Surviving Corporation under this Agreement
shall terminate without further liability of the Company, Shareholders, Parent
or the Surviving Corporation. If the Company or Shareholders fail to
consummate the transactions contemplated on their part to occur on the
scheduled Closing Date, in circumstances whereby all conditions of the Closing
set
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forth in Section 8.2 have been satisfied in all material respects or waived,
Parent's and the Surviving Corporation's sole remedy shall be to (i) to require
Shareholders to consummate and specifically perform the transactions
contemplated hereby, 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
reimbursement of its out-of- pocket expenses incurred directly in connection
with the negotiation, preparation and performance of this Agreement. If Parent
and the Surviving Corporation 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 8.1 have been satisfied in all
respects or waived, the Company's and Shareholders' sole remedy shall be to (i)
to require Parent and the Surviving Corporation to consummate and specifically
perform the transactions contemplated hereby, in accordance with the terms of
this Agreement, and to obtain from Parent and the Surviving Corporation 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.
10.3 Right to Proceed. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or Section 8.2 has
not been satisfied, the Company, Shareholders or Parent and the Surviving
Corporation, in addition to any other rights which may be available to it,
shall have the right to waive any such condition that is for its benefit and to
require the other party hereto to proceed with the Closing.
XI. TAX MATTERS.
11.1 Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the
Code.
"Final Determination" shall mean (i) with respect to Federal
Taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by the
Company or Shareholders, whichever are responsible for payment of such Tax
under applicable law, with respect to any item disallowed or adjusted by a
Taxing Authority, provided that such responsible party determines that no
action should be taken to recoup such payment and the other party agrees.
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"Post-Closing Tax Period" means any Tax period (or portion
thereof) beginning after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax,
gross income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign).
"Tax Indemnification Period", means with respect to any Tax,
any Pre-Closing Tax Period of the Company.
11.2 Covenants.
(a) Without the prior written consent of Parent and the
Surviving Corporation, Shareholders shall not cause the Company to
make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended
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 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 Parent or the Surviving Corporation.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) 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 real property transfer
Tax and any similar Tax) shall be accrued by the Shareholders and be
paid by the Shareholders when due (including any applicable
extensions), and the Shareholders will, at the Shareholders' sole
expense, file all necessary Tax returns and other documentation with
respect to all such Taxes and fees.
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<PAGE> 30
11.3 Cooperation on Tax Matters.
(a) Parent, the Surviving Corporation and Shareholders
shall cooperate fully, 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 6043 of the Code and all Treasury Regulations
promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention
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. Parent and the Surviving Corporation
and Shareholders shall cause the Company to: (i) to retain 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 requirements of any Taxing Authority or any record retention
agreements entered into with any Taxing Authority, and (ii) to give
Shareholders reasonable written notice prior to destroying or
discarding any such books and records and, if Shareholders so
requests, Parent and the Surviving Corporation shall allow
Shareholders to take possession of such books and records.
(b) Parent and the Surviving Corporation and Shareholders
further 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 (including, but not limited to, with
respect to the transactions contemplated hereby).
11.4 Tax Indemnification. The Company and Shareholders hereby
jointly and severally indemnify Parent and the Surviving Corporation against,
and agree to hold Parent and the Surviving Corporation harmless from, any loss,
liability or expense attributable to (i) any Tax with respect to income
(including, to the extent based on income, state franchise Taxes), transfer
Tax, employment or withholding Tax related to employee tips income (actual and
allocated) and related reporting requirements, and gross receipts or royalty
Tax in respect of any franchise operation and any other Tax of the Company
related to the Tax Indemnification Period, (ii) any Tax resulting from a breach
of the provisions of Sections 3.9 and 11.2, and (iii) any liabilities, costs,
expenses (including, without limitation, reasonable expenses of investigation
and attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee or successor (the
sum of (i), (ii), and (iii) being referred to herein as a "Loss"). Parent and
the Surviving Corporation shall give Shareholders ten days notice of any claim
of Loss, and Shareholders shall have the opportunity to defend Parent and the
Surviving Corporation in accordance with Section 9.4 hereof.
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11.5 Acquisition Price Adjustment. Any amount paid by the Company,
Parent, the Surviving Corporation or Shareholders under Section 11.4 will be
treated as an adjustment to the relevant purchase price for all Tax purposes
unless a Final Determination causes any such amount not to constitute an
adjustment to the relevant purchase price. In the event of such a Final
Determination, Parent and the Surviving Corporation or Shareholders, as the
case may be, shall pay an amount that reflects the hypothetical Tax
consequences of the receipt or accrual of such payment, using the maximum
statutory rate (or rates, in the case of an item that affects more than one
Tax) applicable to the recipient of such payment for the relevant year,
reflecting for example, the effect of deductions available for interest paid or
accrued and for Taxes such as state and local income Taxes. Any payment
required to be made by Parent and the Surviving Corporation or Shareholders
under Section 11.4 that is not made when due shall bear interest at the rate
per annum determined, from time to time, under the provision of Section
6621(a)(2) of the Code for each day until paid.
11.6 Survival. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
The provisions of this Article XI shall survive the Closing for the applicable
period of limitations notwithstanding any knowledge that Parent or the
Surviving Corporation may have acquired to the contrary thereof.
XII. MISCELLANEOUS
12.1 Expenses. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 Survival of Representations and Warranties. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing notwithstanding any knowledge that Parent
or the Surviving Corporation may have acquired to the contrary thereof.
12.3 Inurement; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
12.4 Entire Agreement; Amendment. This Agreement, the Schedules
and Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
12.5 Severability. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective
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<PAGE> 32
only to the extent of such invalidity, unenforceability or illegality without
affecting the remaining provisions hereof and without affecting the validity,
enforceability or legality of such provision in any other jurisdiction.
12.6 Incorporation of Exhibits and Schedules. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 Captions and Headings; Use of term "Person". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection
cross-references are to articles, sections and subsections within this
Agreement. As used herein, the term "person" shall mean any corporation,
limited liability company, partnership, venture, proprietorship, trust, benefit
plan or other entity or enterprise.
12.8 Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
12.9 Notices. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to the Company: 2032 Columbia
Bogalusa, Louisiana 70427
to the Shareholders: John Stanley Scianna
1428 Beaver Circle
Bogalusa, LA. 70427
Jennifer Scianna
1428 Beaver Circle
Bogalusa, LA. 70427
with a copy to: John N. Gallaspy
301 Louisiana Avenue
Bogalusa, Louisiana 70427
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to Parent and the
Surviving Corporation: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis, III, President
with a copy to: Alan Schoenbaum, P.C.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St., Suite 1500
San Antonio, Texas 78205
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
12.10 Agents or Brokers. The Company and Shareholders and Parent
and the Surviving Corporation mutually represent and agree with each other that
no agents or brokers have been utilized in the solicitation or negotiation of
the sale of the Business and no fees, commissions or expenses of any type shall
be due or payable out of the proceeds of the Acquisition Price by either party
to this Agreement.
12.11 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities laws, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in San Antonio, Texas and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof, and shall not be appealable. Judicial proceedings may be commenced
only to enforce this arbitration agreement or to enforce the results of
arbitration; provided that such prohibition shall not apply in the event that a
court ordered injunction is an appropriate remedy for a breach of this
Agreement.
12.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
[SCIANNA'S AGREEMENT AND PLAN OF MERGER
SIGNATURE PAGE FOLLOWS]
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[SCIANNA'S AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE, INC.
By:
-------------------------------------
Print Name:
--------------------------
Print Title:
-------------------------
PACKAGED ICE SOUTHEAST, INC.
By:
-------------------------------------
Print Name:
--------------------------
Print Title:
-------------------------
SCIANNA'S PARTY ICE, INC.
By:
-------------------------------------
Print Name:
--------------------------
Print Title:
-------------------------
SHAREHOLDERS:
- ----------------------------------------
JOHN STANLEY SCIANNA
- ----------------------------------------
JENNIFER SCIANNA
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<PAGE> 35
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets of the Company
Exhibit B Assets subject to Capital Leases
Exhibit 5.9 Investment Letter
Exhibit 5.10 Escrow Agreement
Exhibit 5.12 Noncompetition Agreement
Exhibit 5.13 Employment Agreement
Exhibit 5.14 Shareholder Documents
Exhibit 8.1(f) Opinion of Counsel
Shareholders' Disclosure Memorandum
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<PAGE> 1
EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
February 10, 1998, by and among Packaged Ice Southeast, Inc. ("Buyer") and
John Stanley Scianna and Jennifer Scianna (collectively the "Sellers").
PRELIMINARY STATEMENTS
Sellers are engaged in the sale of packaged ice products in the
Gulfport, Mississippi area (such business being hereinafter referred to as
"Seller's Business" or the "Business").
Sellers operate the Business under the name of "All-American Ice."
Sellers are desirous of selling to Buyer and Buyer is desirous of
purchasing certain assets of Sellers' Business, upon the terms and conditions
hereafter set forth;
NOW THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties hereafter set forth, the
parties hereby agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"Assets" shall mean both the Real Property and personal property of
the Sellers which are more fully described in Section 2.1 and Schedule 2.1 of
this Agreement.
"Bill of Sale" shall refer to the Bill of Sale conveying title to the
Assets from Sellers to Buyer attached to this Agreement as Exhibit A.
"Closing" shall mean the consummation of this Agreement.
"Closing Date" shall mean the date on which this Agreement will be
consummated.
"Encumbrance" shall mean any mortgage lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, or adverse claim or
restriction on transfer of any nature whatsoever.
"Escrow Agreement" shall have the meaning set forth in Section 5.11 of
this Agreement.
"Escrow Agent" shall mean Metropolitan National Bank.
<PAGE> 2
"Financial Statements" shall have the meaning set forth in Section
3.3 of this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets of and only of the Business
(together with all pending applications, continuations- in-part and extensions
for any of the above).
"Real Property" shall mean that real property upon which Sellers' ice
storage and distribution business is conducted in Gulfport, Mississippi, and
more fully described in Schedule 2.1.
"Sellers' Disclosure Memorandum" shall mean a memorandum prepared by
Sellers and delivered to Buyer that lists all disclosures by Sellers concerning
the Assets and the Business which are the subject of this Agreement.
"Tax or Taxes" shall mean all excise, added value, sales, use, real
and personal property, occupancy, business and occupation, mercantile, real
estate, or other tax (including interest and penalties thereon and including
estimated taxes thereof).
"Title Insurance Policy" shall mean a title insurance policy,
insuring title to the Real Property, issued by a nationally known title policy
issuer, to be delivered to Buyer at Sellers' sole expense, at the Closing in an
amount equal to $140,000.
II. PURCHASE AND SALE
2.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and
conditions of this Agreement, Sellers agree to sell, convey, assign, transfer
and deliver to Buyer, and Buyer agrees to purchase, at the Closing, the
personal property, the Real Property, intangible assets, contracts and rights
of Sellers related to the Sellers' Business which are described on Schedule 2.1
attached hereto and incorporated herein by reference, and all of the goodwill
of Sellers' Business associated therewith (collectively the "Assets").
2.2 PURCHASE PRICE. The Purchase Price for the Assets shall be
$426,200. The Purchase Price, less any amounts to be paid directly to
creditors of Sellers that are required to discharge any liens or other
Encumbrances against the Assets and the Business and less the Escrow Amount,
shall be paid to Sellers at the Closing. At the Closing, $80,000 of the
Purchase Price shall be placed in escrow (the "Escrow Amount") with the Escrow
Agent for a period of 12 months in accordance with the Escrow Agreement.
2.3 ASSUMPTION OF LIABILITIES. It is hereby agreed and understood
that Buyer is assuming no liabilities whatsoever of Seller, and the Assets will
be conveyed free and clear of all Encumbrances arising out of Seller's Business
or otherwise. Seller shall be responsible for all employment related expenses
which accrue before the Closing Date, including, without
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<PAGE> 3
limitation, salaries, wages, accrued vacation pay, sick pay or leave,
unemployment compensation, ERISA obligations, pension and profit sharing plans,
income tax withholding, and Social Security taxes. Seller will continue to be
responsible for all tort, contractual, statutory and environmental liabilities
(including, without limitation, all cleanup requirements) relating to the
Assets or the business existing or accruing on or prior to the Closing Date.
Seller will terminate its employees as of the Closing Date, and Buyer may
thereafter hire any or all of such employees. The parties agree that Buyer is
not assuming any of Seller's pension or profit sharing plans, and Seller shall
remain responsible therefor.
2.4 PRORATION. The parties shall prorate at the Closing the
current year's ad valorem taxes and vehicle license fees on the property
comprising the Assets, based on the latest available statements from taxing
authorities, whether for the current tax year or the preceding tax year.
Sellers' pro rata share of such taxes and vehicle license fees shall be the
portion attributable to the period through the Closing Date, prorated by days.
The prorated amounts shall be payable in the manner set forth below:
(a) If a prorated amount is payable by Buyer and
determinable at the Closing, it shall be added to the amount payable
by Buyer at the Closing.
(b) If a prorated amount is payable by Buyer and not
determinable at the Closing, it shall be billed by Sellers when
determinable and promptly paid by Buyer to Sellers.
(c) If a prorated amount is payable by Sellers and
determinable at the Closing, it shall be deducted from the amount
otherwise payable by Buyer at the Closing.
(d) If a prorated amount is payable by Sellers and not
determinable at the Closing, it shall be billed by Buyer when
determinable and promptly paid by Sellers to Buyer.
2.5 ALLOCATION. Sellers and Buyer agree to file all Tax returns
or reports including, without limitation, IRS Form 8594, for their respective
taxable years in which the Closing occurs and to reflect the allocation of the
Purchase Price on any such return or report and agree not to take any position
inconsistent therewith before any governmental agency charged with the
collection of any Tax or in any administrative proceeding. Buyer and Sellers
hereby agree to make such allocations to the Purchase Price within 120 days
after the Closing Date.
2.6 PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be
reduced by the sum of the following and paid directly to Sellers' creditors:
(a) the Closing Date payoff amounts of all current and
long term debt and current and Capital Leases (including any unpaid
interest and prepayment penalties);
(b) any mortgages or other Encumbrances against the Real
Property; and
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<PAGE> 4
2.7 PARTIES' INTENT. It is the express intent of the parties
hereto for Sellers to sell to Buyer the Assets that formerly belonged to
All-American Ice, Inc. which were vested in Sellers as the sole stockholders of
All- American Ice, Inc. at the time of its involuntary dissolution. To the
extent that subsequent to the Closing Date, any court of competent jurisdiction
declares that any of the Assets actually and retroactively belong to
All-American Ice, Inc., the officers, directors and stockholders of
All-American Ice, Inc. agree to take all necessary action to convey the Assets
to Buyer as contemplated by this Agreement.
III. REPRESENTATIONS AND WARRANTIES OF SELLER
Sellers, jointly and severally, represents and warrants to Buyer as
follows:
3.1 ORGANIZATION. Sellers are individuals, who as husband and
wife, are residents of the State of Louisiana. Sellers were at all times the
sole stockholders of All-American Ice, Inc. which was dissolved by the
Mississippi Secretary of State on November 10, 1992. At no time from the
incorporation of All-American Ice, Inc. until the date hereof have either
Stanley Scianna or Jennifer Scianna either in their respective personal
capacities or in their respective capacities as officers and directors of
All-American Ice, Inc., caused any additional shares of stock to be issued
either directly or indirectly.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. The
execution, delivery and performance by Sellers of this Agreement and the
consummation of it by the transactions contemplated hereby have been duly
authorized by all necessary action. This Agreement has been duly executed and
delivered by Sellers and constitutes the valid and binding obligation of
Sellers, enforceable against Sellers, jointly and severally, in accordance with
its terms. The execution, delivery and performance of this Agreement by Sellers
will not, with or without the giving of notice, the passage of time, or both,
violate, conflict with, result in a default, breach or loss of rights under, or
result in the creation of any lien, claim or encumbrance pursuant to, any lien,
encumbrance, instrument, agreement, or understanding, or any law, regulation,
rule, order, judgment or decree, to which Sellers are a party or by which it is
bound or affected, respectively.
3.3 FINANCIAL STATEMENTS. Sellers have previously caused to be
furnished to Buyer Sellers' unaudited balance sheet of the Business, as at
December 31, 1996, and the related unaudited statement of income and statement
of cash flow for the 12-month period then ended, and Sellers' unaudited balance
sheet of the Business, as at December 31, 1997, and the related unaudited
statement of income and statement of cash flow for the 12-month period then
ended (all such balance sheets and related statements referenced to in this
Section 3.3 are collectively referred to herein as the "Financial Statements").
The Financial Statements present fairly the financial position,
results of operations, changes in Sellers' equity, and cash flow of the
Business as of the respective dates of and for the periods referred to in such
Financial Statements, all in accordance with GAAP.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by the Sellers in the Sellers' Disclosure
Memorandum and except for liabilities arising
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<PAGE> 5
in the ordinary course of business and consistent with past practice since the
date of the Sellers' December 31, 1997 Balance Sheet, Sellers have operated the
Business in the ordinary course and has incurred no liabilities which would be
required to be reflected in accordance with GAAP, on a balance sheet as of the
date hereof or disclosed in the notes thereto.
Since November 30, 1997 there has not been any adverse change in the
Business, operations, properties, prospects, assets or condition of the
Business, and no event has occurred, nor does a circumstance currently exist,
that may result in such an adverse change. Sellers further warrant and
represent that the actual sales made and expenses incurred by the Business
during 1997 are accurately and truly reflected on the December 31, 1997
Financial Statements. As of the Closing Date, the total amount of the
Business' current liabilities does not exceed the total amount of the
Business' current assets.
3.4 ENCUMBRANCES ON THE ASSETS. Except as set forth on Sellers'
Disclosure Memorandum, there are no debts, liabilities, mortgages, liens,
security interests, charges, pledges, conditional sale agreements, or adverse
claims or restrictions, transfers or any other Encumbrances whatsoever against
the Assets, including any claim or Encumbrances arising against the Assets by
operation of law. To the extent that any of the Assets are determined to have
been forfeited to the State of Mississippi as a result of the involuntary
dissolution of All-American Ice, Inc., Sellers hereby agree to indemnify Buyer
for any and all losses or other Damages occurred by Buyer as a result of such
forfeiture.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. Sellers
acknowledge that Buyer is purchasing the Assets for the express purpose of
operating a packaged ice storage and distribution business. All items
comprising the Assets have been continuously used by Sellers in Sellers'
Business and are now in serviceable condition unless expressly disclosed to the
contrary by Sellers in Sellers' Disclosure Memorandum.
3.6 TITLE TO THE ASSETS. Except as set forth in Sellers'
Disclosure Memorandum, Sellers have good, legal and marketable title to all of
the Assets. At the Closing, Sellers shall deliver to Buyer good, legal and
marketable title to the Assets free from all Encumbrances. None of the Assets
is subject to forfeiture under the provisions of Title 79, Section 79-1-17 of
the Mississippi Code 1972 Annotated regarding the vesting of title in assets
upon dissolution of a corporation.
3.7 LITIGATION. Except as set forth in Sellers' Disclosure
Memorandum, there is no pending claim, action, suit, proceeding or
investigation (judicial, governmental or otherwise), nor any order, decree or
judgment in effect or threatened, against or relating to Sellers, the Assets,
the Business or the transactions contemplated by this Agreement, and no event
has occurred or circumstances exist that will, or is reasonably likely to, give
rise to or serve as a basis for the commencement of any claim, action, suit,
proceeding or investigation.
3.8 COMPLIANCE WITH LAWS. Sellers have complied with all laws,
rules, regulations, ordinances, orders, judgments and decrees relating to the
Assets. The ownership and use of the
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Assets and the conduct of the Business as it specifically relates to the Assets
does not conflict with the rights of any other person.
3.9 TAXES. All returns, including estimated tax returns, required
to be filed after the Closing Date by or with respect to Sellers with respect
to Taxes, that, if unpaid, might result in a lien upon any of the Assets, will
be duly filed and will be true, correct and complete, and all Taxes payable
pursuant thereto will be paid, except such Taxes, if any, as may be contested
in good faith. No deficiency or adjustment in respect to any Taxes that have
been assessed against or with respect to Sellers that if unpaid, might result
in a lien upon any of the Assets, remains unpaid.
All Taxes that relate to the Assets and that are payable or accruable
by Sellers, or to which Sellers have any liability with respect to events
occurring on or before the Closing Date have been paid in full or have been
adequately provided for in the reserve for Taxes on the books of Sellers. All
sales or transfer taxes arising as a result of this Agreement shall be borne by
the Sellers.
3.10 ENVIRONMENTAL. Sellers have complied in all 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
Sellers, the Assets or the Business concerning pollution or protection of the
environment, public health and safety, or employee health and safety,
including, without limitation, laws relating to occupational safety and health,
good manufacturing practices for food products, 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, Sellers have 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 respects, with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
which are contained in such laws.
3.11 EMPLOYEE BENEFITS. All employee benefit plans, if any,
(whether or not covered by ERISA), deferred compensation or executive
compensation plans for employees, directors or independent contractors, and all
other employee or independent contractor arrangements or programs that are
maintained or contributed to by the Sellers (collectively, the "Sellers Plans"
which are fully described in Section 3.11 of Sellers' Disclosure Memorandum)
have been administered and operated in all material respects in compliance with
their terms, ERISA, if applicable, the Internal Revenue Code (the "Code") and
other applicable law. All Sellers Plans that are intended to be qualified
under Section 401(a) of the Code, if any, are so qualified and a current
favorable IRS determination letter exists for each such plan and covers the
amendments required by the Tax Reform Act of 1986. All funded Sellers Plans,
if any, are fully funded
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according to their terms and applicable law. No prohibited transaction or
breach of fiduciary duty under ERISA has been committed by any fiduciary,
disqualified person or party in interest of any of Sellers Plans. The Sellers
have no liability, contingent or otherwise, under Title IV of ERISA. Sellers
understand and agree that Buyer is not assuming any of Sellers' Plans and
Sellers shall remain liable for all obligations thereunder.
3.12 CONSENTS. Except as set forth in Sellers' Disclosure
Memorandum, no consent or approval of any third party, public body or
authority, and no consents or waivers from other parties to licenses,
franchises, permits, agreements or other instruments are required to be
obtained by Sellers as a result of the transfer of the Assets contemplated by
this Agreement to (i) avoid the loss of any license, franchise, permit or other
instrument or the creation of any lien or other claim on any Asset pursuant to
the terms of any law, regulation, order, agreement or other legal requirement
binding upon Sellers relating to the Business or to which any such Asset may be
subject, or (ii) to enable Buyer to continue the operation of the Business
substantially as conducted prior to the Closing.
3.13 CONTRACTS. Sellers are not a party to any contracts relating
to the Business or the Assets that are not terminable at will, other than those
contracts of Sellers relating to the Business listed and described in Sellers'
Disclosure Memorandum.
3.14 INSURANCE AND WARRANTIES.
(a) Insurance. Sellers have in force all policies of
insurance described in Section 3.14(a) of Sellers' Disclosure Memorandum
insuring it (including descriptions of whether such policies and binders are
"claims made" or "occurrences" policies, and the respective issuers and
expiration dates thereof). Sellers have not been advised (i) of any risks or
any fact or matter which might render such policies void or voidable, or (ii)
any cancellations of insurance coverage, or increases in premium, or other
costs related to insurance, to take effect, or that are proposed, or that may
or will occur, following the Closing. All such policies are underwritten by
reputable insurers, and there is no basis to believe the insurers are or are
likely to become financially unsound. Sellers have not been refused insurance
or been notified of any cancellation or involuntary reduction or other
limitation of insurance during the past three years. Section 3.14(a) of
Sellers' Disclosure Memorandum lists all claims made or dues to be made by
Sellers, and all matters for which a claim could reasonably have been but was
not made, against an insurer on account of events occurring since January 1,
1997.
(b) Warranties. Except as described in Section 3.14(b)
of Sellers' Disclosure Memorandum, (i) Sellers have not agreed to become
responsible for consequential damages or made any express warranties to third
parties with respect to any products distributed or sold by Sellers and (ii)
there are no warranties (express or implied) outstanding with respect to any
products. A copy of each standard warranty of Sellers, if any, with respect to
such product is included in Section 3.14(b) of Sellers' Disclosure Memorandum.
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3.15 INVENTORIES.
(a) All inventories shown on the December 31, 1997
Balance Sheet consisted of, and all inventories thereafter acquired will
consist of, items of good and merchantable quality and quantity usable or
salable in the ordinary and regular course of Sellers' Business except for
obsolete items and items below standard quality, all of which have been written
off, or written down to net realizable value on the December 31, 1997 Balance
Sheet. Each inventory or class was priced at the lower of cost or market on
the first-in, first-out basis and, as to the classes of items inventoried and
methods of counting and pricing, such inventories were determined in a manner
consistent with prior years. Except to the extent, if any, disclosed in
Section 3.15 of Sellers' Disclosure Memorandum, Sellers have neither sold any
of its inventory under agreements with an express right of return, nor
consigned any inventory, and Sellers have no knowledge of any pending returns
of inventory in any quantity.
(b) There have been no changes in the inventories
reflected in the November 30, 1997 Balance Sheet and there will be no further
changes in any such inventories except those changes resulting from write down
or write offs, purchases in the ordinary and regular course of business and
sale of merchandise inventory in the ordinary and regular course of business.
3.16 SUPPLIERS AND CUSTOMERS. Except as set forth in Section 3.16
of Sellers' Disclosure Memorandum, no customer of Sellers has communicated to
Sellers in any manner his or its intention to cease to do business with or
trade with Sellers, or alter, modify or amend the terms with which it has
conducted business with Sellers whether as a result of, or in contemplation of,
the consummation of the transactions contemplated by this Agreement.
3.17 COMPLETE AND ACCURATE DISCLOSURE. No representation or
warranty made to Buyer in this Agreement or in connection with this
transaction, to include all previous negotiations between Buyer and Sellers,
contains or will contain an untrue statement of a fact, or omits or will omit
to state a fact necessary to make such representation or warranty not
misleading or necessary to enable a prospective purchaser of Sellers' Business
or the Assets to make a fully informed decision. All documents and information
which have been or will be delivered to Buyer or its representatives by or on
behalf of Sellers are and will be true, correct and complete copies of the
documents they purport to represent. There have been no changes in Sellers'
Business from the commencement of negotiations between Buyer and Sellers and
the Closing of this transaction.
3.18 LIABILITIES OF ALL-AMERICAN ICE, INC. Sellers hereby warrant
and represent that as successors in interest to All-American Ice, Inc., that
Sellers will remain liable for all obligations whatsoever of Sellers, All-
American Ice, Inc., and the Business.
3.19 ABSENCE OF SENSITIVE PAYMENTS. Sellers have not made or
maintained (i) any contributions, payments or gifts of its funds or property to
any official, employee or agent of any vendor, customer or supplier, or of any
governmental entity, where either the payment or the purpose of such
contribution, payment or gift was or is illegal under the laws of the United
States or any state thereof, or any other jurisdiction (foreign or domestic);
or (ii) any contribution, or
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reimbursement of any political gift or contribution made by any other person,
to candidates for public office, whether federal, state, local or foreign,
where such contributions by Sellers were or would be a violation of applicable
law.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Buyer is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas.
4.2 POWER AND AUTHORITY. Buyer has the requisite corporate power
and authority, and has been duly authorized, to enter into this Agreement and
to perform all of its obligations hereunder. Buyer represents and warrants to
Sellers that this Agreement has been duly executed and delivered by Buyer, and
constitutes a valid and binding obligation in accordance with its terms.
V. COVENANTS OF SELLER
Sellers, jointly and severally, hereby covenant and agree as follows:
5.1 CONDUCT OF BUSINESS. Between the date hereof and the Closing
Date, Sellers shall operate the Business in the ordinary course and continue
normal capital expenditures and maintenance in connection with the Assets prior
to the Closing Date, except (i) as may be permitted by this Agreement or (ii)
as necessary to consummate the transactions contemplated hereby.
5.2 INVESTIGATION BY BUYER.
(a) Between the date hereof and the Closing Date, Sellers
shall (i) give Buyer and its authorized representatives and advisors access, at
reasonable times and on reasonable notice, to all items of personal property
and Real Property comprising the Assets, books and records, personnel, offices,
and other facilities of the Assets, (ii) permit Buyer to make such inspections
thereof as Buyer may reasonably require, and (iii) cause its employees, and its
advisors to furnish to Buyer and its authorized representatives and advisors
such financial and operating data and other information with respect to the
Business prepared in the ordinary course of the Business as Buyer or its agent
shall from time to time reasonably request.
(b) Sellers agree that, subsequent to the Closing Date,
Buyer and its agents and accountants will be permitted reasonable access,
during normal business hours, and as often as Buyer may reasonably request,
consistent with reasonable requirements of Sellers, to the books and records of
Sellers and its affiliates, insofar as such books and records contain
information or data pertaining to the Assets prior to the Closing Date to the
extent such information is not otherwise available at the offices or other
facilities of the Buyer, and Buyer shall have the right to make copies thereof
and excerpts therefrom.
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5.3 CLOSING CONDITIONS. Sellers will, to the extent within its
control, use its best efforts to cause the conditions set forth in Article VII
to be satisfied by the Closing Date.
5.4 CONFIDENTIALITY. From and after the date hereof, Sellers
will, and will cause its officers, employees, principals; affiliates,
representatives, consultants and advisors, to hold in confidence all
confidential information in the possession of Sellers, its officers, employees,
principles, affiliates, representatives, consultants and advisors concerning
the Assets. Sellers will not release or disclose any such information to any
person other than Buyer and its authorized representatives. Notwithstanding the
foregoing, the confidentiality obligations of this Section shall not apply to
information:
(a) which Sellers are compelled to disclose by judicial
or administrative process, or, in the reasonable opinion of counsel,
by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to Sellers
by a third party who obtained such information other than as a result
of a breach of a confidential relationship.
5.5 PUBLIC ANNOUNCEMENT. Sellers and Buyer will cooperate in the
public announcement of the transactions contemplated by this Agreement, and,
other than as may be required by applicable law, no such announcement will be
made by either party without the consent of the other party, which consent
shall not be unreasonably withheld.
5.6 NO SHOPPING. Sellers shall not solicit, initiate or
participate, directly or indirectly, or cause any other person to solicit,
initiate or participate, directly or indirectly, in discussions or negotiations
with, or provide any information to, any other person (other than the Buyer)
concerning, or enter into any agreement providing for (other than in the
ordinary course of business) the acquisition of the Assets or part thereof
(whether by merger, purchase of stock or assets or other similar transaction),
other than the acquisition contemplated by this Agreement.
5.7 FURTHER ASSURANCES. Sellers will use their best efforts to
implement the provisions of this Agreement, and for such purpose Sellers, at
the request of Buyer, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Buyer such deeds, assignments, bills of sale, consents, documents
evidencing title and other instruments in addition to those required by this
Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably
deem necessary or desirable to implement any provision of this Agreement.
5.8 INSURANCE. Sellers shall maintain insurance through the
Closing Date with financially sound and reputable insurers unaffiliated with
Sellers in such amounts and against such risks as are adequate to protect the
Assets and the Business.
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5.9 NONCOMPETITION AGREEMENT. At the Closing, Sellers will enter
into and deliver to Buyer noncompetition agreement in the form attached hereto
as Exhibit 5.9 (the "Noncompetition Agreement").
5.10 CESSATION OF BUSINESS/CHANGE OF NAME. Sellers will cease to
conduct any business constituting the manufacturing, packaging, distribution
and/or storage of packaged ice products under the name of "All-American" or any
variation thereof.
5.11 ESCROW AGREEMENT. At the Closing, Sellers shall execute and
deliver to Buyer the escrow agreement in the form attached hereto as Exhibit
5.11 (the "Escrow Agreement").
5.12 DISCHARGE OF SELLERS' DEBTS. Sellers hereby agree and
acknowledge that Buyer is not assuming any debts of Sellers or the Business and
that Sellers remain responsible for and will discharge all debts that relate to
the Business and were incurred by Sellers prior to the Closing. Sellers
furthermore agree to enter into the Undertaking Agreement in the form attached
hereto as Exhibit 5.12.
VI. COVENANTS OF BUYER
6.1 ANCILLARY AGREEMENTS. At the Closing, Buyer will pay the
Purchase Price and enter into the Noncompetition Agreement and all other
ancillary documents required hereunder.
VII. CLOSING
7.1 TIME AND PLACE. The consummation of the sale and purchase of
the Assets and the execution of the Noncompetition Agreement, the Escrow
Agreement, the Undertaking Agreement and all other ancillary document required
or contemplated hereunder (the "Closing") shall take place at a mutually
agreeable time and in a mutually agreeable manner to include, but not limited
to, the exchange of facsimile signature page counterparts that have been signed
by the appropriate parties to this Agreement. The date of the Closing shall
herein be referred to as the "Closing Date."
7.2 SELLERS' OBLIGATIONS AT CLOSING. At the Closing, Sellers
shall execute, acknowledge (where appropriate) and deliver to Buyer in form
reasonably satisfactory to Buyer:
(a) An assignment or assignments assigning to Buyer the
use and possession of all that property comprising the Assets;
(b) copies of all certificates of occupancy, licenses,
permits, authorizations, and approvals required by law and issued by
all governmental authorities having jurisdiction, if any, and the
original of each bill for current real estate and personal property
taxes, together with proof of payment thereof (if any of the same have
been paid);
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(c) Bills of Sale, assignments or other suitable transfer
documents transferring to Buyer, the Assets, free and clear of all
liens and Encumbrances, in form reasonably satisfactory to counsel for
Buyer which includes the form UCC-3 or other appropriate form
indicating release of liens by any secured party and that no action of
redress or reclamation shall be sought by any secured party against
Buyer or the Assets;
(d) the Noncompetition Agreement;
(e) a Certificate of Compliance, in form and substance
satisfactory to Buyer, from Sellers indicating that Sellers have
complied with their obligations contained in this Agreement, that all
representations and warranties contained in this Agreement or in any
certificate required to be delivered in connection with this Agreement
shall be accurate at and as of the Closing with the same force and
effect as though made at Closing, and no adverse change with respect
to the Sellers has occurred;
(f) Sellers shall deliver a warranty deed transferring
the Real Property to Buyer, free and clear of all Encumbrances, along
with the Title Insurance Policy;
(g) Sellers will execute and deliver to Buyer the
Undertaking Agreement and the Escrow Agreement; and
(i) Sellers will execute and deliver to Buyer all other
ancillary documents required hereunder.
7.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer will:
(a) deliver to Sellers by wire transfer or check an
amount equal to $426,200 less amounts needed to discharge Encumbrances
and less $80,000 to be placed into escrow in accordance with the terms
set forth in this Agreement and the Escrow Agreement;
(b) deliver to the holders of any Encumbrances the
amounts necessary to discharge the Encumbrances against the Assets;
(c) deliver to Sellers executed counterparts of the
Noncompetition Agreement and all other ancillary documents required
hereunder; and
(d) a Certificate of Compliance from an officer of Buyer
indicating that Buyer has materially complied with its obligations,
representations and warranties contained in this Agreement.
(e) in the event that Sellers are not able to convey the
Real Property to Buyer at the Closing free and clear of all
Encumbrances, Buyer, at Buyer's sole discretion, shall have the option
to place $140,000 of the Purchase Price into escrow, in addition to
the Escrow Amount, with the Escrow Agent (subject to the same terms
and conditions of the
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Escrow Agreement) until such time that the Sellers are able to convey
said Real Property to Buyer with a title insurance policy as set
forth in this Agreement. During such time that the aforementioned
$140,000 that is held by the Escrow Agent, said $140,000 shall be
subject to the same claims as may be made against the Escrow Amount as
set forth in this Agreement and the Escrow Agreement. In the event
that Sellers are unable to convey the Real Property to Buyer free and
clear of all Encumbrances at the Closing, Sellers hereby agree to
lease the Real Property to Buyer at a lease rate of $1 per month until
such time that Sellers are able to convey the Real Property to Buyer
as contemplated by this Agreement. If Sellers are unable to convey
the Real Property to Buyer within 180 days of the Closing Date, Buyers
shall be under no further obligation to purchase the Real Property and
the $140,000 placed into escrow as additional escrow shall be returned
to Buyer.
VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to complete the transactions contemplated at the Closing shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of
Sellers to be performed on or before the Closing Date shall have been
duly performed in all respects;
(b) Representations and Warranties True; No Adverse
Change. The representations and warranties of Sellers contained
herein or in any certificate required to be delivered in connection
with this Agreement shall have been accurate on the date hereof and
shall be accurate at and as of the Closing and since the date hereof
there shall have occurred no adverse change in the business
operations, properties, prospects, Assets or condition of Sellers;
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Buyer from
consummating the transactions contemplated hereby;
(d) Third Party Creditors. All third party creditors of
the Business and the Assets will be paid in full and have released all
liens or claims against the Assets, or Sellers shall provide to Buyer
documentation from all third party creditors indicating that the third
party creditors have released their liens against the Assets and
consented to Sellers' conveyance of the Assets to Buyer free and clear
of all liens or other Encumbrances;
(e) Ancillary Agreements. Sellers shall have entered
into the Noncompetition Agreement, the Undertaking Agreement, the
Escrow Agreement and all other ancillary documents required hereunder;
and
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(f) Merger Agreement. Buyer and the shareholders of
Scianna's Party Ice, Inc. shall have consummated the Agreement and
Plan of Merger by and among Buyer and the shareholders of Scianna's
Party Ice, Inc. dated February 12, 1998.
8.2 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligation of
Sellers to complete the transactions contemplated at the Closing shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Performance. Each agreement of Buyer to be performed
on or before the Closing Date shall have been duly performed in all
material respects;
(b) Representations and Warranties True. The
representations and warranties of Buyer contained herein shall have
been true in all material respects;
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Sellers from
consummating the transactions contemplated hereby; and
(d) Merger Agreement. Buyer and the shareholders of
Scianna's Party Ice, Inc. shall have consummated the Agreement and
Plan of Merger by and among, Buyer and the shareholders of Scianna's
Party Ice, Inc. dated February 12, 1998.
IX. INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER BY SELLERS. Sellers agree to
indemnify, defend and hold harmless Buyer and Buyer's employees, agents, heirs,
legal representatives, and assigns from and against any and all claims, suits,
losses, expenses (legal, accounting, investigation and otherwise), damages and
liabilities, including, without limitation, tax liabilities (hereinafter,
collectively "Damages"), arising out of or relating to (i) any liability or
obligation of Sellers or the Business, (ii) any inaccuracy of any
representation or warranty set forth in this Agreement or the breach of any
covenant made by Sellers in or pursuant to this Agreement, (iii) any claim by
any third party creditor of the Business or All-American Ice, Inc., (iv) any
claim by any stockholder of All-American Ice, Inc., (v) any claim or cause of
action arising with respect to the conduct or condition of the Business or
Assets prior to the Closing, whether or not disclosed to Buyer. The obligation
of the Sellers to indemnify Buyer shall continue notwithstanding Buyer's
knowledge of the inaccuracy of any representation or warranty of the Sellers'
set forth in this Agreement or in any document or certificate furnished or
required to be furnished pursuant to this Agreement.
9.2 INDEMNIFICATION OF SELLERS BY BUYER. Buyer agrees to
indemnify, defend and hold harmless Sellers from and against only those Damages
arising out of or relating to any material inaccuracy or any material
misrepresentation of any warranty of Buyer set forth in this Agreement or the
material breach of any covenant made by Buyer in or pursuant to this Agreement.
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9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party. Any claim of Buyer against
Sellers for any Damages shall be in accordance with the provisions set forth in
Section 9.6 herein.
9.4 RIGHT TO DEFEND. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within forty-five (45) days after receipt of the Notice of
Claim that the Indemnifying Party intends to assume the defense of such claim
and acknowledges its liability to indemnify the Indemnified Party for any
losses resulting from such claim; provided, however, that if the Indemnifying
Party does not elect to assume the defense of any claim, then (a) the
Indemnifying Party shall have the right to participate in the defense of such
claim or demand at its expense through counsel of its own choosing, provided
the Indemnified Party shall control the defense of such claim, (b) the
Indemnified Party may settle any such claim without the consent of the
Indemnifying Party, however, the Indemnifying Party may not settle any such
claim without the prior written consent of the Indemnified Party; and (c)
Section 9.5 hereof shall be inapplicable. Whether or not the Indemnifying
Party does choose to so defend such claim, the parties hereto shall cooperate
in the defense thereof and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be requested in connection therewith. To the extent Sellers
are the Indemnified Parties for any actual or threatened claim or demand by any
third party, Sellers shall have the right to control the prosecution of any
counterclaim or right related to such a claim or demand, provided that Sellers
agree to reasonably cooperate with Buyer with respect to the prosecution of
such counterclaim or right.
9.5 SETTLEMENT. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
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9.6 EFFECT OF TERMINATION. Without limiting any other rights the
parties may have, the parties specifically agree that the warranties,
representations and covenants contained in this Article will continue to be
enforceable following termination of this Agreement.
X. TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of Sellers
and Buyer;
(b) Misrepresentation or Breach. By Sellers if there has
been a material misrepresentation or a material breach of a warranty
or covenant herein or in any agreement required to be delivered
pursuant hereto on the part of the Buyer;
(c) Misrepresentation or Breach. By Buyer if there has
been a misrepresentation or a breach of a warranty or covenant herein
or in any agreement required to be delivered pursuant hereto on the
part of the Sellers;
(d) Failure of Condition to Buyer's Obligations. By
Buyer, if all of the conditions set forth in Section 8.1 have not been
satisfied;
(e) Failure of Condition to Sellers' Obligations. By
Sellers, if all of the conditions set forth in Section 8.2 have not
been satisfied;
(f) Court Order. By Sellers or Buyer if consummation of
the transactions contemplated hereby shall violate any nonappealable
final order, decree or judgment of any court or governmental body
having competent jurisdiction;
(g) Adverse Change. By Buyer if any event has occurred
after the date hereof which is, or will result in an adverse change in
the prospects, Business or condition of the Assets.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of Sellers and Buyer under
this Agreement shall terminate without further liability of Sellers or Buyer.
If the Sellers fail to consummate the transactions contemplated on
their part to occur on the scheduled Closing Date, in circumstances whereby all
conditions of the Closing set forth in Section 8.2 have been satisfied in all
material respects or waived, Buyer's sole remedy shall be to (i) to require
Sellers to consummate and specifically perform the transactions contemplated
hereby, in accordance with the terms of this Agreement, and to obtain from
Sellers any attorney fees incurred in connection with procuring such specific
performance or (ii) terminate this
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<PAGE> 17
Agreement and reimbursement of its out-of-pocket expenses incurred directly in
connection with the negotiation, preparation and performance of this Agreement.
If Buyer fails 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 8.1 have been satisfied in all respects or waived,
Sellers' sole remedy shall be to (i) to require Buyer to consummate and
specifically perform the transactions contemplated hereby, in accordance with
the terms of this Agreement, and to obtain from Buyer 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.
10.3 RIGHT TO PROCEED. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or 8.2 has not been
satisfied, Sellers or Buyer, in addition to any other rights which may be
available to it, respectively, shall have the right to waive any such condition
that is for its benefit and to require the other party hereto to proceed with
the Closing.
XI. MISCELLANEOUS
11.1 EXPENSES. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses. Any sales, use or transfer tax imposed on either
party as a result of the transfer of this transaction shall be paid solely by
Sellers.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing.
11.3 INUREMENT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto, except that Buyer may assign this Agreement to any entity
that acquires all of the assets or stock of Buyer.
11.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules
and Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
11.5 SEVERABILITY. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the remaining provisions
hereof and without affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
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11.6 INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
11.7 CAPTIONS AND HEADINGS; USE OF TERM "PERSON". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection
cross-references are to articles, sections and subsections within this
Agreement. As used herein, the term "person" shall mean any corporation,
partnership, venture, proprietorship, trust, benefit plan or other entity or
enterprise.
11.8 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
11.9 NOTICE. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to Sellers: John Stanley and Jennifer Scianna
1428 Beaver Circle
Bogalusa, Louisiana 70427
with a copy to: John Gallaspy
301 Louisiana Avenue
Bogalusa, Louisiana 70427
to Buyer: Packaged Ice Southeast, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis III, President
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St.
Suite 1500
San Antonio, Texas 78205
Attn: Alan Schoenbaum
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
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11.10 AGENTS OR BROKERS. Sellers and Buyer mutually represent and
agree with each other that no agents or brokers have been utilized in the
solicitation or negotiation of the sale of the Business and no fees,
commissions or expenses of any type shall be due or payable out of the proceeds
of the Purchase Price by either party to this Agreement.
11.11 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement, and all time limitations shall be strictly construed and rigidly
enforced. The failure or delay in the enforcement of any rights or interests
granted herein shall not constitute a waiver of any such right or interest or
be considered as a basis for estoppel.
11.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
11.13 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 Rules of the American Arbitration
Association by a single arbitrator to be located in San Antonio, Bexar County,
Texas, and judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof, and shall not be appealable.
[ASSET PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS]
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<PAGE> 20
[ASSET PURCHASE AGREEMENT SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE SOUTHEAST, INC.
By:
------------------------------------------
A.J. Lewis, III, President
---------------------------------------------
JOHN STANLEY SCIANNA, AN INDIVIDUAL
---------------------------------------------
JENNIFER SCIANNA, AN INDIVIDUAL
<PAGE> 21
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Exhibit A Bill of Sale
Schedule 2.1 Assets
Exhibit 5.9 Noncompetition Agreement
Exhibit 5.11 Escrow Agreement
Exhibit 5.12 Undertaking Agreement
Sellers' Disclosure Memorandum
General Warranty Deed
</TABLE>
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<PAGE> 1
EXHIBIT 10.5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
March 5, 1998 (the "Effective Date"), by and among Packaged Ice, Inc., a Texas
corporation ("Buyer"), John P. Barker and James M. Grimsley, two individuals
who, together, own all of the outstanding capital stock of Party Time Ice, Co.,
Inc., a Louisiana corporation (individually "Seller" and collectively the
"Sellers").
PRELIMINARY STATEMENTS
Sellers own all of the outstanding shares of capital stock of Party
Time Ice Co., Inc., a Louisiana corporation (hereinafter the "Company"), such
shares hereinafter referred to as the "Stock".
The Company is engaged in the manufacture and sale of packaged ice
products (such business being herein referred to as the "Business").
Sellers are desirous of selling to Buyer, and Buyer is desirous of
purchasing from Sellers, all of the Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties hereafter set forth, the
parties hereby agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"Accrued Expenses" shall mean all expenses accrued by the Company in
the normal course of business, however, accrued Taxes (as defined herein) and
accrued payroll expenses shall not be included in the calculation.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible. The Assets shall include, but shall not be
limited to, those items specifically described in Exhibit A attached hereto,
but shall not include the Excluded Assets.
"Capital Leases" shall mean those leases covering immovable property
and certain capital equipment used in the Business which are used in the direct
manufacturing, distribution and sale of packaged ice products. The property
comprising the Capital Leases is described in Exhibit B attached hereto.
"Closing" shall have the meaning set forth in Section 7.1 of this
Agreement.
<PAGE> 2
"Closing Date" shall have the meaning set forth in Section 7.1 of this
Agreement.
"Code" shall have the meaning set forth in Section 11.1 of this
Agreement.
"Company Plans" shall have the meaning set forth in Section 3.17 of
this Agreement.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage, lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, adverse claim, deed of
trust, or restriction on transfer of any nature whatsoever other than those
held by Buyer or granted by the Company at Buyer's request.
"Environmental Action" shall have the meaning set forth in Section
3.10 of this Agreement.
"Escrow Agreement" shall have the meaning set forth in Section 2.2(b)
of this Agreement.
"Escrow Agent" shall mean Bank One, National Association, located in
Baton Rouge, Louisiana.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"Excluded Assets" shall mean those assets of the Company that will be
distributed to the Sellers prior to Closing and shall not belong to the Company
on the Closing Date. The Excluded Assets will be described in Exhibit C
attached hereto.
"Financial Statements" shall have the meaning set forth in Section
3.3 of this Agreement.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
of this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Investment Letter" shall have the meaning set forth in Section 5.10
of this Agreement.
"Leases" shall have the meaning set forth in Section 3.12 of this
Agreement.
"Liabilities" shall have the meaning set forth in Section 2.2(a) of
this Agreement.
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<PAGE> 3
"Materials" shall have the meaning set forth in Section 3.10 of this
Agreement.
"Noncompetition Agreement" shall have the meaning set forth in Section
5.9 of this Agreement.
"Owned Real Property" shall mean all of that immovable property that
is owned by the Company and is more fully described in Schedule 3.12(e).
"PI Stock" shall have the meaning set forth in Section 2.2.
"Personal Property" shall have the meaning set forth in Section 3.13
of this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.2 of
this Agreement.
"Real Property" shall have the meaning as set forth in Section 3.12
of this Agreement.
"Sellers' Disclosure Memorandum" shall mean that schedule attached
hereto and incorporated herein by reference that lists and describes all
requested disclosures by Sellers concerning the Assets and the Business which
are the subject of this Agreement.
"Shareholder and Voting Agreements" shall mean the Voting Agreement
dated December 2, 1997, by an among the Buyer, Culligan Water Technologies,
Inc., and certain shareholders of the Buyer, the Voting Agreement, dated July
17, 1997, by and among the Buyer, SV Capital Partners, L.P. and certain
shareholders of Buyer, each of Amendment No.1, Amendment No.3 and the Amended
and Restated Voting Agreement, dated September 20, 1995 as amended, by and
among the Buyer and certain shareholders of Buyer, and each of Amendment No.1,
Amendment No.2 and the Amended and Restated Shareholders Agreement, dated
September 20, 1995, as amended, by and among the Buyer and certain shareholders
of Buyer.
"Stock" shall mean all of the capital stock of the Company outstanding
on the Closing Date.
"Tax or Taxes" shall have the meaning as set forth in Section 11.1
hereof.
"Trade Accounts Payable" shall mean all accounts payable accrued by
the Company that relate directly to the manufacture, storage, distribution and
sale of packaged ice products.
II. PURCHASE AND SALE
2.1. STOCK PURCHASE. At the Closing, subject to the terms, covenants
and conditions contained herein, Sellers shall sell to Buyer, and Buyer shall
purchase from Sellers, all of the Stock.
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<PAGE> 4
2.2 PURCHASE PRICE.
The purchase price for all of the Stock shall be Ten Million
Six Hundred Sixty One Thousand Dollars ($10,661,000) (the "Purchase Price"),
less the adjustments set forth hereinbelow. Five Hundred Thousand Dollars
($500,000) of the Purchase Price shall be payable in the form of 38,460 shares
of the $.01 par value common stock of Packaged Ice, Inc. ("PI Stock"), valued
at $13.00052 per share (the "Stock Portion"). Ten Million One Hundred Sixty
One Thousand Dollars ($10,161,000) less adjustments (the "Cash Portion"), of
the Purchase Price will be payable in the form of cash. The Cash Portion of
the Purchase Price shall be payable on the Effective Date and contemporaneously
with the execution of this Agreement as follows:
(a) The Cash Portion of the Purchase Price shall first be
used to pay and discharge all of the Company's debts, obligations and other
liabilities including, without limitation, all current liabilities (save and
except all Trade Accounts Payable and all Accrued Expenses), all long term
liabilities, all interest bearing debt and Encumbrances (excluding all Capital
Leases) (collectively, the "Liabilities") which are estimated by the Buyer and
the Company to exist as of the Closing Date.
(b) Five Hundred Thousand Dollars ($500,000) of the Cash
Portion of the Purchase Price shall be placed in an interest bearing escrow
(the "Escrow Amount") with the Escrow Agent and shall be payable pursuant to
the escrow agreement in the form attached hereto as Exhibit D (the "Escrow
Agreement").
(c) The Cash Portion of the Purchase Price remaining
after the estimated Liabilities have been paid and discharged and the Escrow
Amount has been placed in escrow, shall be paid directly to the Sellers on a
pro rata basis based on their ownership of the Stock in exchange for all of the
Stock owned by the Sellers. The intent and effect of this Section 2.2(c) is to
convey all of the outstanding Stock of the Company to Buyer with there being no
Liabilities (except Trade Accounts Payables and Accrued Expenses) or
Encumbrances immediately after Closing. Sellers hereby agree all Liabilities
which are not discharged at Closing shall be assumed by the Sellers through an
Undertaking Agreement in the form attached hereto as Exhibit E.
The Stock Portion of the Purchase Price shall be distributed at
Closing as follows:
(a) 19,230 shares of PI Stock shall be delivered to John
P. Barker; and
(b) 19,230 shares of PI Stock shall be delivered to James
M. Grimsley.
2.3 ADJUSTMENT TO PURCHASE PRICE AT CLOSING. The Purchase Price
will be adjusted at Closing as follows:
(a) if, as of the Closing Date, the Company's current
assets, including cash, accounts receivable and inventory, are less
than the sum of its Trade Accounts Payable
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<PAGE> 5
and Accrued Expenses, the Cash Portion of the Purchase Price shall be
reduced by an amount equal to the sum of its Trade Accounts Payable
and Accrued Expenses minus current assets, including cash, accounts
receivable and inventory; and
(b) if, as of the Closing Date, the Company's current
assets, including cash, accounts receivable and inventory, exceed the
sum of its Trade Accounts Payable and Accrued Expenses, the Cash
Portion of the Purchase Price shall be increased by the amount equal
to the current assets, including cash, accounts receivable and
inventory, minus Trade Accounts Payable and Accrued Expenses.
2.4 POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price
shall be subject to the following adjustments:
(a) On or before thirty-one (31) days after the Closing
Date, Sellers shall, at their sole cost and expense, pursuant to
Section 5.13 hereof, deliver to Buyer a copy of the compiled balance
sheet of the Company as of the Closing Date prepared by Gary Magee,
CPA, (the "Closing Date Balance Sheet") certified by Sellers to the
best of their knowledge and belief to be true and correct. The
Closing Date Balance Sheet shall (i) fairly present the financial
position of the Company as at the close of business on the Closing
Date in accordance with GAAP, and (ii) include a detailed schedule of
Liabilities. The Closing Date Balance Sheet shall be used to
calculate any post closing adjustments to the Purchase Price as of the
Closing Date and the amount of any Liabilities to be paid by Sellers,
all in accordance with the terms and conditions set forth in this
Agreement.
(b) To the extent the Sellers received at Closing an
amount of cash in excess of what they are entitled to hereunder,
Sellers shall pay to Buyer such amount within thirty (30) days after
such determination. To the extent Sellers are entitled to a greater
amount of cash than they received at Closing, then Buyer and/or the
Company shall pay such amount to Sellers within thirty (30) days
after such determination. It is understood and agreed between the
parties that any such determinations hereunder shall be computed, and
notice given to the applicable party, within sixty (60) days of the
Closing Date.
2.5 PRORATION. The parties shall prorate at the Closing the
current year's ad valorem taxes and prepaid expenses, based on the latest
available statements from taxing authorities, whether for the current tax year
or the preceding tax year. Sellers' pro rata share of such taxes shall be the
portion attributable to the period through the day preceding the Closing Date,
prorated by days. Prorated amounts shall be payable in the manner set forth
below:
(a) If a prorated amount is payable by Buyer and
determinable at the Closing, it shall be added to the amount payable
by Buyer at the Closing.
(b) If a prorated amount is payable by Buyer and not
determinable at the Closing, it shall be billed by Sellers when
determinable and promptly paid by Buyer to Sellers.
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<PAGE> 6
(c) If a prorated amount is payable by Sellers and
determinable at the Closing, it shall be deducted from the amount
otherwise payable by Buyer at the Closing.
(d) If a prorated amount is payable by Sellers and not
determinable at the Closing, it shall be billed by Buyer when
determinable and promptly paid by Sellers to Buyer.
2.6 EMPLOYMENT AGREEMENT. At the Closing, Buyer shall enter into
an employment agreement with James M. Grimsley in the form of Exhibit F
attached hereto.
III. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Louisiana
and has all requisite power and authority to own, lease and operate the
Business as presently conducted and to enter into this Agreement and to perform
its obligations hereunder and is duly qualified to do business in any foreign
jurisdiction in which it is currently conducting business operations. All
shares of Stock owned by Sellers are validly issued, fully paid and
nonassessable. Other than this Agreement, there is no subscription, option,
warrant, call, right, agreement or commitment relating to the issuance, sale,
delivery, repurchase or transfer by Sellers or the Company (including any right
of conversion or exchange under any outstanding security or other instrument)
of any of its capital stock or other securities. Sellers own and have good and
marketable title to the Stock, free and clear of all Encumbrances. The Stock
represents all of the issued and outstanding capital stock of the Company.
Upon the sale of the Stock to Buyer at Closing, Sellers will transfer to Buyer
the entire legal and beneficial interest in all Stock, free and clear of any
Encumbrances. There are no voting trusts, proxies or any other agreements or
understandings with respect to the voting of the Stock.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. This
Agreement has been duly executed and delivered by Sellers and constitutes the
valid and binding obligation of Sellers, enforceable against them in accordance
with its terms. Except as set forth on Section 3.2 of Sellers' Disclosure
Memorandum, the execution, delivery and performance of this Agreement by
Sellers and the consummation of the transactions contemplated hereby will not
require the consent, approval or authorization of any third party or
governmental authority, and will not, with or without the giving of notice, the
passage of time, or both, violate, conflict with, result in a default, breach
or loss of rights under, or result in the creation of any Encumbrance pursuant
to, any lien, encumbrance, instrument, agreement, or understanding, or any law,
regulation, rule, order, judgment or decree, to which Sellers are a party or by
which they are bound or affected.
3.3 FINANCIAL STATEMENTS. Sellers have previously caused to be
furnished to Buyer the Company's audited balance sheets as of December 31, 1996
and December 31, 1997, and the related audited statements of income and
statements of cash flow for the fiscal years then ended (such balance sheets
and related statements are collectively referred to herein as the "Financial
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<PAGE> 7
Statements"). The Financial Statements taken as a whole present fairly the
financial position of the Business as of December 31, 1996, and December 31,
1997, respectively, and the results of operations for such periods, all in
accordance with GAAP.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by Sellers in Sellers' Disclosure
Memorandum and except for Trade Accounts Payable arising in the ordinary course
of business and consistent with past practice since the date of the Company's
December 31, 1997 Balance Sheet, Sellers have operated the Company in the
ordinary course and have incurred no liabilities which would be required by
GAAP to be reflected on a balance sheet of the Company as of the date hereof or
disclosed in the notes thereto. Since December 31, 1997 there has not been any
material adverse change in the business, operations, properties, prospects,
assets or condition of the Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
3.4 SHAREHOLDER DEBT. There are no Encumbrances held by Sellers
whatsoever against the Company or the Assets.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. Sellers
acknowledge that Buyer is purchasing the Stock of the Company for the express
purpose of operating a packaged ice manufacturing and distribution business.
All material items comprising the Assets have been continuously used, or used
as may normally be required, by the Company in connection with the Business and
are now in serviceable condition, unless expressly disclosed to the contrary by
Sellers in Section 3.5 of Sellers' Disclosure Memorandum.
3.6 GOOD TITLE. Except as set forth in Section 3.6 of Sellers'
Disclosure Memorandum, the Company has good, legal and marketable title to all
of the Assets, including the Owned Real Property, free and clear of
Encumbrances.
3.7 LITIGATION. Except as set forth on Section 3.7 of Sellers'
Disclosure Memorandum, there is no pending claim, action, suit, proceeding or
investigation (judicial, governmental or otherwise), nor any order, decree or
judgment in effect, or, to the knowledge of Sellers, threatened, against or
relating to Sellers, the Company or the Assets, or the transactions
contemplated by this Agreement, and 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 claim, action, suit or proceeding.
3.8 COMPLIANCE WITH LAWS. Sellers and the Company have complied
with all laws, rules, regulations, ordinances, orders, judgments and decrees
relating to the Company, the Stock and the Assets. The ownership and/or use of
the Assets and the conduct of the Business as it specifically relates to the
Assets does not conflict with the rights of any other person.
3.9 TAXES. Except as set forth in Section 3.9 of Sellers'
Disclosure Memorandum, the Company has, within the time and manner prescribed
by law, filed all material returns, declarations, reports and statements
required to be filed by it (together, "Returns") in respect of any Taxes and
each such Return has been prepared in compliance in all material respects with
all
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<PAGE> 8
applicable laws and regulations and is true and correct in all material
respects, and the Company has, within the time and in the manner prescribed by
applicable law, paid all Taxes that are shown to be due and payable with
respect to the periods covered thereby. Except as set forth in Section 3.9 of
Sellers' Disclosure Memorandum (i) the Company has not requested or been
granted an extension of the time for filing any Return which has not yet been
filed; (ii) the Company has not consented to extend to a date later than the
date hereof the time in which any Tax may be assessed or collected by any
taxing authority; (iii) no deficiency or proposed adjustment which has not been
settled or otherwise resolved for any amount of Tax has been proposed, asserted
or assessed by any taxing authority against the Company; (iv) there is no
action, suit, taxing authority proceeding, or audit now in progress, pending
or, to Sellers' knowledge, threatened against or with respect to the Company;
(v) no claim has been made by a taxing authority in a jurisdiction where the
Company does not file Tax Returns that the Company is subject to Taxes assessed
by such jurisdiction; (vi) there are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the Assets; (vii) the Company will not be
required to include any amount in taxable income or exclude any item of
deduction or loss from taxable income for any taxable period (or a portion
thereof) ending after the Closing Date as a result of any of the following: (A)
a change in method of accounting for a taxable period ending on or prior to the
Closing Date, (B) any "closing agreement," as described in Code Section 7121
(or any corresponding provision of state, local or foreign income Tax law)
entered into on or prior to the Closing Date, (C) any sale reported on the
installment method where such sale occurred on or prior to the Closing Date,
and (D) any prepaid amount received on or prior to the Closing Date; and (viii)
Company has no obligation or liability for the payment of Taxes of any other
person as a result from any expressed obligation to indemnify another person,
or as a result of such Company assuming or succeeding to the Tax liability of
any other person as successor, transferee or otherwise.
3.10 ENVIRONMENTAL. The Company 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 concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws, without limitation, relating to occupational safety and health, good
manufacturing practices for food products, wetlands, emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes (collectively, "Materials")
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 such Materials, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
(collectively, an "Environmental Action") is pending or threatened to be
commenced against it or the Sellers alleging any failure so to comply, nor is
the Company or the Sellers aware of any circumstances or conditions which may
cause any such Environmental Action to be filed or commenced against the
Sellers or the Company. Without limiting the generality of the preceding
sentence, the Sellers and the Company have obtained and been in material
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
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<PAGE> 9
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in such laws.
3.11 INSURANCE. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Business. The Company has not been refused any insurance with respect to
its assets or operations, and its coverage has not been limited, terminated or
cancelled by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, during the last three (3)
years. Section 3.11 of Sellers' Disclosure Memorandum lists all claims, which
(including related claims which in the aggregate) exceed $10,000 which have
been made by the Company in the last three years under any workers'
compensation, general liability, property or other insurance policy applicable
to Sellers or any of the Assets. Except as set forth on Section 3.11 of
Sellers' Disclosure Memorandum, there are no pending or threatened claims under
any insurance policy. Such claim information includes the following
information with respect to each accident, loss, or other event: (a) the
identity of the claimant; (b) the nature of the claim; (c) the date of the
occurrence; (d) the status as of the report date and (e) the amounts paid or
expected to be paid or recovered.
3.12 REAL PROPERTY.
(a) Section 3.12 of Sellers' Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel of
immovable property owned by, leased to or used by the Company (the "Real
Property") and (ii) a complete and accurate list of all current leases, lease
amendments, subleases, assignments, licenses and other agreements to which the
Real Property is subject (the "Leases"). Sellers have delivered to Buyer true
and complete copies of the Leases. The Sellers' Disclosure Memorandum contains
the address of each property, together with a summary description of the
buildings and improvements thereon, the name and address of each landlord where
the Company is a tenant, and of each tenant where the Company is a landlord,
the commencement and expiration dates of each lease, the monthly rent and
additional rent payable under such lease, and the date to which such rent has
been paid, the amount of any deposits, security or otherwise, made under such
lease, and whether the consent of any other party to the lease is required to
consummate the transaction contemplated hereby.
(b) Except as disclosed in Section 3.12 of Sellers'
Disclosure Memorandum (i) each of the Leases is in full force and effect and
has not been amended or modified; (ii) neither the Company, nor any other party
thereto, is in default thereunder, nor is there any event which with notice or
lapse of time, or both, would constitute a default thereunder; (iii) Sellers
have received no notice that any party to any Lease intends to cancel,
terminate or refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder; and (iv) no monthly rental under the Leases
has been paid more than one month in advance.
(c) The zoning of each parcel of the Real Property
permits the improvements located thereon and the continuation of business
presently being conducted thereon. The Real
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Property is served by utilities and services necessary for the normal and
continued operation of the business presently conducted thereon.
(d) At Closing, the Owned Real Property and the Company's
interest in the leases will be free and clear of all Encumbrances or other
restrictions which would materially affect the use for which it is held by the
Company. Sellers have not received notice that any of the Real Property is
subject to any governmental decree or order to be sold, or is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor has any such condemnation, expropriation or
taking been proposed.
(e) The Company is the owner of the Owned Real Property
described in Schedule 3.12(e) attached hereto.
3.13 PERSONAL PROPERTY.
(a) Exhibit A is an accurate schedule as of December 31,
1997 describing, and specifying the general location of all material inventory,
motor vehicles, machinery, fixtures, equipment, furniture, supplies, tools, and
intangible assets in the possession of, or used by the Company other than the
Excluded Assets (the "Personal Property").
(b) Each material lease, license, rental agreement,
contract of sale or other agreement applicable to any Personal Property is
listed in Section 3.13 of Sellers' Disclosure Memorandum and is in full force
and effect; neither Sellers nor any other party thereto is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. The Company has received no notice that
any party to any such lease, license, rental agreement, contract of sale or
other agreement intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. No
Personal Property is subject to any lease, license, contract of sale or other
agreement that is adverse to the business, properties or financial condition of
the Company.
3.14 CONTRACTS. Section 3.14 of Sellers' Disclosure Memorandum
contains a complete and accurate list of all presently effective contracts,
leases and other material agreements to which the Company is a party and are
not cancelable on notice of thirty days or less (hereinafter "Contracts").
Section 3.14 of Sellers' Disclosure Memorandum shall also describe true and
complete copies (or summaries in the case of oral contracts) of each Contract
which has been delivered to Buyer by Sellers, including, without limitation,
any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any
such obligation for the borrowing of money;
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(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either
within or outside the United States relating to sharing of present or
future commissions, fees or other income or profits;
(d) lease, license, rental agreement, contract of sale or
other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement binding against the Company;
(h) broker or distributorship contract; or
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts
and/or rebates);
(j) employment contracts.
Except as disclosed in Section 3.14 of Sellers' Disclosure Memorandum,
each of the Contracts is in full force and effect and has not been amended or
modified and neither the Company, nor any other party thereto, is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. The Company has received no notice that
any party intends to cancel, terminate or refuse to renew any such Contract or
to exercise or decline to exercise any option or other right thereunder.
3.15 LABOR MATTERS. There are no controversies pending or
threatened between the Company and any employees of the Company. The Company
has complied with all laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining,
immigration, safety and the payment of withholding and social security and
similar taxes, and the Company has no liability for any arrears of wages or
taxes or penalties for failure to comply with any of the foregoing.
3.16 ABSENCE OF SENSITIVE PAYMENTS. Neither the Company nor
Sellers have made or maintained (i) any contributions, payments or gifts of its
or their funds or property to any governmental official, employee or agent
where either the payment or the purpose of such contribution, payment or gift
was or is illegal under the laws of the United States or any state thereof, or
any other jurisdiction (foreign or domestic); or (ii) any contribution, or
reimbursement of any political gift or contribution made by any other person,
to candidates for public office, whether federal, state, local or foreign,
where such contributions by the Company or Sellers were or would be a violation
of applicable law.
3.17 EMPLOYEE BENEFITS. All employee benefit plans (whether or not
covered by ERISA), deferred compensation or executive compensation plans for
employees, directors or
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independent contractors, and all other employee or independent contractor
arrangements or programs that are maintained or contributed to by the Company
(collectively, the "Company Plans") have been administered and operated in all
material respects in compliance with their terms, ERISA, if applicable, the
Code and other applicable law. All Company Plans that are intended to be
qualified under Section 401(a) of the Code are so qualified and a current
favorable IRS determination letter exists for each such plan and covers the
amendments required by the Tax Reform Act of 1986. All funded Company Plans
are fully funded according to their terms and applicable law. To the knowledge
of the Sellers no prohibited transaction or breach of fiduciary duty under
ERISA has been committed by any fiduciary, disqualified person or party in
interest of any Company Plan. The Company has no liability, contingent or
otherwise, under Title IV of ERISA. All Company Plans are listed on Schedule
3.17. Copies of all documents comprising Company Plans, all funding vehicles
and ancillary documents for such plans, all Forms 5500 (or other annual
reports) for the past two plan years for applicable Company Plans, all
administrative forms for Company Plans, and all IRS determination letters have
been made available to Buyer.
3.18 CAPITAL IMPROVEMENTS. Section 3.18 of Sellers' Disclosure
Memorandum describes all of the capital improvements or purchases or other
capital expenditures (as determined in accordance with GAAP) which the Company
has committed to or contracted for which have not been completed prior to the
date hereof and the cost and expense reasonably estimated to complete such work
and purchases.
3.19 CONSENTS. Except as set forth in the Sellers' Disclosure
Memorandum, no consent or approval of any public body or authority, and no
consents or waivers from other parties to the Leases, material licenses,
franchises, permits, agreements, Contracts or other instruments are required to
be obtained by the Company as a result of the transfer of the Stock
contemplated by this Agreement to (i) avoid the loss of any Assigned Leases,
material license, franchise, permit or other instrument or the creation of any
lien or other claim on any Asset pursuant to the terms of any law, regulation,
order, agreement or other legal requirement binding upon Sellers and/or the
Company relating to the Business or to which any such Asset may be subject, or
(ii) to enable Buyer to continue the operation of the Business substantially as
conducted prior to the Closing. Sellers further covenant that the transfer of
Stock contemplated by this Agreement does not require the consent of any third
party.
3.20 WARRANTIES. Except as described in Section 3.20 of the
Sellers' Disclosure Memorandum, (i) Neither Sellers nor the Company have agreed
to become responsible for consequential damages or made any express warranties
to third parties with respect to any products distributed or sold by the
Company, and (ii) there are no warranties (express or implied) outstanding with
respect to any products other than any such implied by law. A copy of each
standard warranty of the Company with respect to such product is included in
Section 3.20 of the Sellers' Disclosure Memorandum.
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3.21 INVENTORIES.
(a) All inventories shown on the December 31, 1997
balance sheet of the Company consisted of, and all inventories
thereafter acquired will consist of, items of good and merchantable
quality and quantity usable or salable in the ordinary and regular
course of the Company's business except for obsolete items and items
below standard quality, all of which have been written off, or written
down to net realizable value on the December 31, 1997 balance sheet of
the Company. Each inventory or class was priced at the lower of cost
or market on the first-in, first-out basis and, as to the classes of
items inventoried and methods of counting and pricing, such
inventories were determined in a manner consistent with prior years.
Except to the extent, if any, disclosed in Section 3.21 of the
Sellers' Disclosure Memorandum, the Company has neither sold any of
its inventory under agreements with an express right of return, nor
consigned any inventory, and Sellers and the Company have no knowledge
of any pending returns of inventory in any material quantity.
(b) There have been no material changes in the
inventories reflected in the December 31, 1997 balance sheet of the
Company and there will be no further changes in any such inventories
except those changes resulting from write down or write-offs,
purchases in the ordinary and regular course of business, and sale of
merchandise inventory in the ordinary and regular course of business.
3.22 SUPPLIERS AND CUSTOMERS. Except as set forth in Section 3.22
of the Sellers' Disclosure Memorandum and to Sellers' and the Company's actual
knowledge, no customer of the Company has communicated to Sellers or the
Company, in any manner, his or its intention to cease to do business with or
trade with the Company, or materially alter, modify or amend the terms with
which it has conducted business with the Company whether as a result of, or in
contemplation of, the consummation of the transactions contemplated by this
Agreement.
3.23 ACCOUNTS RECEIVABLE. Except as otherwise indicated in
Section 3.23 of the Seller's Disclosure Memorandum, all accounts receivable of
the Company have arisen out of bona fide transactions in the ordinary course of
business, and each such account receivable constitutes a valid and binding
obligation of the obligor, maker, co-maker, guarantor, endorser or debtor
thereof or thereunder and is collectible in full within 60 days.
3.24 COMPLETE AND ACCURATE DISCLOSURE. No representation or
warranty made to Buyer in this Agreement or in connection with this transaction
contains or will contain an untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make such representation or
warranty not misleading or necessary to enable Buyer to make a fully informed
decision with respect to its purchase of the Stock. All documents and
information which have been or will be delivered to Buyer or its
representatives by or on behalf of the Company are and will be true, correct
and complete copies of the documents they purport to represent.
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IV. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Buyer is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas.
4.2 POWER AND AUTHORITY. Buyer has the requisite corporate power
and authority, and has been duly authorized, to enter into this Agreement and
to perform all of its obligations hereunder. Buyer represents and warrants to
Sellers that this Agreement has been duly executed and delivered by Buyer, and
constitutes a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms. The execution, delivery and performance of this
Agreement by Buyer, and the consummation of the transactions contemplated
hereby, will not require the consent, approval or authorization of any third
party or governmental authority, and does not violate any federal or state
securities laws.
4.3 TRANSFER OF STOCK PORTION. The Stock Portion shall be
transferred to the Sellers free and clear of any encumbrances, assessments,
liens, voting requirements or other shareholder agreements, rights of first
refusal or other restrictions or limitations upon transfer, other than the
Shareholder and Voting Agreements.
V. COVENANTS OF SELLERS
Sellers hereby covenant and agree as follows:
5.1 CONDUCT OF BUSINESS. Prior to the Closing Date, Sellers shall
cause the Company to operate the Business in the ordinary course and continue
normal capital expenditures and maintenance prior to the Closing Date, except
(i) as may be permitted by this Agreement or (ii) as necessary to consummate
the transactions contemplated hereby and previously disclosed in writing to and
approved by Buyer.
5.2 INVESTIGATION BY BUYER. Prior to the Closing Date, Sellers
shall (i) give Buyer and its authorized representatives and advisors access, at
reasonable times and on reasonable notice, to all items of Personal Property,
books and records, personnel, offices, and other facilities of the Company,
(ii) permit Buyer to make such inspections thereof as Buyer may reasonably
require, and (iii) cause its employees, and its advisors to furnish to Buyer
and its authorized representatives and advisors such financial and operating
data and other information with respect to the Business prepared in the
ordinary course of the Business as Buyer or its agent shall from time to time
reasonably request.
5.3 CLOSING CONDITIONS. Sellers will, to the extent within their
control, use their best efforts to cause the conditions set forth in Section
8.1 to be satisfied by the Closing Date.
5.4 CONFIDENTIALITY. From and after the date hereof, Sellers
will, and will cause the Company and their officers, employees,
representatives, consultants and advisors to, hold in
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confidence all confidential information in the possession of Sellers or the
Company, its affiliates or its financial advisor concerning the Company.
Sellers will not release or disclose any such information to any person other
than Buyer and its authorized representatives. Notwithstanding the foregoing,
the confidentiality obligations of this Section shall not apply to information:
(a) which Sellers or the Company is compelled to disclose
by judicial or administrative process, or, in the reasonable opinion
of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to Sellers
or the Company by a third party who obtained such information other
than as a result of a breach of a confidential relationship.
5.5 PUBLIC ANNOUNCEMENT. Sellers and Buyer will cooperate in the
public announcement of the transactions contemplated by this Agreement, and,
other than as may be required by applicable law, no such announcement will be
made by either party without the consent of the other party, which consent
shall not be unreasonably withheld.
5.6 NO SHOPPING. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither Sellers nor the Company shall (and Sellers and the Company shall cause
their respective affiliates, officers, directors, employees, representatives
and agents not to) directly or indirectly, solicit, initiate or participate in
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Buyer or
an affiliate or an associate of Buyer) concerning, or enter into any agreement
providing for, any merger, sale of material assets, sale of stock or similar
transactions involving the Company, the Stock or the Assets.
5.7 FURTHER ASSURANCES. Sellers will use their best efforts to
implement the provisions of this Agreement, and for such purpose Sellers, at
the request of Buyer, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Buyer such deeds, assignments, bills of sale, consents, documents
evidencing title and other instruments in addition to those required by this
Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably
deem necessary or desirable to implement any provision of this Agreement.
5.8 INSURANCE. Sellers shall cause and the Company shall continue
to maintain insurance through the Closing Date with financially sound and
reputable insurers unaffiliated with Sellers in such amounts and against such
risks as are adequate in the judgment of Sellers to protect the Assets and the
Business.
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5.9 NONCOMPETITION AGREEMENT. At the Closing, Sellers will enter
into a noncompetition agreement in the form attached hereto as Exhibit G (the
"Noncompetition Agreement").
5.10 INVESTMENT LETTER/SHAREHOLDER AND VOTING AGREEMENTS. At the
Closing, each Seller that is receiving PI Stock shall execute and deliver to
Buyer the investment letter in the form attached hereto as Exhibit H (the
"Investment Letter") and counterparts to the Shareholder and Voting Agreements.
5.11 ESCROW AGREEMENT. At the Closing, Sellers shall execute and
deliver to Buyer the Escrow Agreement.
5.12 TERMINATION OF PROFIT SHARING AND PENSION PLANS. Prior to the
Closing, the Company Plans will be terminated by resolution of the board of
directors of the Company and amended as appropriate to effect such termination.
It is understood and agreed that the Company Plans will be terminated and wound
up in accordance with their respective terms and applicable law.
In the event that as of the Closing Date there are additional sums
that have accrued to the Company Plans but such amounts have not been paid,
then Sellers shall remain jointly and severally liable for such amounts and
shall reimburse the Company for any amounts that the Company is required to
make in this regard.
Sellers hereby covenant that they will take all necessary actions to
file the appropriate requests with the Internal Revenue Service to obtain a
favorable determination letters with respect to the termination of the Company
Plans and will bear all costs associated with such favorable determination.
5.13 POST-CLOSING FINANCIAL STATEMENTS. Sellers shall provide to
Buyer, within thirty-one (31) days of the Closing Date, financial statements of
the Company through the Closing Date.
5.14 POST-CLOSING INVENTORY SCHEDULE. Seller shall provide to
Buyer, within ten (10) days after the Closing Date, a schedule of inventory of
the Company as of the Closing Date which includes packaging materials,
supplies, ice inventory and other inventoried goods listed by category and by
location, along with all supporting documentation thereof (including invoices
and other sales records).
VI. COVENANTS OF BUYER
Buyer hereby covenants and agrees as follows:
6.1 CLOSING CONDITIONS. Buyer will, to the extent within its
control, use its best efforts to cause the conditions set forth in Section 8.2
to be satisfied by the Closing Date.
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6.2 ANCILLARY AGREEMENTS. At the Closing, Buyer will enter into
the Noncompetition Agreement and the Escrow Agreement.
6.3 FURTHER ASSURANCES. Buyer will use its best efforts to
implement the provisions of this Agreement and, for such purpose, Buyer, at the
request of Sellers, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Sellers such consents, documents and other instruments, in
addition to those required by this Agreement, in form and substance
satisfactory to Sellers, as Sellers may reasonably deem necessary or desirable
to implement any provision of this Agreement.
VII. CLOSING
7.1 TIME AND PLACE. The consummation of the sale and purchase of
the Stock and the execution of the Escrow Agreement and Noncompetition
Agreement (the "Closing") shall take place at a mutually agreeable time and
place on or before March 5, 1998. The date of the Closing shall herein be
referred to as the "Closing Date."
7.2 SELLERS' OBLIGATIONS AT CLOSING. At the Closing, Sellers
shall execute, acknowledge, deliver, or cause to be delivered, where
appropriate, to Buyer in form reasonably satisfactory to Buyer:
(a) stock certificates representing all of the Stock,
duly endorsed for transfer or accompanied by stock powers duly
executed in blank, and any other documents that are necessary to
transfer to Buyer good and marketable title to the Stock;
(b) the written approvals, consents and certificates
referred to in Section 3.2 of Sellers' Disclosure Memorandum.
(c) the opinion of counsel referred to in Section 8.1(f).
(d) letters of resignation of the officers and directors
of the Company.
(e) all other documents and certificates required to be
delivered to Buyer pursuant to this Agreement, including without
limitation, the Noncompetition Agreement, the Escrow Agreement, the
Employment Agreement, the Investment Letter, the Shareholder and
Voting Agreements, and the Undertaking Agreement.
From time to time following Closing, Sellers will execute and
deliver such instruments and take such action as Buyer may reasonably request
in order to more effectively transfer, convey, assign and deliver to Buyer, and
to put Buyer in actual possession and operating control of, the Company and its
Assets.
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7.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer will:
(a) pay any remaining Cash Portion of the Purchase Price
in accordance with Section 2.2 of this Agreement;
(b) deliver the Stock Portion of the Purchase Price in
accordance with Section 2.2 of this Agreement;
(c) deliver to Sellers executed counterparts of the
Noncompetition Agreement, the Undertaking Agreement, the Employment
Agreement, and the Escrow Agreement.
VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to complete the transactions contemplated at the Closing shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of
Sellers to be performed or complied with on or before the Closing Date
shall have been duly performed or complied with in all material
respects.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Sellers
contained herein shall be true and correct, as expressly stated
herein, on the Closing Date.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Buyer from
consummating the transactions contemplated hereby.
(d) Third Party Creditors. All Liabilities of the
Company will be paid in full, and all Encumbrances against the Stock
and Assets, including all Owned Real Property, will be paid or
discharged, or otherwise assumed as an obligation of the Sellers
pursuant to the Sellers' Undertaking Agreement.
(e) Opinion of Counsel for Sellers Buyer shall have
received the opinion of Seller's Counsel dated as of the Closing Date,
in form and substance satisfactory to Buyer and Buyer's counsel,
subject to reasonable and customary qualifications and exceptions, as
set forth on Exhibit I.
8.2 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligation of
Sellers to complete the transactions contemplated at the Closing shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Performance. Each agreement and obligation of Buyer
to be performed or complied with on or before the Closing Date shall
have been duly performed or complied with in all material respects.
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(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Buyer contained
herein shall be true and correct on the Closing Date.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Sellers from
consummating the transactions contemplated hereby.
IX. INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER BY SELLERS. Sellers agree to
indemnify, defend and hold harmless Buyer and Buyer's employees, agents, heirs,
legal representatives, and assigns from and against any and all claims, suits,
losses, expenses (legal, accounting, investigation and otherwise), damages and
liabilities, including, without limitation, tax liabilities (hereinafter,
collectively "Damages"), arising out of or relating to (i) any liability or
obligation of the Company expressly assumed by Sellers at the Closing Date
hereunder pursuant to the Undertaking Agreement, (ii) any inaccuracy of any
representation or warranty set forth in this Agreement or the breach of any
covenant made by Sellers in or pursuant to this Agreement, as qualified by the
Sellers' Disclosure Memorandum (iii) the improper use, storage, or disposal of
any Materials by the Company prior to the Closing Date, or any Environmental
Action pending, threatened or accrued as of the Closing Date (whether known or
unknown, disclosed or undisclosed), or (iv) any legal claim or cause of action
arising with respect to the conduct or condition of the Company prior to the
Closing, whether or not disclosed by Sellers to Buyer prior to the Closing.
The obligation of the Sellers to indemnify Buyer shall continue notwithstanding
Buyer's knowledge of the inaccuracy of any representation or warranty of the
Company or the Sellers set forth in this Agreement or in any document or
certificate furnished or required to be furnished pursuant to this Agreement,
unless and except to the extent that Buyer's willful or grossly negligent
failure to disclose any such known inaccuracy of any representation or warranty
of the Company or the Sellers causes the Damages sustained by the Company or
Buyer to be aggravated or otherwise increased as a result of such willful or
grossly negligent failure to disclose.
9.2 INDEMNIFICATION OF SELLERS BY BUYER. Buyer agrees to
indemnify, defend and hold harmless Sellers from and against any and all
Damages arising out of or relating to any inaccuracy or any representation or
warranty of Buyer set forth in this Agreement or the breach of any covenant
made by Buyer in or pursuant to this Agreement.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to
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indemnify in respect to such action and shall not relieve the Indemnifying
Party of any other liability which they may have to any Indemnified Party
unless such failure to notify the Indemnifying Party prejudices the rights of
the Indemnifying Party. In addition to all other remedies provided hereunder
or by law, Buyer shall specifically have the right to make a claim against the
Escrow Amount for any of Buyer's Damages, as may be allowed and otherwise
provided in accordance with the express terms of the Escrow Agreement.
9.4 RIGHT TO DEFEND. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within forty-five (45) days after receipt of the Notice of
Claim that the Indemnifying Party intends to assume the defense of such claim
and acknowledges its liability to indemnify the Indemnified Party for any
losses resulting from such claim; provided, however, that if the Indemnifying
Party does not elect to assume the defense of any claim, then (a) the
Indemnifying Party shall have the right to participate in the defense of such
claim or demand at its expense through counsel of its own choosing, provided
the Indemnified Party shall control the defense of such claim, (b) the
Indemnified Party may settle any such claim without the consent of the
Indemnifying Party, however, the Indemnifying Party may not settle any such
claim without the prior written consent of the Indemnified Party; and (c)
Section 9.5 hereof shall be inapplicable. Whether or not the Indemnifying
Party does choose to so defend such claim, the parties hereto shall cooperate
in the defense thereof and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be requested in connection therewith. To the extent Sellers
are the Indemnified Parties for any actual or threatened claim or demand by any
third party, Sellers shall have the right to control the prosecution of any
counterclaim or right related to such a claim or demand, provided that Sellers
agree to reasonably cooperate with Buyer with respect to the prosecution of
such counterclaim or right.
9.5 SETTLEMENT. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.6 TIME LIMITATIONS. Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or with respect to any covenant or obligation to be performed and complied
with, on or prior to the Closing Date, other than those set forth in Sections
3.6, 3.9, and 3.12, unless, on or before two years from the Closing Date Buyer
notifies Sellers of a claim specifying the factual basis of that claim in
reasonable detail to
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the extent then known by Buyer. Any claim with respect to Sections 3.6, 3.9 or
3.12, or a claim for indemnification or reimbursement not based upon any
representation or warranty, or not based upon any covenant or obligation to be
performed and complied with prior to the Closing Date, must be made prior to
the expiration of the applicable statutory period of limitations, including any
extensions to such period, except to the extent otherwise provided in Section
9.7.
9.7 LIMITATIONS ON AMOUNT. Neither party hereto will have any
liability (for indemnification or otherwise) with respect to the matters
described in Section 9.1 (as to Sellers) or 9.2 (as to Buyer) until the total
of all Damages of the Indemnified Party with respect to such matters exceeds
$50,000 in the aggregate (the "Basket"), and then the Indemnifying Party shall
be responsible to the Indemnified Party for all Damages based thereon from the
first dollar of Damages without regard to the Basket; provided, however, the
Basket (as it applies to the Sellers as the Indemnifying Party) shall not apply
to any claim for indemnification arising out of Section 9.1(iii), a breach of
any representations, warranties or covenants contained in Sections 3.6, 3.9,
3.10 or 3.12, or the Sellers' obligation to discharge Liabilities. The maximum
liability that will be payable by Sellers with respect to the matters described
in Section 9.1(iii), or with respect to any alleged breach of any
representations, warranties or covenants set forth in Section 3.10, will be
limited to $1,000,000 in the aggregate for claims made prior to March 1, 1999,
and will be limited to $500,000 in the aggregate for claims made from March 1,
1999 until February 28, 2000, and no amount or liability will be owed by
Sellers for any claims occurring or made after February 28, 2000.
9.8 APPLICABILITY OF INSURANCE. 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 or
receivable by such party from any insurance policies with respect thereto.
X. INTENTIONALLY OMITTED
XI.TAX MATTERS
11.1. TAX DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Final Determination" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the
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filing of claims for refunds, amended returns or appeals from adverse
determinations) or (ii) the payment of Tax by the Company or Sellers, whichever
are responsible for payment of such Tax under applicable law, with respect to
any item disallowed or adjusted by a Taxing Authority, provided that such
responsible party determines that no action should be taken to recoup such
payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion thereof)
beginning on or after the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax, gross
income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign).
"Tax Indemnification Period" means, with respect to any Tax, any
Pre-Closing Tax Period of the Company.
11.2. COVENANTS.
(a) Without the prior written consent of Buyer, Sellers
shall not cause the Company to make or change any tax election, change any
annual tax accounting period, adopt or change any method of tax accounting,
file any amended 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 applicable to any Tax claim or
assessment or take or omit to take any other action similar to the foregoing
conduct, if any such action or omission would have the effect of increasing the
Tax liability of the Company or Buyer.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) 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 during the Tax
Indemnification Period in connection with this Agreement (including any real
property transfer Tax and any similar Tax) shall be accrued by the Company on
the Closing Date Balance Sheet and be paid by the Sellers, in accordance with
this Agreement, when due (including any applicable extensions), and the Company
will, at Sellers' expense, file all necessary Tax returns and other
documentation with respect to all such Taxes and fees.
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11.3. COOPERATION ON TAX MATTERS.
(a) Buyer and Sellers shall cooperate fully, 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 6043 of the Code and all Treasury
Regulations promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention 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. Buyer
shall cause the Company to: (i) to retain 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 requirements of any Taxing Authority or
any record retention agreements entered into with any Taxing Authority, and
(ii) to give Sellers reasonable written notice prior to destroying or
discarding any such books and records and, if Sellers so request, Buyer shall
allow Sellers to take possession of such books and records.
(b) Buyer and Sellers further 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 (including, but not limited
to, with respect to the transactions contemplated hereby).
11.4. TAX INDEMNIFICATION. Sellers hereby jointly and severally
indemnify Buyer against and agree to hold Buyer harmless from any loss,
liability or expense attributable to (i) any Tax with respect to income
(including, to the extent based on income, state franchise Taxes), transfer
Tax, employment or withholding Tax related to employee tips income (actual and
allocated) and related reporting requirements, and gross receipts or royalty
Tax in respect of any franchise operation and any other Tax of the Company
related to the Tax Indemnification Period, (ii) any Tax resulting from Sellers'
breach of the provisions of Section 11.2, and (iii) any liabilities, costs,
expenses (including, without limitation, reasonable expenses of investigation
and attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee or successor (the
sum of (i), (ii), and (iii) being referred to herein as a "Loss"). Buyer shall
give Sellers sufficient reasonable notice to enable Sellers to defend or
contest such Loss, and no less than ten days notice of any claim of Loss, and
Sellers shall have the opportunity to defend Buyer in accordance with Section
9.4 hereof.
Buyer shall indemnify Sellers for any Taxes that accrue
against the Company after the Closing Date.
11.5 PURCHASE PRICE ADJUSTMENT. Any amount paid by Sellers, Buyer
or the Company under Section 11.4 will be treated as an adjustment to the
relevant purchase price for all Tax purposes unless a Final Determination
causes any such amount not to constitute an adjustment to the relevant purchase
price. In the event of such a Final Determination, Buyer, the Company or
Sellers, as the case may be, shall pay an amount that reflects the hypothetical
Tax consequences of the receipt or accrual of such payment, using the maximum
statutory rate (or rates, in the case of an
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item that affects more than one Tax) applicable to the recipient of such
payment for the relevant year, reflecting for example, the effect of deductions
available for interest paid or accrued and for Taxes such as state and local
income Taxes. Any payment required to be made by Buyer or Sellers under this
Agreement that is not made when due shall bear interest at the rate per annum
determined, from time to time, under the provision of Section 6621(a)(2) of the
Code for each day until paid.
11.6. SURVIVAL. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
XII. MISCELLANEOUS
12.1 EXPENSES. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing.
12.3 INUREMENT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
12.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules
and Exhibits attached hereto, and the related agreements referred to herein
embody the entire agreement of the parties hereto, and supersede all prior
agreements and understandings, with respect to the subject matter hereof.
12.5 SEVERABILITY. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the remaining provisions
hereof and without affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
12.6 INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 CAPTIONS AND HEADINGS; USE OF TERM "PERSON". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection
cross-references are to articles, sections and subsections within this
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Agreement. As used herein, the term "person" shall mean any corporation,
limited liability company, partnership, venture, proprietorship, trust,
benefit plan or other entity or enterprise.
12.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA.
12.9 NOTICES. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, or by United States Mail, postage prepaid, by registered or
certified mail (return receipt requested), to the addressed indicated below and
shall be deemed given when received by the addressee thereof:
to Sellers: John P. Barker
Triangle Ice
903 Elizabethtown Road
Lumberton, NC 28358
James M. Grimsley
813 Daventry Drive
Baton Rouge, Louisiana 70808
with a copy to: John S. Campbell, Jr.
451 Florida Street, 8th Floor
Baton Rouge, LA 70801
to Buyer: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: James F. Stuart, Chief Executive Officer
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St., Suite 1500
San Antonio, Texas 78205
Attn: Alan Schoenbaum
or such other address or addresses as may be expressly designated by
either party by notice given in accordance with the foregoing provision.
12.10 AGENTS OR BROKERS. Sellers and Buyer mutually represent and
agree with each other that no agents or brokers have been utilized in the
solicitation or negotiation of the sale of the Business and no fees,
commissions or expenses of any type shall be due or payable out of the proceeds
of the purchase price by either party to this Agreement.
12.11 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of
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securities laws, shall be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in San
Antonio, Texas, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof, and shall not be appealable.
Judicial proceedings may be commenced only to enforce this arbitration
agreement or to enforce the results of arbitration; provided that such
prohibition shall not apply in the event that a court ordered injunction is an
appropriate remedy for a breach of this Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
12.13 NUMBER AND GENDER OF WORDS. When the context so requires in
this Agreement, words of gender shall include either or both genders and the
singular number shall include the plural.
12.14 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement, and all time limitations shall be strictly construed and rigidly
enforced. The failure or delay in the enforcement of any rights or interests
granted herein shall not constitute a waiver of any such right or interest or
be considered as a basis for estoppel.
12.15 CONDITIONAL OBLIGATIONS. None of the provisions of this
Agreement, any of the terms of payment of any amount(s), or any obligations
undertaken in this Agreement, are intended to create or imply any resolutory or
other condition, vendor's lien or privilege, and if such resolutory or other
condition, vendor's lien or privilege, is created or implied, all of the same
are hereby renounced or rescinded, provided that this Section 12.15 shall not
affect Buyer's rights to damages or equitable relief in the event of a breach
by Seller.
(STOCK PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS)
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[STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE, INC.
By:
----------------------------------------
JAMES F. STUART, Chief Executive Officer
SELLERS:
-------------------------------------------
JOHN P. BARKER
-------------------------------------------
MICKEY GRIMSLEY
<PAGE> 28
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets
Exhibit B Property of Party Time Ice Co., Inc. subject to Capital
Leases
Exhibit C Excluded Assets
Exhibit D Escrow Agreement
Exhibit E Undertaking Agreement
Exhibit F Employment Agreement
Exhibit G Noncompetition Agreement
Exhibit H Investment Letter
Exhibit I Opinion of Counsel
Schedule 3.12(e) Real Property Descriptions
Schedule 3.17 Company Plans
Sellers' Disclosure Memorandum
<PAGE> 1
EXHIBIT 10.6
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered into as of
March 6, 1998, by and among Packaged Ice, Inc., a Texas corporation ("Parent"),
Packaged Ice Southeast, Inc., a Texas corporation and a wholly-owned subsidiary
of Parent ("Surviving Corporation"), J.P. Albert Ice Co., a Florida corporation
("Company"), and James P. Albert, who owns all of the outstanding shares of
capital stock of the Company ("Shareholder").
PRELIMINARY STATEMENTS
The respective Boards of Directors of Parent, the Surviving
Corporation and the Company have each approved the merger of the Company with
and into the Surviving Corporation, 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:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Article I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and the plural forms of any of the
terms herein defined.
"Acquisition Price" shall have the meaning set forth in Section 2.7(d)
of this Agreement.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible which shall include, but not be limited to,
those items described more fully in Exhibit A attached hereto.
"Business" shall mean all of the operations of Company including the
production, storage, distribution and sale of packaged ice products and other
items.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business which are used in the direct manufacturing,
distribution and sale of packaged ice products which shall include, but not be
limited to, those items more fully described in Exhibit B, attached hereto.
The equipment covered by the Capital Leases shall be free and clear of the
Capital Leases, liens, claims and other Encumbrances at the Closing.
Shareholder hereby agrees to ensure that title to the assets that are subject
to Capital Leases shall be conveyed to the Surviving Corporation as a result of
this Agreement.
"Closing Date" shall mean the date on which this Agreement is
consummated.
"Contracts" shall have the meaning set forth in Section 3.15 of this
Agreement.
<PAGE> 2
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage, lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, or adverse claim or
restriction on transfer of any nature whatsoever other than those held by
Parent or the Surviving Corporation or granted by the Company at the Parent or
Surviving Corporation's request.
"Escrow Agreement" shall have the meaning set forth in Section 5.10 of
this Agreement.
"Escrow Agent" shall mean Gulf Coast National Bank, P.O. Box 413040,
3838 Tamiami Trail North, Naples, Florida 34103.
"Financial Statements" shall have the meaning set forth in Section 3.3
of this Agreement.
"Financing Statements" shall have the meaning as set forth in Section
5.11 of this Agreement.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Investment Letter" shall have the meaning set forth in Section 5.9 of
this Agreement.
"Merger" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Personal Property" shall have the meaning set forth in Section 3.14
of this Agreement.
"Real Property" shall have the meaning set forth in Section 3.13 of
this Agreement.
"Shareholder's Disclosure Memorandum" shall mean that schedule
attached hereto and incorporated herein by reference that lists and describes
all disclosures by
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<PAGE> 3
Shareholder and Company concerning the Assets and the Business which are the
subject of this Agreement.
"Shares" or "Shares" shall have the meaning set forth in Section 2.7.
"Taxes" shall have the meaning set forth in Section 11.1 hereof.
II. THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the corporation laws of Texas and Florida, the
Company shall be merged ("Merger") with and into the Surviving Corporation, and
the Surviving Corporation shall be 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 Section 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code
("Code").
2.2 Continuing Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of the Surviving
Corporation, with all its purposes, powers, franchises, privileges, rights and
immunities, shall continue unaffected and unimpaired by the Merger. 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 the Surviving Corporation, and the Surviving
Corporation shall be vested fully therewith and the separate corporate
existence and identity of the Company shall cease except to the extent
continued by statute.
2.3 Effective Date. The Merger shall become effective upon the
occurrence of the issuance of certificates of merger ("Effective Date") by the
Secretary of State of the State of Texas and the Secretary of State of Florida
upon filing on the Closing Date of articles of merger with the Secretary of the
State of Texas pursuant to Article 5.04 of the Texas Business Corporation Act
("TBCA") and the Secretary of State of Florida pursuant to applicable Florida
law.
2.4 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of the Surviving Corporation as in effect on the
Effective Date shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation following the Merger.
2.5 Directors. The members of the Board of Directors of the
Surviving Corporation at the Effective Date shall be the directors of the
Surviving Corporation immediately following the Merger.
2.6 Officers. The officers of the Surviving Corporation at the
Effective Date shall be the officers of the Surviving Corporation immediately
following the Merger.
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<PAGE> 4
2.7 Conversion of Shares.
(a) Each share of the Company's $1 par value common stock
("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 automatically into the
right to receive the Share Price (as hereinafter defined) which shall
be payable, without interest thereon, upon the surrender of the
certificates formerly representing each such Share, in accordance with
Section 2.7(g).
(b) Each Share shall, by virtue of the Merger and without
any action on the part of the holder, be canceled and retired and
cease to exist.
(c) The "Share Price" for each Share will be (x)/(y)
where (x) is the Acquisition Price (as defined in Section 2.7(d)) and
(y) is the total number of outstanding Shares.
(d) The acquisition price ("Acquisition Price") shall be
$2,334,000 less the adjustments set forth in Section 2.11. These
adjustments will be made to the $1,143,655 cash portion of the
Acquisition (after adjustment, the "Cash Amount"). The remaining
portion of the Acquisition Price will consist of 91,565 shares of
Parent's common stock, par value $.01 per share ("Parent's Stock")
valued at $13 per share (rounded up to the nearest $13) and issued
directly to the Shareholder ("Stock Amount").
(e) Each share of the Company's common stock held in the
treasury of the Company immediately prior to the Effective Date 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.
(f) All of the Parent's Stock, when delivered pursuant to
the provisions of this Agreement, shall be validly issued, fully paid
and nonassessable.
(g) At Closing, Parent will pay to Shareholder the
Acquisition Price less $114,372 of the Cash Amount and 9,156 shares
of Parent's common stock of the Stock Amount ("Escrow Amount") which
will be placed in escrow with the Escrow Agent for a period of twelve
(12) months in accordance with the Escrow Agreement attached hereto as
Exhibit 5.10. At 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 the Share Price for each
Share surrendered.
(h) 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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<PAGE> 5
(i) No fractional shares of Parent Stock and no
certificates or scrip therefor shall be issued.
(j) At the Closing, the Shareholder will be paid the
Stock Amount and the Cash Amount less the Escrow Amount. The
remaining amount of the Acquisition Price comprising the Escrow Amount
will be paid to Shareholder at the termination of the Escrow
Agreement.
2.8 Filing of Articles of Merger. Upon the terms and subject to
the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII hereof, the Company and the
Surviving Corporation shall execute and file a certificate of merger in the
manner required by the TBCA and the parties hereto shall take all such other
and further actions as may be required by law to make the Merger effective.
Prior to the filings referred to in this Section, the foregoing will be
confirmed at the Closing.
2.9 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 the Surviving Corporation
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
the Surviving Corporation 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.
2.10 Proration. The parties shall prorate at the Closing the
current year's ad valorem taxes and prepaid expenses, based on the latest
available statements from taxing authorities, whether for the current tax year
or the preceding tax year. The Shareholder's pro rata share of such taxes
shall be the portion attributable to the period through the day
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<PAGE> 6
preceding the Effective Date, prorated by days, ("Prorated Amount"). The
Prorated Amount shall be adjustments to the cash portion of the Acquisition
Price and shall be payable in the manner set forth below:
(a) If a prorated amount is payable by Parent or the
Surviving Corporation and determinable at the Closing, it shall be
added to the amount payable by Parent or the Surviving Corporation at
the Closing.
(b) If a prorated amount is payable by Parent or the
Surviving Corporation and not determinable at the Closing, it shall
be billed by Shareholder when determinable and promptly paid by Parent
or the Surviving Corporation to Shareholder.
(c) If a prorated amount is payable by Shareholder and
determinable at the Closing, it shall be deducted from the amount
otherwise payable by Parent or the Surviving Corporation at the
Closing.
(d) If a prorated amount is payable by Shareholder and
not determinable at the Closing, it shall be billed by Parent or the
Surviving Corporation when determinable and promptly paid by
Shareholder to Parent.
2.11 Adjustment to Acquisition Price. The Cash Amount shall be
reduced by the sum of the following ("Adjustment Amount"):
(a) the payoff amounts as at February 28, 1998 of all
current and long term debt (excluding trade accounts
payable and accrued expenses) and current and long
term Capital Leases (including any unpaid interest
and prepayment penalties);
(b) intercompany and affiliated accounts and notes
payable as of February 28, 1998;
(c) the Prorated Amount (defined in Section 2.10), if
determinable at the Closing;
(d) if the sum of trade accounts payable as of February
28, 1998 and accrued expenses as of February 28, 1998
exceeds current assets, an amount equal to such
difference. Consequently, if the amount of current
assets exceeds the sum of trade accounts payable,
then the Acquisition Price shall be increased by such
amount;
(e) any amounts advanced to the Company and the
Shareholder for the purposes of financing the
Company's acquisition of certain of the assets of
Matanzas Ice Corp., d/b/a Tropic Ice, of Ft. Myers,
Florida, as contemplated by the letter of intent
dated January 29, 1998 by and between Parent, the
Company and the Shareholder.
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<PAGE> 7
The Adjustment Amount will be estimated by the parties based on an
estimated balance sheet as of February 28, 1998 to be prepared by the Company
and delivered to the parties at least one business day prior to the Closing
Date for purposes of determining the Cash Amount to be paid at Closing
("Estimated Adjustment Amount"). The Adjusted Amount will be finally
determined after the Closing based on a balance sheet ("Closing Balance Sheet")
of the Company as of February 28, 1998. If the actual Adjustment Amount is
greater than the Estimated Adjustment Amount, the Shareholder shall promptly
pay the difference to Parent. If the actual Adjustment Amount is less than the
Estimated Adjustment Amount, Parent shall promptly pay the difference to the
Shareholder, and Surviving Corporation shall be permitted to make a claim
against the Escrow Amount for any such amounts. All adjustments that reflect a
decrease in the Acquisition Price shall be paid from the Cash Amount. All
adjustments that reflect an increase in the Acquisition Price shall be paid in
the same ratio of Parent Stock to Cash as the Acquisition Price. The Closing
Balance Sheet and its accompanying information relating to income and cash
flow, dated as of February 28, 1998, shall be provided to Parent and Surviving
Corporation no later than 30 days after the Closing Date.
III. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND SHAREHOLDER
The Company and the Shareholder, jointly and severally, represent and
warrant to Parent and the Surviving Corporation as follows:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida
and is in good standing and is duly qualified to do business in any foreign
jurisdiction in which it is currently conducting business operations. The
Company has full corporate power and authority to own or use the properties and
assets that it purports to own or use, and to perform all of its obligations
hereunder. All outstanding shares of stock of the Company are validly issued,
fully paid, nonassessable and owned, both beneficially and of record, solely by
Shareholder. Other than this Agreement, there is no subscription, option,
warrant, call, right, agreement or commitment relating to the issuance, sale,
delivery, repurchase or transfer by Shareholder or the Company (including any
right of conversion or exchange under any outstanding security or other
instrument) of any of its capital stock or other securities. There are no
voting trusts, proxies or any other agreements or understandings with respect
to the voting of the Shares.
3.2 Execution, Delivery and Performance of Agreement. This
Agreement has been duly executed and delivered by the Company and Shareholder
and constitutes the legal, valid and binding obligation of the Company and
Shareholder, enforceable against them in accordance with its terms. Upon the
execution and delivery by Shareholder of the Escrow Agreement, Noncompetition
Agreement and any other ancillary document required hereunder (collectively,
the "Shareholder's Closing Documents"), the Shareholder's Closing Documents
will constitute the legal, valid, and binding obligations
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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 and the Company have held a Shareholder meeting (or
have executed a consent) and all resolutions required by law to approve the
Merger have been duly adopted in accordance with Florida law. Except as set
forth on Section 3.2 of Shareholder's Disclosure Memorandum, the execution,
delivery and performance of this Agreement by the Company and Shareholder and
the consummation of the transactions contemplated hereby will not require the
consent, approval or authorization of any person or governmental authority, and
will not, with or without the giving of notice, the passage of time, or both,
violate, conflict with, result in a default, breach or loss of rights under, or
result in the creation of any lien, claim or encumbrance pursuant to, any lien,
encumbrance, instrument, agreement, or understanding, or any law, regulation,
rule, order, judgment or decree, to which Shareholder or the Company are a
party or by which they are bound or affected.
3.3 Financial Statements. The Company has previously caused to be
furnished to Parent:
(a) the Company's unaudited balance sheet as at December
31, 1996 and the related unaudited statement of income and statement
of cash flow for the 12-month period then ended.
(b) the Company's unaudited balance sheet as at December
31, 1997 and the related unaudited statement of income and statement
of cash flow for the 12-month period then ended (all such balance
sheets and related statements referenced to in this Section 3.3 are
collectively referred to herein as the "Financial Statements").
The Financial Statements taken as a whole present fairly the financial
position, results of operations, changes in Shareholder's equity, and cash flow
of the Company as the respective dates of and for the periods referred to in
such Financial Statements, all in accordance with GAAP. During the year ended
December 31, 1997, the Company had gross sales of packaged ice products of no
less than $750,000.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by the Company in the Shareholder's
Disclosure Memorandum and except for liabilities arising in the ordinary course
of business and consistent with past practice since the date of the Company's
December 31, 1997 Balance Sheet, the Company has operated the Business in the
ordinary course and has incurred no liabilities which would be required to be
reflected in accordance with GAAP, on a balance sheet as of the date hereof or
disclosed in the notes thereto.
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Since November 30, 1997 there has not been any adverse change in the
business, operations, properties, prospects, assets or condition of the
Business, and no event has occurred, nor does a circumstance currently exist,
that may result in such an adverse change. The Shareholder further warrants and
represents that the actual sales made and expenses incurred by the Company
during 1997 are accurately and truly reflected on the December 31, 1997
Financial Statements. As of the Closing Date, the total amount of the Company's
current liabilities does not exceed the total amount of the Company's current
assets.
3.4 Accounts Receivable. Except as otherwise indicated in
Section 3.4 of the Seller's Disclosure Memorandum, all accounts receivable of
the Company have arisen out of bona fide transactions in the ordinary course of
business, and each such account receivable constitutes a valid and binding
obligation of the obligor, maker, co-maker, guarantor, endorser or debtor
thereof or thereunder and is collectible in full within 60 days.
3.5 Shareholder Debt. Shareholder warrants that there are no
Encumbrances held by Shareholder whatsoever against the Company or the Assets.
3.6 Business Operations and Condition of Assets. All items
comprising the Assets have been continuously used by the Company in connection
with the Business and are now in serviceable condition and 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, unless
expressly disclosed to the contrary by the Company and Shareholder in Section
3.6 of Shareholder's Disclosure Memorandum.
3.7 Title to Personal Property. Except as set forth in Section
3.7 of Shareholder's Disclosure Memorandum, the Company has good, legal and
marketable title to all of the personal property comprising the Assets, free
and clear of Encumbrances.
3.8 Litigation. Except as set forth on Section 3.8 of
Shareholder's Disclosure Memorandum, there is no pending claim, action, suit,
proceeding or investigation (judicial, governmental or otherwise), nor any
order, decree or judgment in effect, or threatened, against or relating to
Shareholder, the Company, the Business, the Assets or the transactions
contemplated by this Agreement.
3.9 Compliance with Laws. Shareholder and the Company have
complied with all laws, rules, regulations, ordinances, orders, judgments and
decrees relating to the Company, the Shares, the Assets, and the Business.
3.10 Taxes.
(a) Except as set forth in Section 3.10(a) of
Shareholder's Disclosure Memorandum, the Company has, within the time
and manner prescribed by law, filed all returns, declarations, reports
and statements required to be filed by it
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(collectively, "Returns") in respect of any Taxes and each such Return has been
prepared in compliance in all respects with all applicable laws and regulations
and is true and correct in all respects, and the Company has, within the time
and in the manner prescribed by applicable law, paid all Taxes that are shown
to be due and payable with respect to the periods covered thereby.
(b) Except as set forth in Section 3.10(b) of
Shareholder's Disclosure Memorandum (i) the Company has not requested
or been granted an extension of the time for filing any Return which
has not yet been filed; (ii) the Company has not consented to extend
to a date later than the date hereof the time in which any Tax may be
assessed or collected by any taxing authority; (iii) no deficiency or
proposed adjustment which has not been settled or otherwise resolved
for any amount of Tax has been proposed, asserted or assessed by any
taxing authority against the Company; (iv) there is no action, suit,
taxing authority proceeding, or audit now in progress, pending or
threatened against or with respect to the Company; (v) no claim has
been made by a taxing authority in a jurisdiction where the Company
does not file Tax Returns that the Company is subject to Taxes
assessed by such jurisdiction; (vi) there are no liens for Taxes
(other than for current Taxes not yet due and payable) upon the
Assets; (vii) the Company will not be required to include any amount
in taxable income or exclude any item of deduction or loss from
taxable income for any taxable period (or a portion thereof) ending
after the Closing Date as a result of any of the following: (A) a
change in method of accounting for a taxable period ending on or prior
to the Closing Date, (B) any "closing agreement," as described in Code
Section 7121 (or any corresponding provision of state, local or
foreign income Tax law) entered into on or prior to the Closing Date,
(C) any sale reported on the installment method where such sale
occurred on or prior to the Closing Date, and (D) any prepaid amount
received on or prior to the Closing Date; and (viii) the Company does
not have any obligation or liability for the payment of Taxes of any
other person as a result from any expressed obligation to indemnify
another person, or as a result of such Company assuming or succeeding
to the Tax liability of any other person as successor, transferee or
otherwise.
(c) The charges, accruals, and reserves with respect to
Taxes on the books of the Company are adequate and are at least equal
to the Company's liability for Taxes. There exists no proposed tax
assessment against the company except as disclosed in Section 3.10(c)
of the Shareholder's Disclosure Memorandum. No consent to the
application of Section 341(f)(2) of the Code 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 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 Code with respect to any transaction contemplated
hereby. The Company has not been a member of any affiliated group (as
defined in Code Section 1504(a)) or consolidated, combined or unitary
group for purposes of any other Taxes. None of the property used by
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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 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 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) The Surviving Corporation 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
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) The liabilities of the Company assumed by the
Surviving Corporation 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, the Surviving Corporation, the Company and
the Shareholder will pay their respective expenses, if any, incurred
in connection with the Merger.
(i) There is no intercompany indebtedness existing
between Parent and the Company or between the Surviving Corporation
and the Company that was issued, acquired, or will be settled at a
discount.
(j) 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 Code.
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(k) The fair market value of the assets of the Company
transferred to the Surviving Corporation will equal or exceed the sum
of the liabilities assumed by the Surviving Corporation, plus the
amount of liabilities, if any, to which the transferred assets are
subject.
(l) The Company is not an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.11 Environmental. The Company has complied in all 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 concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including, without limitation, laws
relating to occupational safety and health, good manufacturing practices for
food products, 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, the Company 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 respects, with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in such laws.
3.12 Insurance. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Business. The Company has not been refused any insurance with respect to
its assets or operations, and its coverage has not been limited, terminated or
canceled by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, during the last three (3)
years. Section 3.12 of Shareholder's Disclosure Memorandum lists all claims,
which (including related claims which in the aggregate) exceed $5,000 which
have been made by the Company or against any policy of the Company in the last
three years under any workers' compensation, general liability, property or
other insurance policy applicable to Company, any Assets of the Company or the
Business. Except as set forth on Section 3.12 of Shareholder's Disclosure
Memorandum, there are no pending or threatened claims under any insurance
policy. Such claim information includes the following information with respect
to each accident, loss, or other event: (a) the identity of the claimant; (b)
the nature of the claim; (c) the date of the occurrence; (d) the status as of
the report date and (e) the amounts paid or expected to be paid or recovered.
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3.13 Real Property.
(a) Section 3.13 of Shareholder's Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel
of real property owned by, leased to or used by the Company ("Real
Property") and (ii) a complete and accurate list of all current
leases, lease amendments, subleases, assignments, licenses and other
agreements to which the Real Property is subject (collectively, the
"Leases"), together with the name and address of each tenant, the
commencement and expiration date of each lease, the monthly rent and
additional rent payable under each lease and the date to which such
rent has been paid, the amount of any deposits, security or otherwise
made under such lease and whether the consent of any party to the
lease (or their mortgage) is required to consummate the transactions
contemplated hereby. The Company has delivered to Parent and the
Surviving Corporation true and complete copies of the Leases.
(b) Except as disclosed in Section 3.13 of Shareholder's
Disclosure Memorandum (i) each of the Leases is in full force and
effect and has not been amended or modified; (ii) neither the Company,
nor any other party thereto, is in default thereunder, nor is there
any event which with notice or lapse of time, or both, would
constitute a default thereunder; (iii) the Company has received no
notice that any party to any Lease intends to cancel, terminate or
refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder; and (iv) no rental under the Leases
has been paid more than one month in advance.
(c) The Company owns good and marketable title to the
Real Property, and the corresponding interest in the leases in which
the Company is the landlord. The Company is fully authorized to
convey the Real Property pursuant to this Agreement, and, at Closing,
the Company shall convey the Real Property to the Surviving
Corporation free and clear of all Encumbrances or other restrictions
which would materially affect the us for which it is currently held by
the Company.
(d) There are no pending or threatened condemnation or
similar proceedings or assessments affecting the Real Property,
lawsuits by adjoining landowners or others, nor is there any belief by
the Company or Shareholder that any such lawsuit is contemplated by
any person, nor is any condemnation or assessment contemplated by any
governmental entity.
(e) At the time of Closing the Real Property will not in
whole or in part be under lease, other than the Leases described
above.
(f) The Company has not and will not enter into any
written contracts, agreements, or listings, or be a party to any oral
understandings or agreements
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affecting the Real Property or the Lease which may become binding upon
Surviving Corporation.
(g) Shareholder has complied with all applicable laws,
ordinances, regulations, statutes and rules relating to the Real
Property or any part thereof.
(h) To the best of Shareholder's knowledge, during the
period that the Company has owned the Property, there has been no
storage, production, transportation, disposal, treatment or release of
any solid waste, hazardous waste, toxic substance, or any other
pollutants or contaminants (hereinafter collectively referred to as
"Pollutants") on or in the Real Property, and the Company has complied
with all applicable local, state or federal environmental laws and
regulations. There are no underground storage tanks, covered surface
impoundments or other sources of environmental Pollutants or
contaminants on the Real Property.
(i) To the best of Shareholder's knowledge, prior to the
Company's acquisition of the Real Property, there was no storage,
production, transportation, disposal, treatment or release of any
Pollutants on or in the Real Property. There have been no Pollutants
on or in the neighboring properties which, through soil or groundwater
migration, could have moved to the Real Property. Shareholder shall
indemnify, defend, and hold the Surviving Corporation and Parent
harmless from any claims, damages, and/or liability of every kind,
including all expenses of litigation and attorneys' fees, arising from
the Company or Shareholder's breach of the warranties contained
herein.
(j) The Company shall not and the Shareholder shall cause
the Company to not change or make alterations to the Real Property
between the date of this Agreement and the Closing. Such prohibited
changes shall include, but shall not be limited to, removal or
relocation of site improvements, buildings and landscaping.
(k) The zoning of each parcel of the Real Property
permits the improvements located thereon and the continuation of
business presently being conducted thereon. The Real Property is
served by utilities and services necessary for the normal and
continued operation of the business presently conducted thereon. None
of the real property constituting the Real Property or Owned Real
Property is subject to any zoning or historical preservation rulings
or ordinances that will prohibit the Surviving Corporation from
continuing its intended use as an ice manufacturing and/or
distribution facility.
3.14 Personal Property.
(a) Section 3.14 of Shareholder's Disclosure Memorandum
is a complete and accurate schedule as of the Closing Date describing,
and specifying the location of, all inventory, motor vehicles,
machinery, fixtures, equipment,
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furniture, supplies, tools, Intangible Assets, and all other tangible
or intangible personal property owned by, in the possession of, or
used by the Company ("Personal Property").
(b) Each lease, license, rental agreement, contract of
sale or other agreement applicable to any Personal Property is listed
in Section 3.14 of Shareholder's Disclosure Memorandum and is in full
force and effect; neither the Company nor any other party thereto is
in default thereunder, nor is there any event which with notice or
lapse of time, or both, would constitute a default thereunder. The
Company has received no notice that any party to any such lease,
license, rental agreement, contract of sale or other agreement intends
to cancel, terminate or refuse to renew the same or to exercise or
decline to exercise any option or other right thereunder. No Personal
Property is subject to any lease, license, contract of sale or other
agreement that is adverse to the Business, Assets or financial
condition of the Company.
(c) The inventory of the Company as reflected by the
Financial Statements and as described in Section 3.14 of Shareholder's
Disclosure Memorandum consisted and consists of items substantially
all of which were and will be of the usual quality and quantity
necessary for the normal conduct of the Company and reasonably
expected to be usable or salable within a reasonable period of time in
the ordinary course of business of the Company, except items of
inventory which have been written down to realizable market value or
written off completely, and damaged or broken items in an amount which
does not affect the value of the inventory as reflected on the
Financial Statements. With respect to inventory in the hands of
suppliers for which the Company is committed as of the date hereof,
such inventory is reasonably expected to be usable in the ordinary
course of business of the Company as presently being conducted.
3.15 Contracts. Section 3.15 of Shareholder's Disclosure Memorandum
contains a complete and accurate list of all presently effective contracts,
leases and other agreements ("Contracts") to which the Company is a party and
which affect or are applicable to the Assets or the Company, true and complete
copies (or summaries in the case of oral contracts) of each of which have been
delivered to Parent and the Surviving Corporation by the Company, including,
without limitation, any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any
such obligation for the borrowing of money;
(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either
within or outside the United
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States relating to sharing of present or future commissions, fees or
other income or profits;
(d) lease, license, rental agreement, contract of sale or
other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract; or
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts
and/or rebates).
Except as disclosed in Section 3.15 of Shareholder's Disclosure
Memorandum, each of the Contracts is in full force and effect and has not been
amended or modified and neither the Company, nor any other party thereto, is in
default thereunder, nor is there any event which with notice or lapse of time,
or both, would constitute a default thereunder. The Company has received no
notice that any party intends to cancel, terminate or refuse to renew any such
Contract or to exercise or decline to exercise any option or other right
thereunder.
3.16 Labor Matters. There are no controversies pending or
threatened between the Company and any employees of the Company. The Company
has complied with all laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining,
immigration, safety and the payment of withholding and social security and
similar taxes, and the Company has no liability for any arrears of wages or
taxes or penalties for failure to comply with any of the foregoing.
3.17 Absence of Sensitive Payments. The Company has not made or
maintained (i) any contributions, payments or gifts of its funds or property to
any official, employee or agent of any vendor, customer or supplier, or of any
governmental entity, where either the payment or the purpose of such
contribution, payment or gift was or is illegal under the laws of the United
States or any state thereof, or any other jurisdiction (foreign or domestic);
or (ii) any contribution, or reimbursement of any political gift or
contribution made by any other person, to candidates for public office, whether
federal, state, local or foreign, where such contributions by the Company or
Shareholder were or would be a violation of applicable law.
3.18 Employee Benefits. All employee benefit plans including, but
not limited to health benefit plans, (whether or not covered by ERISA),
deferred compensation or executive compensation plans for employees, directors
or independent contractors, and all other employee or independent contractor
arrangements or programs that are maintained
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or contributed to by the Company (collectively, the "Company Plans") have been
administered and operated in all material respects in compliance with their
terms, ERISA, if applicable, the Code and other applicable law. All Company
Plans that are intended to be qualified under Section 401(a) of the Code are so
qualified and a current favorable IRS determination letter exists for each such
plan and covers the amendments required by the Tax Reform Act of 1986. All
funded Company Plans are fully funded according to their terms and applicable
law. No prohibited transaction or breach of fiduciary duty under ERISA has been
committed by any fiduciary, disqualified person or party in interest of any
Company Plan. The Company has no liability, contingent or otherwise, under
Title IV of ERISA. The Company has neither a pension plan nor a "401(k)"
employee benefit plan.
3.19 Capital Improvements. Section 3.19 of Shareholder's
Disclosure Memorandum describes all of the capital improvements or purchases or
other capital expenditures (as determined in accordance with GAAP) which the
Company has committed to or contracted for which have not been completed prior
to the date hereof and the cost and expense reasonably estimated to complete
such work and purchases.
3.20 No Undisclosed Liabilities. Except as set forth in Section
3.20 of the Shareholder's Disclosure Memorandum and obligations and liabilities
arising under the contracts disclosed in Section 3.15 of the Shareholder's
Disclosure Memorandum, 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 Financial Statements and current liabilities incurred
in the ordinary course of business since the respective dates thereof.
3.21 Complete and Accurate Disclosure. No representation or
warranty made to Parent or the Surviving Corporation in this Agreement or in
connection with this transaction contains or will contain an untrue statement
of a fact, or omits or will omit to state a fact necessary to make such
representation or warranty not misleading or necessary to enable Parent and the
Surviving Corporation to make a fully informed decision with respect to the
Merger of the Company into the Surviving Corporation. All documents and
information which have been or will be delivered to Parent and the Surviving
Corporation or its representatives by or on behalf of the Company or
Shareholder are and will be true, correct and complete copies of the documents
they purport to represent.
3.22 No Adverse Change. There has not been any adverse change in
the business, operations, properties, prospects, assets or condition of the
Company since December 31, 1996, and no event has occurred or circumstance
exists that will, or is reasonably likely to, result in such an adverse change.
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IV. REPRESENTATIONS AND WARRANTIES
OF THE SURVIVING CORPORATION AND PARENT
4.1 Corporate Existence; Good Standing; Capitalization. Parent
and the Surviving Corporation are corporations duly organized, validly
existing, and in good standing under the laws of the State of Texas. All
outstanding shares of stock of Parent are validly issued, fully paid and
nonassessable.
4.2 Power and Authority. Parent and the Surviving Corporation
have the requisite corporate power and authority, and have been duly
authorized, to enter into this Agreement and to perform all of its obligations
hereunder.
V. COVENANTS OF THE COMPANY AND SHAREHOLDER
Shareholder and the Company hereby, jointly and severally, covenant
and agree as follows:
5.1 Conduct of the Business Pending the Closing Date. The
Shareholder and the Company hereby agree that, from the date hereof to the
Closing Date, they will:
(a) maintain the Assets in good repair, order and
condition, and make such capital expenditures as necessary to maintain
the Business, in accordance with past practices and sound business
judgment;
(b) maintain insurance upon all of its properties and
with respect to the conduct of the Business in such amounts and of
such kinds to adequately safeguard and protect the Assets and the
Business;
(c) not issue or agree to issue any additional shares of
common stock or of any other voting security or any rights to acquire
any such additional common stock or voting security which would cause
a change of control of Shareholder;
(d) use its best efforts to comply with all laws and
contractual obligations applicable to it and to the conduct of the
Business;
(e) not (i) mortgage, pledge or, except in the ordinary
course of business, subject to any lien, charge, security interest or
other encumbrance any of the Assets (whether tangible or intangible),
(ii) sell, assign, transfer, convey, lease or otherwise dispose of, or
agree to sell, assign, transfer, convey, lease or otherwise dispose
of, any of the Assets outside the ordinary course of business other
than that expressly disclosed in the Shareholder's Disclosure
Memorandum;
(f) not authorize or consummate any dividends or
distributions of assets to its stockholders, any consolidation or
merger, purchase of all or substantially all of the assets of any
entity, or any other extraordinary corporate transaction other than
expressly disclosed in the Shareholder's Disclosure Memorandum;
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(g) conduct its business in its usual and ordinary
manner; and
(h) pay all taxes that may be accrued to either party as
a result of the consummation of this transaction.
5.2 Investigation by Parent and the Surviving Corporation. Prior
to the Closing Date, the Company shall (i) give Parent and its authorized
representatives and advisors access, at reasonable times and on reasonable
notice, to all items of Real and Personal Property, books and records,
personnel, offices, and other facilities of the Company, (ii) permit Parent or
the Surviving Corporation to make such inspections thereof as Parent or the
Surviving Corporation may reasonably require, and (iii) cause its employees,
and its advisors to furnish to Parent and its authorized representatives and
advisors such financial and operating data and other information with respect
to the Business prepared in the ordinary course of the Business as Parent or
its agent shall from time to time reasonably request.
5.3 Closing Conditions. Shareholder and the Company will, to the
extent within their control, use their best efforts to cause the conditions set
forth in Section 8.1 to be satisfied by the Closing Date.
5.4 Confidentiality. From and after the date hereof, Shareholder
will, and will cause the Company and its officers, employees, representatives,
consultants and advisors to hold in confidence all confidential information in
the possession of the Company, its affiliates or its financial advisor
concerning Parent, the Surviving Corporation or the Company. Shareholder and
the Company will not release or disclose any such information to any person
other than Parent and its authorized representatives. Notwithstanding the
foregoing, the confidentiality obligations of this Section shall not apply to
information:
(a) which the Shareholder or the Company are compelled to
disclose by judicial or administrative process, or, in the reasonable
opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to the
Company or Shareholder by a third party who obtained such information
other than as a result of a breach of a confidential relationship.
5.5 Public Announcement. The Company, Shareholder, the Surviving
Corporation and Parent will cooperate in the public announcement of the
transactions contemplated by this Agreement, and, other than as may be required
by applicable law, no such announcement will be made by either party without
the consent of the other party, which consent shall not be unreasonably
withheld.
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5.6 No Shopping. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither the Company nor Shareholder shall (and the Company and Shareholder
shall cause their respective affiliates, officers, directors, employees,
representatives and agents not to) directly or indirectly, solicit, initiate or
participate in discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group (other than
Parent or an affiliate or an associate of Parent) concerning, or enter into any
agreement providing for, any merger, sale of material assets, sale of stock or
similar transactions involving the Company or the Assets.
5.7 Further Assurances. The Shareholder and the Company will use
their best efforts to implement the provisions of this Agreement, and for such
purpose the Shareholder or the Company, at the request of Parent or the
Surviving Corporation, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Parent and the Surviving Corporation such deeds, assignments,
bills of sale, consents, documents evidencing title and other instruments in
addition to those required by this Agreement, in form and substance
satisfactory to Parent and the Surviving Corporation, as Parent and the
Surviving Corporation may reasonably deem necessary or desirable to implement
any provision of this Agreement.
5.8 Insurance. Shareholder shall cause the Company to continue to
maintain insurance through the Closing Date with financially sound and
reputable insurers unaffiliated with the Company or Shareholder in such amounts
and against such risks as are adequate to protect the Assets and the Business.
5.9 Investment Letter. At the Closing, Shareholder shall execute
and deliver to Parent the investment letter in the form attached hereto as
Exhibit 5.9 ("Investment Letter").
5.10 Escrow Agreement. At the Closing, Shareholder shall execute
and deliver to Parent and the Surviving Corporation the escrow agreement in the
form attached hereto as Exhibit 5.10 ("Escrow Agreement").
5.11 Title Reports. Within ten (10) days after the date hereof,
Shareholder, at Shareholder's sole cost and expense, shall provide a title
report(s) for all real property owned by the Company ("Owned Real Property")
and current reports of searches made of the Uniform Commercial Code Records of
the County and State where each parcel of Owned Real Property is located
("Financing Statements") setting forth the state of liens affecting the title
to the personal property and real property to be conveyed hereunder. At the
Closing, the Owned Real Property shall be subject to no liens, charges,
encumbrances, exceptions, or reservations of any kind or character other than
those specifically approved by Parent and the Surviving Corporation in writing
("Permitted Exceptions").
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5.12 Noncompetition Agreement. At the Closing, Shareholder will
enter into the Noncompetition Agreement attached hereto as Exhibit 5.12.
5.13 Employment Agreement. At the Closing, Shareholder will enter
into the Employment Agreement attached hereto as Exhibit 5.13.
VI. COVENANTS OF PARENT AND THE SURVIVING CORPORATION
6.1 Closing Conditions. Parent and the Surviving Corporation
will, to the extent within their control, use reasonable efforts to cause the
conditions set forth in Section 8.2 to be satisfied by the Closing Date.
6.2 Ancillary Agreements. At the Closing, Parent and the
Surviving Corporation will enter into the Noncompetition Agreement, the Escrow
Agreement, and all other ancillary documents required hereunder.
6.3 Confidentiality. From and after the date hereof,
Parent and Surviving Corporation will, and will cause its officers, employees,
representatives, consultants and advisors to hold in confidence all
confidential information in the possession of Parent and Surviving Corporation
concerning the Shareholder. Notwithstanding the foregoing, the confidentiality
obligations of this Section shall not apply to information:
(a) which Parent or the Surviving Corporation are
compelled to disclose by judicial or administrative process, or, in
the reasonable opinion of counsel, by other mandatory requirements of
law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to Parent or
the Surviving Corporation by a third party who obtained such
information other than as a result of a breach of a confidential
relationship.
VII. THE CLOSING
7.1 The Closing. The consummation of the transactions
contemplated by this Agreement ("Closing") shall take place at a mutually
agreeable time and date. The date of the closing shall herein be referred to
as the "Closing Date." Subject to the provisions of Article X, failure to
consummate the transaction set forth in this Agreement on the date and time and
place determined by this Section 7.1 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this
Agreement.
7.2 Closing Obligations. At the Closing, subject to the terms,
covenants and conditions contained herein:
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(a) Shareholder will deliver to Parent and the Surviving
Corporation:
(i) certificates representing the Shares, to be
surrendered to the Surviving Corporation or Parent;
(ii) a certificate executed by Shareholder
representing and warranting to Parent and the Surviving
Corporation that Shareholder's and the Company's
representations and warranties in this Agreement are accurate
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 Memorandum which was delivered by
Shareholder to Parent and the Surviving Corporation prior to
the Closing Date);
(iii) an investment letter executed by Shareholder
with respect to the Parent's common stock in the form attached
hereto as Exhibit 5.9, ("Investment Letter");
(iv) an escrow agreement ("Escrow Agreement" in
the form attached hereto as Exhibit 5.10);
(v) an opinion of counsel as referred to in
Section 8.1(f);
(vi) letters of resignation of the officers and
directors of the Company;
(vii) executed counterparts of all other documents
and certificates required to be delivered to Parent and the
Surviving Corporation pursuant to this Agreement including,
but not limited to the Noncompetition Agreement, satisfactory
evidence that all third party creditors of the Company have
been satisfied.
(b) Parent and the Surviving Corporation will deliver to
Shareholder:
(i) certificates evidencing the Stock Amount,
issued to Shareholder;
(ii) the Cash Amount (less the Estimated
Adjustment Amount, and less the amount to be placed in escrow,
pursuant to the Escrow Agreement) 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;
(iii) a certificate executed by Parent and the
Surviving Corporation to the effect that, except as otherwise
stated in such certificate, each of Parent and the Surviving
Corporation's representations and warranties in this Agreement
is accurate in all respects as of the
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Closing Date as if made on the Closing Date ("Parent and the
Surviving Corporation's Certificate"); and
(c) The Surviving Corporation and the Company will
execute articles of merger and file the same with the Secretaries of
State of the State of Texas and the State of Florida.
(d) Parent will place $114,372 of the Cash Amount into
escrow to be held pursuant to the Escrow Agreement.
VIII. CONDITIONS TO CLOSING
8.1 Conditions to Obligations of Parent and the Surviving
Corporation. The obligations of Parent and the Surviving Corporation to
complete the transactions contemplated at the Closing shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of
Shareholder or the Company to be performed or complied with on or
before the Closing Date shall have been duly performed or complied
with in all respects and Shareholder shall deliver to Parent and the
Surviving Corporation a certificate signed by Shareholder and an
officer of the Company to such effect.
(b) Representations and Warranties True; No Adverse
Change. The representations and warranties of Shareholder and the
Company contained herein shall be true and correct, in all respects,
on the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date, and
since the date hereof there shall have occurred no adverse change in
the Business, and Shareholder shall deliver to Parent and the
Surviving Corporation a certificate signed by Shareholder and an
officer of the Company to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Parent and the
Surviving Corporation from consummating the transactions contemplated
hereby.
(d) Third Party Creditors. All third party creditors of
the Business will be paid in full, and all Encumbrances against the
Stock, Assets and the Business will be paid or discharged.
(e) Capital Leases. All Capital Leases shall be paid in
full and the personal property subject thereto shall be conveyed to
the Company free and clear of Encumbrances.
(f) Opinion of Counsel for Shareholder and the Company.
Shareholder shall have received the opinion of Treiser, Kobza & Volpe,
Chartered, dated as of
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the Closing Date, in form and substance satisfactory to the Surviving
Corporation's and Parent's counsel, subject to reasonable
qualifications and exceptions, as set forth on Exhibit 8.1(f).
(g) Due Diligence. Parent and the Surviving Corporation
shall have completed and be satisfied with their due diligence
investigation of the Company and Matanzas Ice Corp.
(i) Ancillary Agreements. Shareholder has executed the
Noncompetition Agreement, the Employment Agreement, the Escrow
Agreement and all other ancillary documents required hereunder.
(j) Asset Purchase of Matanzas Ice Corp. The Company
shall have acquired certain assets of Matanzas Ice Corp. as
contemplated by the letter of intent between the Company and Matanzas
Ice Corp. dated January 28, 1998.
8.2 Conditions to Obligations of the Company and Shareholder. The
obligation of the Company and Shareholder to complete the transactions
contemplated at the Closing shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of Parent
and the Surviving Corporation to be performed or complied with on or
before the Closing Date shall have been duly performed or complied
with in all material respects and Parent and the Surviving Corporation
shall deliver to Shareholder a certificate signed by an officer of
Parent and the Surviving Corporation to such effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Parent and the
Surviving Corporation contained herein shall be true and correct on
the Closing Date with the same force and effect as though such
representations and covenants had been made on the Closing Date, and
Parent and the Surviving Corporation shall deliver to Shareholder a
certificate signed by an officer of Parent and the Surviving
Corporation to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining the Company from
consummating the transactions contemplated hereby.
IX. IDEMNIFICATION
9.1 Indemnification of Parent and the Surviving Corporation by the
Company and Shareholder. The Company and Shareholder agree to indemnify,
defend and hold harmless Parent and the Surviving Corporation and Parent's and
the Surviving Corporation's employees, agents, heirs, legal representatives,
and assigns from and against any and all claims, suits, losses, expenses
(legal, accounting, investigation and
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otherwise), damages and liabilities, including, without limitation, tax
liabilities (hereinafter, collectively "Damages"), arising out of or relating
to (i) any inaccuracy of any representation or warranty of the Company or the
Shareholder set forth in this Agreement or in any document or certificate
furnished or required to be furnished to Parent or the Surviving Corporation or
the breach of any covenant made by the Company in or pursuant to this
Agreement; or (ii) any claim or cause of action arising with respect to the
conduct or condition of the Business or Assets prior to the Closing, whether or
not disclosed to Parent or the Surviving Corporation. The obligation of the
Shareholder to indemnify Parent and Surviving Corporation shall continue
notwithstanding either Parent or Surviving Corporation's knowledge of the
inaccuracy of any representation or warranty of the Company or the Shareholder
set forth in this Agreement or in any document or certificate furnished or
required to be furnished pursuant to this Agreement.
9.2 Indemnification of the Company and Shareholder by Parent and
the Surviving Corporation. Parent and the Surviving Corporation agree to
indemnify, defend and hold harmless the Company and Shareholder from and
against any and all Damages arising out of or relating to any inaccuracy or any
representation or warranty set forth in this Agreement or the breach of any
covenant made by Parent or the Surviving Corporation in or pursuant to this
Agreement.
9.3 Claims for Indemnification. Whenever any claim arises for
indemnification hereunder, the indemnified party ("Indemnified Party") shall
notify the indemnifying party ("Indemnifying Party") in writing by registered
or certified mail promptly after the Indemnified Party has actual knowledge of
the facts constituting the basis for such claim ("Notice of Claim"). Such
notice shall specify all material facts known to the Indemnified Party giving
rise to such indemnification right, and to the extent practicable, the amount
or an estimate of the amount of the liability arising therefrom. The failure of
any Indemnified Party to promptly notify the Indemnifying Party shall not
relieve the Indemnifying Party of its obligation to indemnify in respect to
such action and shall not relieve the Indemnifying Party of any other liability
which they may have to any Indemnified Party unless such failure to notify the
Indemnifying Party prejudices the rights of the Indemnifying Party. In
addition to all other remedies provided hereunder or by law, Parent and the
Surviving Corporation shall have the right to make a claim against the Escrow
Amount for any of Parent's or the Surviving Corporation's Damages.
9.4 Right to Defend. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within forty-five (45) days after receipt of the Notice of
Claim that the Indemnifying Party intends to assume the defense of such claim
and acknowledges its liability to indemnify the
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Indemnified Party for any losses resulting from such claim; provided, however,
that if the Indemnifying Party does not elect to assume the defense of any
claim, then (a) the Indemnifying Party shall have the right to participate in
the defense of such claim or demand at its expense through counsel of its own
choosing, provided the Indemnified Party shall control the defense of such
claim, (b) the Indemnified Party may settle any such claim without the consent
of the Indemnifying Party, however, the Indemnifying Party may not settle any
such claim without the prior written consent of the Indemnified Party; and (c)
Section 9.5 hereof shall be inapplicable. Whether or not the Indemnifying
Party does choose to so defend such claim, the parties hereto shall cooperate
in the defense thereof and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be requested in connection therewith. To the extent Parent
or the Surviving Corporation is the Indemnified Party for any actual or
threatened claim or demand by any third party, Parent and the Surviving
Corporation shall have the right to control the prosecution of any counterclaim
or right related to such a claim or demand, provided that Parent and the
Surviving Corporation agree to reasonably cooperate with the Company or
Shareholder with respect to the prosecution of such counterclaim or right.
9.5 Settlement. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.6 Effect of Termination. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
X. TERMINATION
10.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of the
Shareholder, Company, Parent and the Surviving Corporation;
(b) Misrepresentation or Breach. By the Company or
Shareholder if there has been a material misrepresentation or a
material breach of a warranty or covenant herein or in any agreement
required to be delivered pursuant hereto on the part of the Surviving
Corporation or Parent;
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(c) Misrepresentation or Breach. By Parent or the
Surviving Corporation, if there has been a misrepresentation or a
breach of a warranty or covenant herein or in any agreement required
to be delivered pursuant hereto on the part of the Company or
Shareholder;
(d) Failure of Condition to Parent's and the Surviving
Corporation's Obligations. By Parent and the Surviving Corporation,
if all of the conditions set forth in Section 8.1 have not been
satisfied;
(e) Failure of Condition to the Company and Shareholder's
Obligations. By the Company or Shareholder, if all of the conditions
set forth in Section 8.2 have not been satisfied;
(f) Court Order. By the Company and Shareholder or
Parent and the Surviving Corporation, if consummation of the
transactions contemplated hereby shall violate any non-appealable
final order, decree or judgment of any court or governmental body
having competent jurisdiction;
(g) Adverse Change. By Parent and the Surviving
Corporation if any event has occurred after the date hereof which is,
or will result in a material adverse change in the prospects, business
or condition of the Assets;
(h) Due Diligence Inspection. By Parent and the
Surviving Corporation if Parent and the Surviving Corporation are not
satisfied with their due diligence inspection of the Company,
Shareholder and Matanzas Ice Corp.
(i) Drop Dead Date. This Agreement shall terminate if it
has not been consummated by March 12, 1998.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of the Company,
Shareholder and Parent and the Surviving Corporation under this Agreement shall
terminate without further liability of the Company, Shareholder, Parent or the
Surviving Corporation. If the Company or Shareholder fails to consummate the
transactions contemplated on their part to occur on the scheduled Closing Date,
in circumstances whereby all conditions of the Closing set forth in Section 8.2
have been satisfied in all material respects or waived, Parent's and the
Surviving Corporation's sole remedy shall be to (i) to require Shareholder to
consummate and specifically perform the transactions contemplated hereby, 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 reimbursement of its out-of-pocket
expenses incurred directly in connection with the negotiation, preparation and
performance of this Agreement. If Parent and the Surviving Corporation 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 8.1 have been satisfied in all respects or waived, the Company's and
Shareholder's sole remedy shall be to (i) to require Parent
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and the Surviving Corporation to consummate and specifically perform the
transactions contemplated hereby, in accordance with the terms of this
Agreement, and to obtain from Parent and the Surviving Corporation 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.
10.3 Right to Proceed. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or Section 8.2 has
not been satisfied, the Company, Shareholder or Parent and the Surviving
Corporation, in addition to any other rights which may be available to it,
shall have the right to waive any such condition that is for its benefit and to
require the other party hereto to proceed with the Closing.
XI. TAX MATTERS
11.1 Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the
Code.
"Final Determination" shall mean (i) with respect to Federal
Taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by the
Company or Shareholder, whichever are responsible for payment of such Tax under
applicable law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that such responsible party determines that no action
should be taken to recoup such payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion
thereof) beginning after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax,
gross income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever,
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together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority ("Taxing Authority") responsible for the
imposition of any such tax (domestic or foreign).
"Tax Indemnification Period" means with respect to any Tax,
any Pre-Closing Tax Period of the Company.
11.2 Covenants.
(a) Without the prior written consent of Parent and the
Surviving Corporation, Shareholder shall not cause the Company to make
or change any tax election, change any annual tax accounting period,
adopt or change any method of tax accounting, file any amended 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 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, Parent or the Surviving Corporation.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) 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 real property transfer
Tax and any similar Tax) shall be accrued by the Shareholder and be
paid by the Shareholder when due (including any applicable
extensions), and the Shareholder will, at the Shareholder's sole
expense, file all necessary Tax returns and other documentation with
respect to all such Taxes and fees.
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11.3 Cooperation on Tax Matters.
(a) Parent, the Surviving Corporation and Shareholder
shall cooperate fully, 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 6043 of the Code and all Treasury Regulations
promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention
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. Parent and the Surviving Corporation
and Shareholder shall cause the Company to: (i) to retain 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 requirements of any Taxing Authority or any record retention
agreements entered into with any Taxing Authority, and (ii) to give
Shareholder reasonable written notice prior to destroying or
discarding any such books and records and, if Shareholder so requests,
Parent and the Surviving Corporation shall allow Shareholder to take
possession of such books and records.
(b) Parent and the Surviving Corporation and Shareholder
further 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 (including, but not limited to, with
respect to the transactions contemplated hereby).
11.4 Tax Indemnification. The Company and Shareholder hereby
jointly and severally indemnify Parent and the Surviving Corporation against,
and agree to hold Parent and the Surviving Corporation harmless from, any loss,
liability or expense attributable to (i) any Tax with respect to income
(including, to the extent based on income, state franchise Taxes), transfer
Tax, employment or withholding Tax related to employee tips income (actual and
allocated) and related reporting requirements, and gross receipts or royalty
Tax in respect of any franchise operation and any other Tax of the Company
related to the Tax Indemnification Period, (ii) any Tax resulting from a breach
of the provisions of Sections 3.9 and 11.2, and (iii) any liabilities, costs,
expenses (including, without limitation, reasonable expenses of investigation
and attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee or successor (the
sum of (i), (ii), and (iii) being referred to herein as a "Loss"). Parent and
the Surviving Corporation shall give Shareholder ten days notice of any claim
of Loss, and Shareholder shall have the opportunity to defend Parent and the
Surviving Corporation in accordance with Section 9.4 hereof.
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11.5 Acquisition Price Adjustment. Any amount paid by the Company,
Parent, the Surviving Corporation or Shareholder under Section 11.4 will be
treated as an adjustment to the Acquisition Price for all Tax purposes unless a
Final Determination causes any such amount not to constitute an adjustment to
the relevant purchase price. In the event of such a Final Determination,
Parent and the Surviving Corporation or Shareholder, as the case may be, shall
pay an amount that reflects the hypothetical Tax consequences of the receipt or
accrual of such payment, using the maximum statutory rate (or rates, in the
case of an item that affects more than one Tax) applicable to the recipient of
such payment for the relevant year, reflecting, for example, the effect of
deductions available for interest paid or accrued and for Taxes such as state
and local income Taxes. Any payment required to be made by Parent and the
Surviving Corporation or Shareholder under Section 11.4 that is not made when
due shall bear interest at the rate per annum determined, from time to time,
under the provision of Section 6621(a)(2) of the Code for each day until paid.
11.6 Survival. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
The provisions of this Article XI shall survive the Closing for the applicable
period of limitations notwithstanding any knowledge that Parent or the
Surviving Corporation may have acquired to the contrary thereof.
XII. MISCELLANEOUS
12.1 Expenses. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 Survival of Representations and Warranties. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing notwithstanding any knowledge that Parent
or the Surviving Corporation may have acquired to the contrary thereof.
12.3 Inurement; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
12.4 Entire Agreement; Amendment. This Agreement, the schedules
and exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
12.5 Severability. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the
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remaining provisions hereof and without affecting the validity, enforceability
or legality of such provision in any other jurisdiction.
12.6 Incorporation of Exhibits and Schedules. All exhibits and
schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 Captions and Headings; Use of Term "Person". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection
cross-references are to articles, sections and subsections within this
Agreement. As used herein, the term "person" shall mean any corporation,
limited liability company, partnership, venture, proprietorship, trust, benefit
plan or other entity or enterprise.
12.8 Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.
12.9 Notices. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to the Company Jim Albert
and Shareholder: 1901 J&C Blvd.
Naples, Florida 34109
with a copy to: Thomas A. Collins II
Treiser, Kobza & Volpe, Chartered
The Northern Trust Building
4001 Tamiami Trail North, Suite 330
Naples, Florida 34103
to Parent and the
Surviving Corporation: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis, III, President
with a copy to: Alan Schoenbaum
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St., Suite 1500
San Antonio, Texas 78205
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or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
12.10 Agents or Brokers. The Company and Shareholder and Parent and
the Surviving Corporation mutually represent and agree with each other that no
agents or brokers have been utilized in the solicitation or negotiation of the
sale of the Business and no fees, commissions or expenses of any type shall be
due or payable out of the proceeds of the Acquisition Price by either party to
this Agreement.
12.11 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities laws, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in Collier County, Florida and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof, and shall not be appealable. Judicial proceedings may be commenced
only to enforce this arbitration agreement or to enforce the results of
arbitration; provided that such prohibition shall not apply in the event that a
court ordered injunction is an appropriate remedy for a breach of this
Agreement.
12.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
[SIGNATURE PAGE FOLLOWS]
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[J.P. ALBERT ICE CO. AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE, INC.
By:
---------------------------------
Print Name:
----------------
Print Title:
---------------
PACKAGED ICE SOUTHEAST, INC.
By:
---------------------------------
Print Name:
----------------
Print Title:
---------------
J.P. ALBERT ICE CO.
By:
---------------------------------
James P. Albert, President
- ------------------------------------
James P. Albert
<PAGE> 35
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets of the Company
Exhibit B Assets subject to Capital Leases
Exhibit 5.9 Investment Letter
Exhibit 5.10 Escrow Agreement
Exhibit 5.12 Noncompetition Agreement
Exhibit 5.13 Employment Agreement
Exhibit 8.1(f) Opinion of Counsel
Shareholder's Disclosure Memorandum
<PAGE> 1
EXHIBIT 10.7
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as
of March 11, 1998, by and among Packaged Ice, Inc., a Texas corporation
("Parent"), Packaged Ice Southeast, Inc., a Texas corporation wholly owned by
Parent ("Surviving Corporation"), Artic Ice Corporation, a Florida corporation
(the "Company") and Arthur E. Biggs and Charlotte Biggs (the "Shareholders")
who collectively own the majority of the outstanding shares of capital stock of
the Company.
PRELIMINARY STATEMENTS
The respective Boards of Directors of Parent, Surviving Corporation
and the Company have each approved the merger of the Company with and into
Surviving Corporation (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:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Article I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and the plural forms of any of the
terms herein defined.
"Acquisition Price" shall have the meaning set forth in Section 2.7(d)
of this Agreement.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible which shall include, but not be limited to,
those items described more fully in Exhibit A attached hereto.
"Business" shall mean all of the operations of Company including the
production, storage, distribution, and sale of packaged ice products and other
items.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business for the direct manufacturing, distribution and
sale of packaged ice products which shall include, but not be limited to, those
items more fully described in Exhibit B, attached hereto. The equipment
comprising the Capital Leases shall be free and clear of the Capital Leases,
liens, claims and other Encumbrances at the Closing. Title to the assets that
are subject to Capital Leases shall be conveyed to the Surviving Corporation as
a result of this Agreement.
"Closing Date" shall mean the date on which this Agreement is
consummated.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
<PAGE> 2
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage, lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, or adverse claim or
restriction on transfer of any nature whatsoever other than those held by
Parent or Surviving Corporation or granted by the Company at Parent's or
Surviving Corporation's request.
"Escrow Agreement" shall have the meaning set forth in Section 5.10 of
this Agreement.
"Escrow Agent" shall mean First Union National Bank.
"Financial Statements" shall have the meaning set forth in Section 3.3
of this Agreement.
"Financing Statements" shall have the meaning as set forth in Section
5.11 of this Agreement.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Investment Letter" shall have the meaning set forth in Section 5.9 of
this Agreement.
"Liabilities" shall have the meaning set forth in Section 2.11 of this
Agreement.
"Merger" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Personal Property" shall have the meaning set forth in Section 3.13
of this Agreement.
"Real Property" shall have the meaning set forth in Section 3.12 of
this Agreement.
"Shareholders' Disclosure Memorandum" shall mean that schedule
attached hereto and incorporated herein by reference that lists and describes
all disclosures by the
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<PAGE> 3
Shareholders and Company concerning the Assets and the Business which are the
subject of this Agreement.
"Shareholder Documents" shall mean the Amended and Restated
Shareholders Agreement (September 20, 1995); the Amendment No. 1 to Amended and
Restated Shareholders Agreement (dated as of January 17, 1997); Amendment No. 2
to Amended and Restated Shareholders Agreement (dated as of March 14, 1997);
Amended and Restated Voting Agreement (dated September 20, 1995); Amendment
NO. 1 to Amended and Restated Voting Agreement (dated as of January 17, 1997);
Amendment No. 2 to Amended and Restated Voting Agreement (dated as of March 14,
1997); Amendment No. 3 to Amended and Restated Voting Agreement (dated as of
November 4, 1997); and Culligan Voting Agreement (dated December 2, 1997).
"Shares" shall mean all of the capital stock of Company outstanding on
the Closing Date.
"Taxes" shall have the meaning set forth in Section 11.1 hereof.
II. THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the corporation laws of Texas and Florida, the
Company shall be merged (the "Merger") with and into Surviving Corporation and
Surviving Corporation shall be 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 Section 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code
(the "Code").
2.2 Continuing Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of Surviving
Corporation, with all its purposes, powers, franchises, privileges, rights and
immunities, and shall continue unaffected and unimpaired by the Merger. 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 Surviving Corporation, and Surviving Corporation
shall be vested fully therewith and the separate corporate existence and
identity of the Company shall cease except to the extent continued by statute.
2.3 Effective Date. The Merger shall become effective upon the
occurrence of the issuance of certificates of merger (the "Effective Date") by
the Secretary of State of the State of Texas and the Secretary of State of
Florida upon filing on the Closing Date of articles of merger with the
Secretary of the State of Texas pursuant to Article 5.04 of the Texas Business
Corporation Act ("TBCA") and the Secretary of State of Florida pursuant to
Section 607.1105 of the Florida Business Corporation Act.
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<PAGE> 4
2.4 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of Surviving Corporation as in effect on the Effective
Date shall be the Articles of Incorporation and Bylaws of the Surviving
Corporation following the Merger.
2.5 Directors. The members of the Board of Directors of Surviving
Corporation at the Effective Date shall be the directors of the Surviving
Corporation immediately following the Merger.
2.6 Officers. The officers of Surviving Corporation at the
Effective Date shall be the officers of the Surviving Corporation immediately
following the Merger.
2.7 Conversion of Shares.
(a) Each share of the Company's $1 par value common stock
("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 automatically into the
right to receive the Share Price (as hereinafter defined) which shall
be payable, without interest thereon, upon the surrender of the
certificates formerly representing such Share, in accordance with
Section 2.7(g).
(b) Each Share shall, by virtue of the Merger and without
any action on the part of the holder, be canceled and retired and
cease to exist.
(c) The "Share Price" for each Share will be (x)/(y)
where (x) is the Acquisition Price (as defined in Section 2.7(d)) and
(y) is the total number of outstanding Shares.
(d) The acquisition price ("Acquisition Price") shall be
$2,200,000, which shall consist of $784,210 in cash, as adjusted as
set forth in Section 2.11 of this Agreement, (the "Cash Amount") and
141,579 newly issued shares of Parent's common stock, par value $0.01
per share ("Parent's Stock") valued at $10 per share and issued
directly to the Shareholders (the 141,579 shares of Parent Stock being
the "Stock Amount").
(e) Each share of the Company's common stock held in the
treasury of the Company immediately prior to the Effective Date 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.
(f) All of the Parent's Stock, when delivered pursuant to
the provisions of this Agreement, shall be validly issued, fully paid
and nonassessable.
(g) At Closing, Parent will pay to the Shareholders and
other holders of Shares, the total sum of the Acquisition Price.
$47,900 and 9,910 shares of
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Parent Stock will be placed in escrow with the Escrow Agent for a
period of 10 months in accordance with the Escrow Agreement (the
"Escrow Amount"). The Escrow Amount shall be approximately 7% of the
Acquisition Price and shall consist of a combination of cash and
Parent Stock. The ratio of Parent Stock and cash constituting the
Escrow Amount shall be the same as the ratio of the Parent Stock and
cash constituting the Acquisition Price. At 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
the Share Price for each Share surrendered.
(h) 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.
(i) No fractional shares of Parent Stock and no
certificates or scrip therefor shall be issued; instead, the dollar
value of any such fractional amount shall be added to the Cash Amount.
(j) All of the shares representing the Stock Amount will
be validly issued, fully paid and nonassessable.
(k) In the event that any shareholders of the Company are
determined in the sole discretion of Parent to not be an "Accredited
Investor" as defined in Rule 501(a) of Regulation D of the Securities
Act of 1933, such shareholders will be paid only from the Cash Amount.
2.8 Filing of Articles of Merger. Upon the terms and subject to
the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII hereof, the Company and the
Parent and Surviving Corporation shall execute and file a certificate of merger
in the manner required by the TBCA and the parties hereto shall take all such
other and further actions as may be required by law to make the Merger
effective. Prior to the filings referred to in this Section, the foregoing
will be confirmed at the Closing.
2.9 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 Surviving Corporation
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.
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(b) All liabilities and obligations of the Company and
Surviving Corporation 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.
2.10 Proration. To the extent such items are not reflected on the
Company's balance sheet, the parties shall prorate at the Closing the current
year's ad valorem taxes and prepaid expenses, based on the latest available
statements from taxing authorities, whether for the current tax year or the
preceding tax year. The Shareholders' pro rata share of such taxes shall be
the portion attributable to the period through the day preceding the Effective
Date, prorated by days. The prorated amounts shall be adjustments to the
Acquisition Price and shall be payable in a combination of Parent Stock and
cash in the same ratio in which the Acquisition Price is being paid. The
prorated amounts shall be payable in the manner set forth below:
(a) If a prorated amount is payable by Parent or
Surviving Corporation and determinable at the Closing, it shall be
added to the amount payable by Parent or Surviving Corporation at the
Closing.
(b) If a prorated amount is payable by Parent or
Surviving Corporation and not determinable at the Closing, it shall
be billed by the Shareholders when determinable and promptly paid by
Parent or Surviving Corporation to the Shareholders.
(c) If a prorated amount is payable by the Shareholders
and determinable at the Closing, it shall be deducted from the amount
otherwise payable by Parent or Surviving Corporation at the Closing.
(d) If a prorated amount is payable by the Shareholders
and not determinable at the Closing, it shall be billed by Parent or
Surviving Corporation when determinable and promptly paid by the
Shareholders to Parent.
2.11 Adjustment to Purchase Price. The Acquisition Price shall be
adjusted by the following (the "Adjustment Amount"):
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<PAGE> 7
(a) the Closing Date payoff amounts of all current and
long term interest bearing debt and current and long term Capital
Leases (including any unpaid interest and prepayment penalties) For
the purposes of this Section 2.11(a), all payments made by Surviving
Corporation or Parent to discharge all current and long term debt or
Capital Leases shall be paid from the Cash Amount;
(b) if the Company's ratio of current assets to current
liabilities is less than 1:1 at the Closing Date, the Acquisition
Price shall be reduced by an amount equal to the difference between
the current liabilities and the current assets. If the Company's
ratio of current assets to current liabilities is greater than 1:1 at
the Closing Date, the Acquisition Price shall be increased by an
amount equal to the difference of the current assets and the current
liabilities.
The Adjustment Amount will be estimated by the parties based on an
estimated Closing Date balance sheet to be prepared by the Company and
delivered to the parties at least one business day prior to the Closing Date
for purposes of determining the Cash Amount to be paid at Closing (the
"Estimated Adjustment Amount"). The Adjusted Amount will be finally determined
within 90 days after the Closing based on an audited balance sheet (the
"Closing Balance Sheet") of the Company as of the Closing Date. If the actual
Adjustment Amount is greater than the Estimated Adjustment Amount, the
Shareholders shall promptly pay the difference to Parent. If the actual
Adjustment Amount is less than the Estimated Adjustment Amount, Parent shall
promptly pay the difference to the Shareholders.
III. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent and
warrant to Parent and Surviving Corporation as follows:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida
and is in good standing and is duly qualified to do business in any foreign
jurisdiction in which it is currently conducting business operations. The
Company has full corporate power and authority to own or use the properties and
assets that it purports to own or use, and to perform all of its obligations
hereunder. All outstanding shares of stock of the Company are validly issued,
fully paid, nonassessable and a majority are owned, both beneficially and of
record, by the Shareholders. Other than this Agreement, there is no
subscription, option, warrant, call, right, agreement or commitment relating to
the issuance, sale, delivery, repurchase or transfer by Shareholders or the
Company (including any right of conversion or exchange under any outstanding
security or other instrument) of any of its capital stock or other securities.
There are no voting trusts, proxies or any other agreements or understandings
with respect to the voting of the Shares.
3.2 Execution, Delivery and Performance of Agreement. This
Agreement has been duly executed and delivered by the Company and the
Shareholders and constitutes
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the legal, valid and binding obligation of the Company and the Shareholders,
enforceable against them in accordance with its terms. Upon the execution and
delivery by the Shareholders of the Escrow Agreement, Noncompetition Agreement
and any other ancillary document required hereunder (collectively, the
"Shareholders' Closing Documents"), the Shareholders' Closing Documents will
constitute the legal, valid, and binding obligations of the Shareholders,
enforceable against the 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
and the Company have held a shareholders meeting (or have executed a consent)
and all resolutions required by law to approve the Merger have been duly
adopted in accordance with Florida law. Except as set forth on Section 3.2 of
Shareholders' Disclosure Memorandum, the execution, delivery and performance of
this Agreement by the Company and the Shareholders and the consummation of the
transactions contemplated hereby will not require the consent, approval or
authorization of any person or governmental authority, and will not, with or
without the giving of notice, the passage of time, or both, violate, conflict
with, result in a default, breach or loss of rights under, or result in the
creation of any lien, claim or encumbrance pursuant to, any lien, encumbrance,
instrument, agreement, or understanding, or any law, regulation, rule, order,
judgment or decree, to which the Shareholders or the Company are a party or by
which they are bound or affected. All shareholders who are not parties to this
Agreement have given all required consents and waived all dissenters rights
required by or provided by Florida law.
3.3 Financial Statements. The Company has previously caused to be
furnished to Parent the Company's unaudited balance sheet as at December 31,
1996, and the related statements of income and statements of cash flow for the
fiscal year then ended, and the Company's unaudited balance sheet as of
December 31, 1997 (the "December 31, 1997 Balance Sheet") and the related
statements of income and cash flow for the fiscal year then ending. Such
balance sheets and related statements of income and cash flow referenced in
this Section 3.3 are unaudited and collectively referred to herein as the
"Financial Statements").
The Financial Statements taken as a whole present fairly the financial
position, results of operations, changes in shareholders' equity, and cash flow
of the Company as the respective dates of and for the periods referred to in
such Financial Statements in a consistently applied manner.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by the Company in the Shareholders'
Disclosure Memorandum and except for liabilities arising in the ordinary course
of business and consistent with past practice since the date of the December
31, 1997 Balance Sheet, the Company has operated the Business in the ordinary
course and has incurred no material liabilities which would be required to be
reflected in accordance with GAAP, on a balance sheet as of the date hereof or
disclosed in the notes thereto.
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Since October 31, 1997 there has not been any material adverse change
in the business, operations, properties, prospects, assets or condition of the
Business, and no event has occurred, nor does a circumstance currently exist,
that may result in such a material adverse change. The Shareholders further
warrant and represent that the actual sales and expenses that relate to the
Company are accurately and truly reflected on the December 31, 1997 Financial
Statements.
3.4 Shareholders' Debt. Section 3.4 of the Shareholders'
Disclosure Memorandum sets forth all loans to the Company from the Shareholders
(the "Shareholders Debt"). The Shareholders represent and warrant that, in
connection with the Shareholders' Debt or otherwise, there are no other
Encumbrances held by Shareholders whatsoever against the Company or the Assets
other than those amounts set forth.
3.5 Business Operations and Condition of Assets. All items
comprising the Assets have been used by the Company in connection with the
Business and are now in serviceable condition, subject to normal maintenance
and periodic repair, and are currently sufficient for the conduct of the
Company's business after the Closing, in substantially the same manner as
conducted prior to the Closing, unless expressly disclosed to the contrary by
the Company and the Shareholders in Section 3.5 of Shareholders' Disclosure
Memorandum.
3.6 Title to Personal Property. Except as set forth in Section
3.6 of Shareholders' Disclosure Memorandum, the Company has good, legal and
marketable title to all of the personal property comprising the Assets, free
and clear of Encumbrances.
3.7 Litigation. Except as set forth on Section 3.7 of
Shareholders' Disclosure Memorandum, there is no pending claim, action, suit,
proceeding or investigation (judicial, governmental or otherwise), nor any
order, decree or judgment in effect, or, to the knowledge of the Company or the
Shareholders, threatened, against or relating to the Shareholders, the Company,
the Business, the Assets, or the transactions contemplated by this Agreement.
3.8 Compliance with Laws. The Shareholders and the Company have
materially complied with all laws, rules, regulations, ordinances, orders,
judgments and decrees relating to the Company, the Shares, the Assets, and the
Business.
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<PAGE> 10
3.9 Taxes.
(a) Except as set forth in Section 3.9 of Shareholders'
Disclosure Memorandum, the Company has, within the time and manner
prescribed by law, filed all returns, declarations, reports and
statements required to be filed by it (collectively, "Returns") in
respect of any Taxes and each such Return has been prepared in
compliance in all material respects with all applicable laws and
regulations and is true and correct in all respects, and the Company
has, within the time and in the manner prescribed by applicable law,
paid all Taxes that are shown to be due and payable with respect to
the periods covered thereby.
(b) Section 3.9 of the Shareholders' Disclosure
Memorandum describes the status of the Company's election as an "S
corporation" under the Code. The Company is not liable for any
federal income taxes as a "C- corporation" under the Code.
(c) Except as set forth in Section 3.9 of Shareholders'
Disclosure Memorandum (i) the Company has not requested or been
granted an extension of the time for filing any Return which has not
yet been filed; (ii) the Company has not consented to extend to a date
later than the date hereof the time in which any Tax may be assessed
or collected by any taxing authority; (iii) no deficiency or proposed
adjustment which has not been settled or otherwise resolved for any
amount of Tax has been proposed, asserted or assessed by any taxing
authority against the Company; (iv) there is no action, suit, taxing
authority proceeding, or audit now in progress, pending or, to the
Company's or the Shareholders' knowledge, threatened against or with
respect to the Company; (v) no claim has been made by a taxing
authority in a jurisdiction where the Company does not file Tax
Returns that the Company is subject to Taxes assessed by such
jurisdiction; (vi) there are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the Assets; (vii) the
Company will not be required to include any amount in taxable income
or exclude any item of deduction or loss from taxable income for any
taxable period (or a portion thereof) ending after the Closing Date as
a result of any of the following: (A) a change in method of accounting
for a taxable period ending on or prior to the Closing Date, (B) any
"closing agreement," as described in Code Section 7121 (or any
corresponding provision of state, local or foreign income Tax law)
entered into on or prior to the Closing Date, (C) any sale reported on
the installment method where such sale occurred on or prior to the
Closing Date, and (D) any prepaid amount received on or prior to the
Closing Date; and (viii) the Company does not have any obligation or
liability for the payment of Taxes of any other person as a result
from any expressed obligation to indemnify another person, or as a
result of such Company assuming or succeeding to the Tax liability of
any other person as successor, transferee or otherwise.
(d) 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
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Company's liability for Taxes. There exists no proposed tax
assessment against the company except as disclosed in Section 3.9 of
the Shareholders' Disclosure Memorandum. No consent to the
application of Section 341(f)(2) of the Code 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 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 Code with respect to any transaction contemplated
hereby. The Company has not been a member of any affiliated group (as
defined in Code 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.
(e) Except as set forth in Section 3.9 of the
Shareholders' Disclosure Memorandum, 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.
(f) Surviving Corporation 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 the 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 Surviving
Corporation 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) The Shareholders will pay their respective expenses,
if any, incurred in connection with the Merger.
(i) There is no intercompany indebtedness existing
between Parent and the Company or between Surviving Corporation and
the Company that was issued, acquired, or will be settled at a
discount.
(j) 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 Code.
(k) The fair market value of the assets of the Company
transferred to Surviving Corporation will equal or exceed the sum of
the liabilities assumed by
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Surviving Corporation, plus the amount of liabilities, if any, to
which the transferred assets are subject.
(l) The Company is not an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.10 Environmental. The Company 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 concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to occupational health and safety, good manufacturing practices
for food products, 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, the Company has obtained and been in material 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.
3.11 Insurance. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Business. The Company has not been refused any insurance with respect to
its assets or operations, and its coverage has not been limited, terminated or
canceled by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, during the last three (3)
years. Section 3.11 of Shareholders' Disclosure Memorandum lists all claims,
which (including related claims which in the aggregate) exceed $5,000 which
have been made by the Company or against any policy of the Company in the last
three years under any workers' compensation, general liability, property or
other insurance policy applicable to Company, any Assets of the Company or the
Business. Except as set forth on Section 3.11 of Shareholders' Disclosure
Memorandum, there are no pending or threatened claims under any insurance
policy. Such claim information includes the following information with respect
to each accident, loss, or other event: (a) the identity of the claimant; (b)
the nature of the claim; (c) the date of the occurrence; (d) the status as of
the report date and (e) the amounts paid or expected to be paid or recovered.
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3.12 Real Property.
(a) Section 3.12 of Shareholders' Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel
of real property owned by, leased to or used by the Company (the "Real
Property") and (ii) a complete and accurate list of all current
leases, lease amendments, subleases, assignments, licenses and other
agreements to which the Real Property is subject (collectively, the
"Leases"). The Company has delivered to Parent and Surviving
Corporation true and complete copies of the Leases.
(b) Except as disclosed in Section 3.12 of Shareholders'
Disclosure Memorandum (i) each of the Leases is in full force and
effect and has not been amended or modified; (ii) neither the Company,
nor any other party thereto, is in default thereunder, nor is there
any event which with notice or lapse of time, or both, would
constitute a default thereunder; (iii) the Company has received no
notice that any party to any Lease intends to cancel, terminate or
refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder; and (iv) no rental under the Leases
has been paid more than one month in advance.
(c) Except as disclosed in Section 3.12 of Shareholders'
Disclosure Memorandum, (i) there are no tanks on or below the surface
of the Real Property, (ii) there is no hazardous or toxic waste,
substance or material or other contaminant or pollutant (as determined
under federal, state or local law) present on or below the surface of
the Real Property including, without limitation, in the soil, subsoil,
groundwater or surface water, which constitutes a violation of any
law, ordinance, rule or regulation of any governmental entity having
jurisdiction thereof or subjects or could subject Parent or Surviving
Corporation to any liability to third parties, and (iii) the Real
Property has never been used by the Company or by any previous owners
or operators to generate, manufacture, refine, produce, store, handle,
transfer, process or transport any hazardous or toxic waste, substance
or material or other contaminant or pollutant.
(d) The zoning of each parcel of the Real Property
permits the improvements located thereon and the continuation of
business presently being conducted thereon. The Real Property is
served by utilities and services necessary for the normal and
continued operation of the business presently conducted thereon.
3.13 Personal Property.
(a) Section 3.13 of Shareholders' Disclosure Memorandum
is a complete and accurate schedule as of the Closing Date describing,
and specifying the location of, all inventory, motor vehicles,
machinery, fixtures, equipment, furniture, supplies, tools, Intangible
Assets, and all other tangible or intangible personal property owned
by, in the possession of, or used by the Company as to
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which the Company has an unamortized basis exceeding $1,000 (the
"Personal Property").
(b) Each lease, license, rental agreement, contract of
sale or other agreement applicable to any Personal Property is listed
in Section 3.14 of Shareholders' Disclosure Memorandum and is in full
force and effect; neither the Company nor any other party thereto is
in material default thereunder, nor is there any event which with
notice or lapse of time, or both, would constitute a default
thereunder. The Company has received no notice that any party to any
such lease, license, rental agreement, contract of sale or other
agreement intends to cancel, terminate or refuse to renew the same or
to exercise or decline to exercise any option or other right
thereunder. Except as set forth in Section 3.13 of Shareholders'
Disclosure Memorandum, no Personal Property is subject to any lease,
license, contract of sale or other agreement.
(c) The inventory of the Company as reflected by the
Financial Statements and as described in Section 3.13 of Shareholders'
Disclosure Memorandum consisted and consists of items substantially
all of which were and will be of the usual quality and quantity
necessary for the normal conduct of the Business and reasonably
expected to be usable or salable within a reasonable period of time in
the ordinary course of business of the Company, except items of
inventory which have been written down to realizable market value or
written off completely, and damaged or broken items in an amount which
does not materially affect the value of the inventory as reflected on
the Financial Statements. With respect to inventory in the hands of
suppliers for which the Company is committed as of the date hereof,
such inventory is reasonably expected to be usable in the ordinary
course of business of the Company as presently being conducted.
(d) All accounts receivable of the Company that are
reflected on the December 31, 1997 Balance Sheet or on the Company's
accounting records as of the Closing Date (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
collectible net of the respective reserves shown on the December 31,
1997 Balance Sheet or on the accounting records of the Company as of
the Closing Date (which reserves are adequate and, in the case of the
reserve as of the Closing Date, will not be more than the reserve
reflected in the December 31, 1997 Balance Sheet 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 date on which it was accrued. There is no contest, claim,
or right of set-off under any agreement with any obligor of an Account
Receivable relating to the amount or validity of such Account
Receivable.
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3.14 Contracts. Section 3.14 of Shareholders' Disclosure Memorandum
contains a complete and accurate list of all presently effective material
contracts, leases and other agreements ("Contracts") to which the Company is a
party and which affect or are applicable to the Assets or the Company, true and
complete copies (or summaries in the case of oral contracts) of each of which
have been delivered to Parent and Surviving Corporation by the Company,
including, without limitation, any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any
such obligation for the borrowing of money;
(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either
within or outside the United States relating to sharing of present or
future commissions, fees or other income or profits;
(d) lease, license, rental agreement, contract of sale or
other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract; or
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts
and/or rebates).
Except as disclosed in Section 3.14 of Shareholders' Disclosure
Memorandum, each of the Contracts is in full force and effect and has not been
amended or modified and neither the Company, nor any other party thereto, is in
material default thereunder, nor is there any event which with notice or lapse
of time, or both, would constitute a material default thereunder. The Company
has received no notice that any party intends to cancel, terminate or refuse to
renew any such Contract or to exercise or decline to exercise any option or
other right thereunder.
3.15 Labor Matters. There are no controversies pending or, to the
best knowledge of the Company or the Shareholders, threatened between the
Company and any employees of the Company. The Company has complied with all
laws relating to the employment of labor, including any provisions thereof
relating to wages, hours,
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collective bargaining, immigration, safety and the payment of withholding and
social security and similar taxes, and the Company has no liability for any
arrears of wages or taxes or penalties for failure to comply with any of the
foregoing.
3.16 Absence of Sensitive Payments. To the best knowledge of the
Company, the Company has not made or maintained (i) any contributions, payments
or gifts of its funds or property to any governmental official, employee or
agent where either the payment or the purpose of such contribution, payment or
gift was or is illegal under the laws of the United States or any state
thereof, or any other jurisdiction (foreign or domestic); or (ii) any
contribution, or reimbursement of any political gift or contribution made by
any other person, to candidates for public office, whether federal, state,
local or foreign, where such contributions by the Company or the Shareholders
were or would be a violation of applicable law.
3.17 Employee Benefits. All employee benefit plans (whether or not
covered by ERISA), deferred compensation or executive compensation plans for
employees, directors or independent contractors, and all other employee or
independent contractor arrangements or programs that are maintained or
contributed to by the Company (collectively, the "Company Plans") have been
administered and operated in all material respects in compliance with their
terms, ERISA, if applicable, the Code and other applicable law. All Company
Plans that are intended to be qualified under Section 401(a) of the Code are so
qualified and a current favorable IRS determination letter exists for each such
plan and covers the amendments required by the Tax Reform Act of 1986. All
funded Company Plans are fully funded according to their terms and applicable
law. No prohibited transaction or breach of fiduciary duty under ERISA has been
committed by any fiduciary, disqualified person or party in interest of any
Company Plan. The Company has no liability, contingent or otherwise, under
Title IV of ERISA.
3.18 Capital Improvements. Section 3.18 of Shareholders'
Disclosure Memorandum describes all of the capital improvements or purchases or
other capital expenditures which the Company has committed to or contracted for
which have not been completed prior to the date hereof and the cost and expense
reasonably estimated to complete such work and purchases.
3.19 No Undisclosed Liabilities. Except as set forth in Section
3.19 of the Shareholders' Disclosure Memorandum and obligations and liabilities
arising under the contracts disclosed in Section 3.14 of the Shareholders'
Disclosure Memorandum, the Company has no liabilities or obligations of the
type required to be reflected as liabilities on a balance sheet prepared in
accordance with Generally Accepted Accounting Principles (GAAP), except for
liabilities or obligations reflected or reserved against in the Financial
Statements and current liabilities incurred in the ordinary course of business
since the respective dates thereof.
3.20 Complete and Accurate Disclosure. No representation or
warranty made to Parent or Surviving Corporation in this Agreement or in
connection with this transaction contains or will contain an untrue statement
of a material fact, or omits or will
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omit to state a material fact necessary to make such representation or warranty
not misleading or necessary to enable Parent and Surviving Corporation to make
a fully informed decision with respect to the Merger of the Company into
Surviving Corporation. All documents and information which have been or will
be delivered to Parent and Surviving Corporation or its representatives by or
on behalf of the Company or the Shareholders are and will be true, correct and
complete copies of the documents they purport to represent.
3.21 Intercompany and Affiliate Debt. As of the Closing Date all
intercompany and affiliated accounts of the Company to include, but not limited
to, all intercompany and affiliate notes payables and receivables, will be
settled and eliminated.
3.22 No Material Adverse Change. Since October 31, 1997, there has
not been any material adverse change in the Business or the 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.
3.23 Accredited Investors. All recipients of Parent's Stock are
accredited investors as defined in accordance with the Securities and Exchange
Commission Rule 501 of Regulation D as promulgated under the Securities Act of
1933.
IV. REPRESENTATIONS AND WARRANTIES
OF SURVIVING CORPORATION AND PARENT
4.1 Corporate Existence; Good Standing; Capitalization. Parent
and Surviving Corporation are corporations duly organized, validly existing,
and in good standing under the laws of the State of Texas and have all
requisite corporate power and authority to issue the Parent's Stock and to own
its properties and assets and to carry on its business as now conducted as
proposed to be conducted. Parent and Surviving Corporation are duly qualified
to transact business and are in good standing in the State of Florida. The
copies of the Articles of Incorporation and bylaws of Parent and Surviving
Corporation delivered to the Company and the Shareholders prior to the
execution of this Agreement are true and complete copies of the duly and
legally adopted Articles of Incorporation and bylaws of Parent and Surviving
Corporation in effect as of the date of this Agreement.
4.2 Power and Authority. Parent and Surviving Corporation have
the requisite corporate power and authority, and have been duly authorized, to
enter into this Agreement and all ancillary agreements, as applicable, and to
perform all of its obligations hereunder.
4.3 Court Orders, Decrees, Etc. To the best of Parent's and
Surviving Corporation's knowledge, there is no outstanding order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal
against or adversely affecting Parent or the Surviving Corporation or their
respective subsidiaries, or their respective properties or
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businesses or having the effect of preventing, delaying, making illegal or
otherwise interfering with the transactions contemplated hereby.
4.4 Franchises, Permits, and Consents. Each of Parent, the
Surviving Corporation and their respective subsidiaries possesses all material:
governmental franchises, licenses, permits, consents, authorizations,
exemptions and orders, required by Parent, the Surviving Corporation and such
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 Parent, the Surviving Corporation
or such subsidiaries or in connection with the consummation of the transactions
by this Agreement have been made or obtained.
4.5 Disclosure. Parent and the Surviving Corporation have not
knowingly withheld from the Shareholders any material facts relating to the
assets, business, operations, financial condition or prospects of Parent or the
Surviving Corporation or their respective 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.
4.6 Parent SEC Reports. Since September 30, 1997, Parent has
filed on a timely basis all reports and statements, together with all
amendments required to be made with respect thereto that it is required to file
with the SEC. No Parent SEC Document with respect to periods beginning on or
after September 30, 1997, and until the Closing contained or will contain any
information that was false or misleading with respect to any material fact, or
omitted or will omit to state any material fact necessary in order to make
statements therein not misleading.
Parent's Offering Circular dated as of January 22, 1998 did not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Shareholders and the Company are
entitled to rely on the statements therein as though made in this Agreement.
The financial statements and notes thereto included in such Offering Circular
for Parent (a) are in accordance with the books and records of Parent, which
are complete in all material respects and have been maintained in accordance
with good business practices and (b) present fairly the consolidated financial
position and the consolidated results of operations, changes in shareholders'
equity and cash flows of Parent as of the dates and for the periods indicated,
in accordance with generally accepted accounting principles.
4.7 Taxes.
(a) Prior to the proposed transaction, Parent will be in
control of Surviving Corporation within the meaning of section 368(c) of the
Code.
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(b) Surviving Corporation has no plan or intention to
issue additional shares of its stock following the proposed transaction that
would result in Parent losing control of Surviving Corporation within the
meaning of section 368(c) of the Code.
(c) Parent has no plan or intention to reacquire any of
the Parent Stock interests issued to the Shareholders in the proposed
transaction.
(d) Following the proposed transaction, Parent will
continue the historic business of the Company or use a significant portion of
the Company's business assets in a business, as determined under the principles
of Treasury Regulation 1.368-1(d). Parent and Surviving Corporation have no
plan or intention to dispose of any of the assets of the Company acquired in
the proposed transaction other than transfers in the ordinary course of
business, and Parent and Surviving Corporation have no intention to transfer
any interest in any entity that would cause any of the assets of the Company
acquired in the transaction to no longer be deemed to be used by the Parent
under the principles of Treasury Regulation 1.368-1(d).
(e) The Surviving Corporation will not pay or assume any
expenses of the Company that are not solely and directly related to the
proposed transaction in accordance with the guidelines established in Rev. Rul.
73- 54, 1973-1 C.B. 187. Parent and Surviving Corporation will pay their
respective expenses incurred in connection with the Merger.
(f) There is no intercorporate indebtedness existing
between Parent and the Company or between Surviving Corporation and the Company
that was issued, acquired or will be settled at a discount.
(g) Neither Parent nor Surviving Corporation are
investment companies as defined in sections 368(a)(2)(F)(iii) and (iv) of the
Code.
V. COVENANTS OF THE COMPANY AND SHAREHOLDERS
The Shareholders and the Company hereby, jointly and severally,
covenant and agree as follows:
5.1 Conduct of the Business Pending the Closing Date. The
Shareholders and the Company hereby agree that, from the date hereof to the
Closing Date, they will:
(a) maintain the Assets in normal good repair, order and
condition, and make such capital expenditures as necessary to maintain
the Business, in accordance with past practices and sound business
judgment;
(b) maintain insurance upon all of its properties and
with respect to the conduct of the Business in such amounts and of
such kinds to adequately safeguard and protect the Assets and the
Business;
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(c) not issue or agree to issue any additional shares of
common stock or of any other voting security or any rights to acquire
any such additional common stock or voting security which would cause
a change of control of the Shareholders;
(d) use its best efforts to comply with all laws and
material contractual obligations applicable to it and to the conduct
of the Business;
(e) not (i) mortgage, pledge or, except in the ordinary
course of business, subject to any lien, charge, security interest or
other encumbrance any of the Assets (whether tangible or intangible),
(ii) sell, assign, transfer, convey, lease or otherwise dispose of, or
agree to sell, assign, transfer, convey, lease or otherwise dispose
of, any of the Assets outside the ordinary course of business other
than that expressly disclosed in the Shareholders' Disclosure
Memorandum;
(f) not authorize or consummate any dividends or
distributions of assets to its stockholders, any consolidation or
merger, purchase of all or substantially all of the assets of any
entity, or any other extraordinary corporate transaction other than
expressly disclosed in the Shareholders' Disclosure Memorandum;
(g) conduct its business in its usual and ordinary
manner.
5.2 Investigation by Parent and Surviving Corporation. Prior to
the Closing Date, the Company shall (i) give Parent and its authorized
representatives and advisors access, at reasonable times and on reasonable
notice, to all items of Real and Personal Property, books and records,
personnel, offices, and other facilities of the Company, (ii) permit Parent or
Surviving Corporation to make such inspections thereof as Parent or Surviving
Corporation may reasonably require, and (iii) cause its employees, and its
advisors to furnish to Parent and its authorized representatives and advisors
such financial and operating data and other information with respect to the
Business prepared in the ordinary course of the Business as Parent or its agent
shall from time to time reasonably request.
5.3 Closing Conditions. The Shareholders and the Company will, to
the extent within their control, use their best reasonable efforts to cause the
conditions set forth in Section 8.1 to be satisfied by the Closing Date.
5.4 Confidentiality. From and after the date hereof, the
Shareholders will, and will cause the Company and its officers, employees,
representatives, consultants and advisors to hold in confidence all
confidential information in the possession of the Company, its affiliates or
its advisors concerning Parent, Surviving Corporation or the Company. The
Shareholders and the Company will not release or disclose any such information
to any person other than Parent and its authorized representatives.
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Notwithstanding the foregoing, the confidentiality obligations of this Section
shall not apply to information:
(a) which the Shareholders or the Company are compelled
to disclose by judicial or administrative process, or, in the
reasonable opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to the
Company or the Shareholders by a third party who obtained such
information other than as a result of a breach of a confidential
relationship, known to the Company or the Shareholders.
5.5 Public Announcement. The Company, the Shareholders, Surviving
Corporation and Parent will cooperate in the public announcement of the
transactions contemplated by this Agreement, and, other than as may be required
by applicable law, no such announcement will be made by either party without
the consent of the other party, which consent shall not be unreasonably
withheld.
5.6 No Shopping. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither the Company nor the Shareholders shall (and the Company and the
Shareholders shall cause their respective affiliates, officers, directors,
employees, representatives and agents not to) directly or indirectly, solicit,
initiate or participate in discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent or an affiliate or an associate of Parent) concerning, or
enter into any agreement providing for, any merger, sale of material assets,
sale of stock or similar transactions involving the Company or the Assets.
5.7 Further Assurances. The Shareholders and the Company will use
their best efforts to implement the provisions of this Agreement, and for such
purpose the Shareholders or the Company, at the request of Parent or Surviving
Corporation, at or after the Closing Date, will, without further consideration,
promptly execute and deliver, or cause to be executed and delivered, to Parent
and Surviving Corporation such deeds, assignments, bills of sale, consents,
documents evidencing title and other instruments in addition to those required
by this Agreement, in form and substance satisfactory to Parent and Surviving
Corporation, as Parent and Surviving Corporation may reasonably deem necessary
or desirable to implement any provision of this Agreement.
5.8 Insurance. The Shareholders shall cause the Company to
continue to maintain insurance through the Closing Date with financially sound
and reputable insurers unaffiliated with the Company or the Shareholders in
such amounts and against such risks as are adequate in the judgment of the
Shareholders to protect the Assets and the Business.
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5.9 Investment Letter. At the Closing, the Shareholders shall
execute and deliver to Parent the investment letter in the form attached hereto
as Exhibit 5.9 (the "Investment Letter").
5.10 Escrow Agreement. At the Closing, the Shareholders shall
execute and deliver to Parent and Surviving Corporation the escrow agreement in
the form attached hereto as Exhibit 5.10 (the "Escrow Agreement").
5.11 Title Reports. Within ten (10) days after the date hereof,
the Shareholders, at the Shareholders' sole cost and expense, shall provide a
title report(s) for all real property owned by the Company ("Owned Real
Property") and current reports of searches made of the Uniform Commercial Code
Records of the County and State where each parcel of Owned Real Property is
located (the "Financing Statements") setting forth the state of liens affecting
the title to the personal property and real property to be conveyed hereunder.
The title report shall form the basis for a title insurance policy, issued by a
nationally known title policy issuer, to be delivered to Parent and Surviving
Corporation, at the Shareholders' sole expense, at the Closing in an amount
equal to $600,000. At the Closing, the Owned Real Property shall be subject to
no liens, charges, encumbrances, exceptions, or reservations of any kind or
character other than those specifically approved by Parent and Surviving
Corporation in writing (the "Permitted Exceptions").
5.12 Noncompetition Agreement. At the Closing, Arthur E. Biggs and
Charlotte Biggs will enter into the Noncompetition Agreement attached hereto as
Exhibit 5.12.
5.13 Registration Rights Agreement. At the Closing, the
Shareholders shall enter into the Registration Rights Agreement attached hereto
as Exhibit 5.13.
5.14 Shareholder Documents. At the Closing, the Shareholders shall
enter into and deliver the Shareholder Documents attached hereto as Exhibit
5.14 to Parent.
VI. COVENANTS OF PARENT AND SURVIVING CORPORATION
6.1 Closing Conditions. Parent and Surviving Corporation will, to
the extent within their control, use their best reasonable efforts to cause the
conditions set forth in Section 8.2 to be satisfied by the Closing Date.
6.2 Ancillary Agreements. At the Closing, Parent and Surviving
Corporation will enter into the Noncompetition Agreement, the Escrow Agreement,
and all other ancillary documents required hereunder.
6.3 Investigation by the Shareholders. Prior to the Closing Date,
Parent and Surviving Corporation shall (i) give the Shareholders and their
authorized representatives and advisors access, at reasonable times and on
reasonable notice, to all items of Real and
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Personal Property, books and records, personnel, offices, and other facilities
of Parent and the Shareholders, (ii) permit the Shareholders to make such
inspections thereof as the Shareholders may reasonably require, and (iii) cause
their respective employees, and their respective advisors to furnish to the
Shareholders and their authorized representatives and advisors such financial
and operating data and other information with respect to Parent and Surviving
Corporation prepared in the ordinary course of business as the Shareholders or
their agent shall from time to time reasonably request.
6.4 Confidentiality. From and after the date hereof, Parent and
Surviving Corporation will, and will cause their respective officers,
employees, representatives, consultants and advisors to hold in confidence all
confidential information in the possession of either Parent or Surviving
Corporation, respectively, their affiliates or their advisors concerning the
Shareholders. Parent and Surviving Corporation will not release or disclose
any such information to any person other than the Shareholders or their
authorized representatives. Notwithstanding the foregoing, the confidentiality
obligations of this Section shall not apply to information:
(a) which the Parent or Surviving Corporation are
compelled to disclose by judicial or administrative process, or, in
the reasonable opinion of counsel, by other mandatory requirements of
law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to Parent or
Surviving Corporation by a third party who obtained such information
other than as a result of a breach of a confidential relationship,
known to the Parent or the Surviving Corporation.
6.5 Registration Rights Agreement. At the Closing,
Parent and Surviving Corporation shall enter into the Registration Rights
Agreement attached hereto as Exhibit 5.13.
VII. THE CLOSING
7.1 The Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at a mutually
agreeable time and date. The date of the closing shall herein be referred to
as the "Closing Date." Subject to the provisions of Article X, failure to
consummate the transaction set forth in this Agreement on the date and time and
place determined by this Section 7.1 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this
Agreement.
7.2 Closing Obligations. At the Closing, subject to the terms,
covenants and conditions contained herein:
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(a) The Shareholders will deliver to Parent and Surviving
Corporation:
(i) certificates representing the Shares, to be
surrendered to Surviving Corporation or Parent;
(ii) a certificate executed by the Shareholders
representing and warranting to Parent and Surviving
Corporation that the Shareholders' and the Company's
representations and warranties in this Agreement are accurate
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 Memorandum which was delivered by
the Shareholders to Parent and Surviving Corporation prior to
the Closing Date); and
(iii) investment letter executed by the
Shareholders in the form attached hereto as Exhibit 5.9, (the
"Investment Letter").
(iv) an escrow agreement (the "Escrow Agreement"
as set forth in Exhibit 5.10).
(v) an opinion of counsel as referred to in
Section 8.1(f);
(vi) letters of resignation of the officers and
directors of the Company;
(vii) executed counterparts of all other documents,
including the Shareholder Documents, and certificates required
to be delivered to Parent and Surviving Corporation pursuant
to this Agreement including, but not limited to the
Undertaking Agreement, the Noncompetition Agreement,
satisfactory evidence that all third party creditors of the
Company have been satisfied and the title insurance policy as
set forth in Section 8.1(k) in the amount of $600,000 has been
delivered to Surviving Corporation.
(b) Parent and Surviving Corporation will deliver to the
Shareholders:
(i) the Stock Amount, issued to the Shareholders;
(ii) the Cash Amount (less the amounts due to
third party creditors and less the estimated adjustment
amount, and less the amount to be placed in escrow) by bank,
cashier's or certified check payable to the order of the
Shareholders or other holders of the Shares or wire transfer
in immediately available funds to an account designated by the
Shareholders or other holders of Shares, as may be selected by
them;
(iii) a certificate executed by Parent and
Surviving Corporation to the effect that, except as otherwise
stated in such certificate, each of Parent and Surviving
Corporation's representations and warranties in this
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Agreement is accurate in all respect as of the Closing Date as
if made on the Closing Date ("Parent and Surviving
Corporation's Certificate"); and
(c) Surviving Corporation and the Company will execute
articles of merger and file the same with the Secretaries of State of
the State of Texas and the State of Florida.
(d) Parent will place 9,910 shares of Parent Stock and
$47,900 in cash of the Acquisition Price into escrow.
VIII. CONDITIONS TO CLOSING
8.1 Conditions to Obligations of Parent and Surviving Corporation.
The obligations of Parent and Surviving Corporation to complete the
transactions contemplated at the Closing shall be subject to the satisfaction
on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of the
Shareholders or the Company to be performed or complied with on or
before the Closing Date shall have been duly performed or complied
with in all material respects and the Shareholders shall deliver to
Parent and Surviving Corporation a certificate signed by the
Shareholders and an officer of the Company to such effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of the
Shareholders and the Company contained herein shall be true and
correct, in all material respects, on the Closing Date with the same
force and effect as though such representations and warranties had
been made on the Closing Date, and since the date hereof there shall
have occurred no material adverse change in the Business, and the
Shareholders shall deliver to Parent and Surviving Corporation a
certificate signed by the Shareholders and an officer of the Company
to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Parent and Surviving
Corporation from consummating the transactions contemplated hereby.
(d) Third Party Creditors. All third party creditors of
the Business will be paid in full, and all Encumbrances against the
Shares, Assets and the Business will be paid or discharged.
(e) Capital Leases. All Capital Leases shall be paid in
full and the personal property subject thereto shall be conveyed to
the Company free and clear of Encumbrances.
(f) Opinion of Counsel for the Shareholders and the
Company. Parent and Surviving Corporation shall have received the
opinion of Broad and Cassel
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dated as of the Closing Date, in form and substance satisfactory to
Surviving Corporation's and Parent's counsel, subject to reasonable
qualifications and exceptions, as set forth on Exhibit 8.1(f). This
Opinion of Counsel shall also set forth that any shareholders who are
not parties to this Agreement have given all required consents and
waived all dissenters rights required by or provided by Florida law.
(g) Due Diligence Inspection Complete. Parent and
Surviving Corporation shall have completed and are satisfied with
their due diligence inspection of the Company.
(i) Ancillary Agreements. The Shareholders shall have
executed the Noncompetition Agreement, the Escrow Agreement,
Investment Letter and all other ancillary documents required
hereunder.
(j) Mergers. The contemplated mergers agreements whereby
Artic Crystal Corporation and Dolphin Ice Co., Inc. will merge into
Surviving Corporation and Surviving Corporation will remain as the
surviving entity shall have occurred contemporaneously with the
execution of this Agreement.
(k) Conveyance of Real Property. At or prior to this
Closing, Arthur E. Biggs shall have conveyed by general warranty deed
the real property and improvements comprising the Artic Ice
Corporation ice manufacturing facilities located at 335 N. Congress,
Del Ray Beach, Florida to Surviving Corporation with a title insurance
policy issued by a nationally known title insurance issuer insuring
title to the real property in the amount of $600,000. The effect of
the conveyance of this real property by Arthur E. Biggs will be to
convey a fee simple interest in the aforementioned real property
comprising the Artic Ice Corporation ice manufacturing facility to
Surviving Corporation free and clear of any and all Encumbrances
unless excepted to in writing by Surviving Corporation.
(l) Registration Rights Agreement. The Shareholders
shall have entered into the Registration Rights Agreement attached
hereto as Exhibit 5.13.
(m) Shareholder Documents. The Shareholders shall have
entered into and delivered the Shareholder Documents to Parent.
(n) All shareholders who are not parties to this
Agreement have given all required consents and waived all dissenters
rights required by or provided by Florida law.
8.2 Conditions to Obligations of the Company and the Shareholders.
The obligation of the Company and the Shareholders to complete the transactions
contemplated at the Closing shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
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(a) Performance. Each agreement and obligation of Parent
and Surviving Corporation to be performed or complied with on or
before the Closing Date shall have been duly performed or complied
with in all material respects and Parent and Surviving Corporation
shall deliver to the Shareholders a certificate signed by an officer
of Parent and Surviving Corporation to such effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Parent and
Surviving Corporation contained herein shall be true and correct on
the Closing Date with the same force and effect as though such
representations and covenants had been made on the Closing Date, since
the date hereof there shall have occurred no material adverse change
in Parent's or Surviving Corporation's business operations and Parent
and Surviving Corporation shall deliver to the Shareholders a
certificate signed by an officer of Parent and Surviving Corporation
to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining the Company from
consummating the transactions contemplated hereby.
(d) Due Diligence Inspection Complete. The Shareholders
have completed and are satisfied with their due diligence inspection
of Parent and Surviving Corporation.
(e) Registration Rights Agreement. Parent shall have
entered into the Registration Rights Agreement attached hereto as
Exhibit 5.13.
IX. INDEMNIFICATION
9.1 Indemnification of Parent and Surviving Corporation by
Shareholders. The Shareholders agree to indemnify, defend and hold harmless
Parent and Surviving Corporation and Parent's and Surviving Corporation's
employees, agents, heirs, legal representatives, and assigns from and against
any and all claims, suits, losses, expenses (legal, accounting, investigation
and otherwise), damages and liabilities, including, without limitation, tax
liabilities (hereinafter, collectively "Damages"), arising out of or relating
to (i) any inaccuracy of any representation or warranty of the Company or the
Shareholders set forth in this Agreement or in any document or certificate
furnished or required to be furnished to Parent or the Surviving Corporation or
the breach of any covenant made by the Company in or pursuant to this
Agreement; or (ii) any claim or cause of action arising with respect to the
conduct or condition of the Business or Assets prior to the Closing.
Except for events requiring indemnification under Sections 3.4, 3.6,
3.9 and Article XI of this Agreement and Sections 3.4, 3.6, 3.9 and any
disclosures relating to Article XI in the Shareholders' Disclosure Memorandum,
if an event occurs that otherwise requires indemnification hereunder and said
event is disclosed in the Shareholders' Disclosure Memorandum, the Shareholders
shall not be required to
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indemnify Surviving Corporation or Parent for any such event. In the event
that the Shareholders fail or neglect to disclose any such items requiring
indemnification in the Shareholders' Disclosure Memorandum, the Shareholders
shall be required to fully indemnify Surviving Corporation and Parent as
required herein whether Surviving Corporation or Parent had knowledge of such
event or not.
9.2 Indemnification of the Company and the Shareholders by Parent
and Surviving Corporation. Parent and Surviving Corporation agree to
indemnify, defend and hold harmless the Company and the Shareholders from and
against any and all Damages arising out of or relating to any inaccuracy or any
representation or warranty set forth in this Agreement or the breach of any
covenant made by Parent or Surviving Corporation in or pursuant to this
Agreement.
9.3 Claims for Indemnification. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified
Party has actual knowledge of the facts constituting the basis for such claim
(the "Notice of Claim"). Such notice shall specify all material facts known to
the Indemnified Party giving rise to such indemnification right, and to the
extent practicable, the amount or an estimate of the amount of the liability
arising therefrom. The failure of any Indemnified Party to promptly notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligation
to indemnify in respect to such action and shall not relieve the Indemnifying
Party of any other liability which they may have to any Indemnified Party
unless such failure to notify the Indemnifying Party prejudices the rights of
the Indemnifying Party. In addition to all other remedies provided hereunder
or by law, Parent and Surviving Corporation shall have the right to make a
claim against the Escrow Amount for any of Parent's or Surviving Corporation's
Damages. Parent and Surviving Corporation agree that any claims for
indemnification by Parent and/or Surviving Corporation made against the
Shareholders shall first be satisfied with any amounts that have been paid into
escrow in accordance with the terms set forth in this Agreement.
9.4 Right to Defend. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within sixty (60) days after receipt of the Notice of Claim
that the Indemnifying Party intends to assume the defense of such claim and
acknowledges its liability to indemnify the Indemnified Party for any losses
resulting from such claim; provided, however, that if the Indemnifying Party
does not elect to assume the defense of any claim, then (a) the Indemnifying
Party shall have the right to participate in the defense of such claim or
demand at its expense through counsel of its own choosing, provided the
Indemnified
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Party shall control the defense of such claim, (b) the Indemnified
Party may settle any such claim without the consent of the Indemnifying Party,
however, the Indemnifying Party may not settle any such claim without the prior
written consent of the Indemnified Party; and (c) Section 9.5 hereof shall be
inapplicable. Whether or not the Indemnifying Party does choose to so defend
such claim, the parties hereto shall cooperate in the defense thereof and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be requested in
connection therewith. To the extent Parent or Surviving Corporation is the
Indemnified Party for any actual or threatened claim or demand by any third
party, Parent and Surviving Corporation shall have the right to control the
prosecution of any counterclaim or right related to such a claim or demand,
provided that Parent and Surviving Corporation agree to reasonably cooperate
with the Company or the Shareholders with respect to the prosecution of such
counterclaim or right.
9.5 Settlement. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld and (ii) the Indemnifying
Party can settle without the consent of the Indemnified Party only if the
settlement involves only the payment of money for which the Indemnifying Party
will be fully liable. No other settlement of any claim may be made without the
prior written consent of both the Indemnified Party and the Indemnifying Party,
which consent shall not be unreasonably withheld.
9.6 Effect of Termination. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
9.7 Limitations on Amount. Neither party hereto will have any
liability (for indemnification or otherwise) with respect to the matters
described in Section 9.1 (as to the Shareholders) or 9.2 (as to Parent and
Surviving Corporation) until the total of all Damages of the Indemnified Party
with respect to such matters exceeds $75,000 in the aggregate (the "Basket"),
and then the Indemnifying Party shall be responsible to the Indemnified Party
for all Damages based thereon from the first dollar of Damages without regard
to the Basket; provided, however, the Basket (as it applies to the Shareholders
as the Indemnifying Party) shall not apply to any claim for indemnification
arising out of a breach of any representations, warranties or covenants
contained in Sections 3.3, 3.4, 3.6, 3.9, 3.12(b-d) or 3.19, and the
Shareholders' obligation to discharge all liabilities not assumed by Parent or
Surviving Corporation. The maximum liability, that will payable by either
party hereto to the other party, respectively, with respect to the matters
described in Section 9.1 or 9.2, respectively, will be limited to Two Million
Dollars ($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 or the Shareholders representations, warranties or covenants
contained in Sections 3.4, 3.6, 3.7, 3.9, 3.10, 3.11, 3.12(b-d) or 3.19,
Damages resulting from willful
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or intentional misrepresentations and the Shareholders' obligation to discharge
all liabilities not assumed by Parent or Surviving Corporation.
9.8 Applicability of Insurance. 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.
9.9 Payment of Indemnification. Any payment made by the
Indemnifying Party to the Indemnified Party as set forth in this Article IX may
be paid, in the sole discretion of the Indemnifying Party, in either cash or
common stock of Parent so long as any such payments do not threaten to defeat
the tax-free treatment of this transaction. If such a case arises whereby the
payment of any amounts to an Indemnified Party threatens to defeat the tax-free
treatment of this Agreement, then said amounts shall be made in such a ratio
Parent common stock to cash as the payment of the Purchase Price hereunder. The
shares of the common stock of Parent used for the payment of any amounts under
this Article IX shall be valued at $10.00 per share. In the event that the
Parent and Surviving Corporation are the Indemnifying Party, any payments made
pursuant to this Article IX shall be made in cash. In the event that the
Shareholders are the Indemnifying Party, the Shareholders shall have the right
to pay all claims in cash. In the event that there is an insufficient amount
of cash in the Escrow Amount, the Shareholders shall have the right to pay any
such claims for indemnification to Parent and Surviving Corporation and
preserve the Shareholders ownership of the Parent Stock comprising the Escrow
Amount. The shares of Parent Stock shall be valued at $10 per share for
purposes of the payment of any claims pursuant to this Article IX.
X. TERMINATION
10.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of the
Shareholders, Company, Parent and Surviving Corporation;
(b) Misrepresentation or Breach. By the Company, the
Shareholders, or Parent and Surviving Corporation, if there has been a
material misrepresentation or a material breach of a warranty or
covenant herein or in any agreement required to be delivered pursuant
hereto on the part of the other party hereto;
(c) Failure of Condition to Parent's and Surviving
Corporation's Obligations. By Parent and Surviving Corporation, if
all of the conditions set forth in Section 8.1 have not been
satisfied;
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(d) Failure of Condition to the Company's and the
Shareholders' Obligations. By the Company or the Shareholders, if all
of the conditions set forth in Section 8.2 have not been satisfied;
(e) Court Order. By the Company and the Shareholders or
Parent and Surviving Corporation, if consummation of the transactions
contemplated hereby shall violate any non-appealable final order,
decree or judgment of any court or governmental body having competent
jurisdiction;
(f) Material Adverse Change. By Parent and Surviving
Corporation, in the reasonable judgment of their respective board of
directors, or by the Shareholders if any event has occurred after the
date hereof which is, or will result in a material adverse change in
the Business or condition of the Assets of the Company or Parent
and/or Surviving Corporation, respectively;
(g) Drop Dead Date. This Agreement shall terminate if it
has not been consummated by March 12, 1998.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of the Company, the
Shareholders and Parent and Surviving Corporation under this Agreement shall
terminate without further liability of the Company, the Shareholders, Parent or
Surviving Corporation, except that the mutual provisions contained herein
relating to confidentiality shall survive any such termination.
10.3 Right to Proceed. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or Section 8.2 has
not been satisfied, the Company, the Shareholders or Parent and Surviving
Corporation, in addition to any other rights which may be available to it,
shall have the right to waive any such condition that is for its benefit and to
require the other party hereto to proceed with the Closing.
XI. TAX MATTERS.
11.1 Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the
Code.
"Final Determination" shall mean (i) with respect to Federal
Taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of
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Tax by the Company or the Shareholders, whichever are responsible for payment
of such Tax under applicable law, with respect to any item disallowed or
adjusted by a Taxing Authority, provided that such responsible party determines
that no action should be taken to recoup such payment and the other party
agrees.
"Post-Closing Tax Period" means any Tax period (or portion
thereof) beginning after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax,
gross income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign).
"Tax Indemnification Period", means with respect to any Tax,
any Pre-Closing Tax Period of the Company.
11.2 Filing of Short Period Returns. Parent and Surviving
Corporation and the Shareholders shall treat and cause the Company to treat the
day of the Closing as the last day of the taxable period in which the Company
is an S corporation, as defined under the Code. All Tax returns 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 Code, the books of the Company shall be closed
effective the day of the Closing. The Shareholders will cause its accounting
firm to prepare, at the Shareholders' sole expense, the S Short Year Returns.
11.3 Covenants.
(a) Without the prior written consent of Parent and
Surviving Corporation, and as it relates to the Pre-Closing Tax
Period, the Shareholders shall not cause the Company to make or change
any tax election, change any annual tax accounting period, adopt or
change any method of tax accounting, file any amended 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 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 Parent or Surviving Corporation.
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Without the prior written consent of the
Shareholders, and as it relates to the Pre-Closing Tax Period, Parent
and Surviving Corporation shall not cause the Company to make or
change any tax election, change any annual tax accounting period,
adopt or change any method of tax accounting, file any amended 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 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 Shareholders.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) will be filed when
due in accordance with all applicable laws. The parties agree that
any final Return relating to the Pre-Closing Tax Period shall be
timely filed by the Shareholders on behalf of the Company and with
Parent's and Surviving Corporation's prior written consent, such
consent not to be unreasonably withheld or delayed.
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees incurred in
connection with this Agreement (including any real property transfer
Tax and any similar Tax) shall be accrued by the Shareholders and be
paid by the Shareholders when due (including any applicable
extensions), and the Shareholders will, at the Shareholders' sole
expense, file all necessary Tax returns and other documentation with
respect to all such Taxes and fees.
11.4 Cooperation on Tax Matters.
(a) Parent, Surviving Corporation and the Shareholders
shall cooperate fully, 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 6043 of the Code and all Treasury Regulations
promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention
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. Parent and Surviving Corporation and
the Shareholders shall cause the Company to: (i) to retain 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 requirements of any Taxing Authority or any record retention
agreements entered into with any Taxing Authority, and (ii) to give
the Shareholders reasonable written notice prior to destroying or
discarding any such books and records and, if the Shareholders so
requests, Parent and Surviving Corporation shall allow the
Shareholders to take possession of such books and records.
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(b) Parent and Surviving Corporation and the Shareholders
further 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 (including, but not limited to, with
respect to the transactions contemplated hereby).
11.5 Tax Indemnification.
(a) The Company and the Shareholders hereby jointly and
severally indemnify Parent and Surviving Corporation against, and
agree to hold Parent and Surviving Corporation harmless from, any
loss, liability or expense attributable to (i) any Tax with respect to
income (including, to the extent based on income, state franchise
Taxes), transfer Tax, employment or withholding Tax related to
employee tips income (actual and allocated) and related reporting
requirements, and gross receipts or royalty Tax in respect of any
franchise operation and any other Tax of the Company related to the
Tax Indemnification Period, (ii) any Tax resulting from a breach of
the provisions of Sections 3.9, 11.2, 11.3, and 11.4, and (iii) any
liabilities, costs, expenses (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees
and expenses), losses, damages, assessments, settlements or judgments
arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the
contest in good faith in appropriate proceedings relating to the
imposition, assessment or assertion of any such Tax, and any liability
as transferee or successor (the sum of (i), (ii), and (iii) being
referred to herein as a "Loss"). Parent and Surviving Corporation
shall give the Shareholders ten days notice of any claim of Loss, and
the Shareholders shall have the opportunity to defend Parent and
Surviving Corporation in accordance with Section 9.4 hereof.
(b) If a claim is made against Parent and/or Surviving
Corporation for any Loss as defined in Section 11.5(a) hereof, Parent
or the Surviving Corporation shall notify the Shareholders as provided
in Section 11.4(a). Parent and/or Surviving Corporation shall, at the
Shareholders' expense, take such action as the Shareholders may
reasonably request in writing with respect to such Loss, and if
reasonably requested by the Shareholders and upon the prior payment to
the Parent or Surviving Corporation of an amount equal to such Loss,
any payment by Parent or Surviving Corporation shall be made under
protest. If protest is made, Parent and/or Surviving Corporation
shall, the Shareholders' expense, take such action as the Shareholders
may reasonably request to recover such payment and shall, if
requested, permit the Shareholders in Parent's and/or Surviving
Corporation's name to file a claim or prosecute an action to recover
such payment.
(c) For the purposes of this Section 11.4, the parties
hereby agree that all notices to the Shareholders shall be delivered
to Arthur E. Biggs.
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(d) The indemnity set forth in this Section 11.4 shall
terminate upon the expiration of the applicable statutory period of
limitations.
11.6 Acquisition Price Adjustment. Any amount paid by the Company,
Parent, Surviving Corporation or the Shareholders under Section 11.5 will be
treated as an adjustment to the relevant purchase price for all Tax purposes
unless a Final Determination causes any such amount not to constitute an
adjustment to the relevant purchase price. In the event of such a Final
Determination, Parent and Surviving Corporation or the Shareholders, as the
case may be, shall pay an amount that reflects the hypothetical Tax
consequences of the receipt or accrual of such payment, using the maximum
statutory rate (or rates, in the case of an item that affects more than one
Tax) applicable to the recipient of such payment for the relevant year,
reflecting for example, the effect of deductions available for interest paid or
accrued and for Taxes such as state and local income Taxes. Any payment
required to be made by Parent and Surviving Corporation or the Shareholders
under Section 11.5 that is not made when due shall bear interest at the rate
per annum determined, from time to time, under the provision of Section
6621(a)(2) of the Code for each day until paid.
11.7 Survival. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
XII. MISCELLANEOUS
12.1 Expenses. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 Survival of Representations and Warranties. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing for the applicable statute of limitations
periods.
12.3 Inurement; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the prior written consent of
the other parties hereto.
12.4 Entire Agreement; Amendment. This Agreement, the Schedules
and Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof. This Agreement may
not be amended except by a written agreement executed by all of the parties
hereto.
12.5 Severability. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective
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only to the extent of such invalidity, unenforceability or illegality without
affecting the remaining provisions hereof and without affecting the validity,
enforceability or legality of such provision in any other jurisdiction.
12.6 Incorporation of Exhibits and Schedules. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 Captions and Headings; Use of term "Person". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection
cross-references are to articles, sections and subsections within this
Agreement. As used herein, the term "person" shall mean any corporation,
limited liability company, partnership, venture, proprietorship, trust, benefit
plan or other entity or enterprise.
12.8 Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
12.9 Notices. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to the Company: c/o Arthur Biggs
3210 St. Charles Place
Boca Raton, Florida 33434
to the Shareholders: 3210 St. Charles Place
Boca Raton, Florida 33434
with a copy to: Nina S. Gordon, P.A.
Broad and Cassel
201 S. Biscayne Blvd.
Miami, Florida 33131
to Parent and
Surviving Corporation: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis, III, President
with a copy to: Alan Schoenbaum
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Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St., Suite 1500
San Antonio, Texas 78205
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
12.10 Agents or Brokers. The Company and the Shareholders and
Parent and Surviving Corporation mutually represent and agree with each other
that no agents or brokers have been utilized in the solicitation or negotiation
of the sale of the Business and no fees, commissions or expenses of any type
shall be due or payable out of the proceeds of the Acquisition Price by any
party to this Agreement.
12.11 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities laws, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in San Antonio, Texas and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof, and shall not be appealable. The prevailing party in any such
arbitration shall be entitled to recover its reasonable attorneys' fees and
expenses in connection with any such arbitration. Judicial proceedings may be
commenced only to enforce this arbitration agreement or to enforce the results
of arbitration; provided that such prohibition shall not apply in the event
that a court ordered injunction is an appropriate remedy for a breach of this
Agreement.
12.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
[ARTIC ICE CORPORATION AGREEMENT AND
PLAN OF MERGER COUNTERPART SIGNATURE PAGE FOLLOWS]
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[ARTIC ICE CORPORATION AGREEMENT AND
PLAN OF MERGER COUNTERPART SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE, INC.
By:
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Print Name:
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Print Title:
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PACKAGED ICE SOUTHEAST, INC.
By:
-----------------------------------
Print Name:
-------------------------
Print Title:
-----------------------
ARTIC ICE CORPORATION
By:
-----------------------------------
Print Name:
-------------------------
Print Title:
-----------------------
SHAREHOLDERS:
- -----------------------------------------------------
Name of Shareholder if Entity/Signature if Individual
By:
-----------------------------------
Title:
--------------------------------
- --------------------------------------
Please type or print name
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LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets of the Company
Exhibit B Assets subject to Capital Leases
Exhibit 5.9 Investment Letter
Exhibit 5.10 Escrow Agreement
Exhibit 5.12 Noncompetition Agreement
Exhibit 5.13 Registration Rights Agreement
Exhibit 5.14 Shareholders Documents
Exhibit 8.1(f) Opinion of Counsel
Shareholders' Disclosure Memorandum
<PAGE> 1
EXHIBIT 10.8
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as
of March 11, 1998, by and among Packaged Ice, Inc., a Texas corporation
("Parent"), Packaged Ice Southeast, Inc., a Texas corporation wholly owned by
Parent ("Surviving Corporation"), Artic Crystal Ice Corporation, a Florida
corporation (the "Company") and William E. Biggs and Arthur E. Biggs, III, who
collectively own a majority of all of the outstanding shares of capital stock
of the Company (collectively the "the Shareholders").
PRELIMINARY STATEMENTS
The respective Boards of Directors of Parent, Surviving Corporation
and the Company have each approved the merger of the Company with and into
Surviving Corporation (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:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Article I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and the plural forms of any of the
terms herein defined.
"Acquisition Price" shall have the meaning set forth in Section 2.7(d)
of this Agreement.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible which shall include, but not be limited to,
those items described more fully in Exhibit A attached hereto.
"Business" shall mean all of the operations of Company including the
production, storage, distribution, storage and sale of packaged ice products
and other items.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business for the direct manufacturing, distribution and
sale of packaged ice products which shall include, but not be limited to, those
items more fully described in Exhibit B, attached hereto. The equipment
comprising the Capital Leases shall be free and clear of the Capital Leases,
liens, claims and other Encumbrances at the Closing. Title to the assets that
are subject to Capital Leases shall be conveyed to the Surviving Corporation as
a result of this Agreement.
"Closing Date" shall mean the date on which this Agreement is
consummated.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
<PAGE> 2
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage, lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, or adverse claim or
restriction on transfer of any nature whatsoever other than those held by
Parent or Surviving Corporation or granted by the Company at Parent's or
Surviving Corporation's request.
"Escrow Agent" shall mean First Union National Bank.
"Escrow Agreement" shall have the meaning set forth in Section 5.10 of
this Agreement.
"Financial Statements" shall have the meaning set forth in Section 3.3
of this Agreement.
"Financing Statements" shall have the meaning as set forth in Section
5.11 of this Agreement.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Investment Letter" shall have the meaning set forth in Section 5.9 of
this Agreement.
"Liabilities" shall have the meaning set forth in Section 2.11 of this
Agreement.
"Merger" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Personal Property" shall have the meaning set forth in Section 3.13
of this Agreement.
"Real Property" shall have the meaning set forth in Section 3.12 of
this Agreement.
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<PAGE> 3
"the Shareholders' Disclosure Memorandum" shall mean that Schedule
attached hereto and incorporated herein by reference that lists and describes
all disclosures by the Shareholders and Company concerning the Assets and the
Business which are the subject of this Agreement.
"Shareholder Documents" shall mean the Amended and Restated the
Shareholders Agreement (September 20, 1995); the Amendment No. 1 to Amended and
Restated the Shareholders Agreement (dated as of January 17, 1997); Amendment
No. 2 to Amended and Restated the Shareholders Agreement (dated as of March 14,
1997); Amended and Restated Voting Agreement (dated September 20, 1995);
Amendment NO. 1 to Amended and Restated Voting Agreement (dated as of January
17, 1997); Amendment No. 2 to Amended and Restated Voting Agreement (dated as
of March 14, 1997); Amendment No. 3 to Amended and Restated Voting Agreement
(dated as of November 4, 1997); and Culligan Voting Agreement (dated December
2, 1997).
"Shares" shall mean all of the capital stock of Company outstanding on
the Closing Date.
"Taxes" shall have the meaning set forth in Section 11.1 hereof.
II. THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the corporation laws of Texas and Florida, the
Company shall be merged (the "Merger") with and into Surviving Corporation and
Surviving Corporation shall be 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 Section 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code
(the "Code").
2.2 Continuing Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of Surviving
Corporation, with all its purposes, powers, franchises, privileges, rights and
immunities, and shall continue unaffected and unimpaired by the Merger. 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 Surviving Corporation, and Surviving Corporation
shall be vested fully therewith and the separate corporate existence and
identity of the Company shall cease except to the extent continued by statute.
2.3 Effective Date. The Merger shall become effective upon the
occurrence of the issuance of certificates of merger (the "Effective Date") by
the Secretary of State of the State of Texas and the Secretary of State of
Florida upon filing on the Closing Date of articles of merger with the
Secretary of the State of Texas pursuant to Article 5.04 of the Texas Business
Corporation Act ("TBCA") and the Secretary of State of Florida pursuant to
Section 607.1105 of the Florida Business Corporation Act.
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<PAGE> 4
2.4 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of Surviving Corporation as in effect on the Effective
Date shall be the Articles of Incorporation and Bylaws of the Surviving
Corporation following the Merger.
2.5 Directors. The members of the Board of Directors of Surviving
Corporation at the Effective Date shall be the directors of the Surviving
Corporation immediately following the Merger.
2.6 Officers. The officers of Surviving Corporation at the
Effective Date shall be the officers of the Surviving Corporation immediately
following the Merger.
2.7 Conversion of Shares.
(a) Each share of the Company's no par value common stock
("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 automatically into the
right to receive the Share Price (as hereinafter defined) which shall
be payable, without interest thereon, upon the surrender of the
certificates formerly representing such Share, in accordance with
Section 2.7(g).
(b) Each Share shall, by virtue of the Merger and without
any action on the part of the holder, be canceled and retired and
cease to exist.
(c) The "Share Price" for each Share will be (x)/(y)
where (x) is the Acquisition Price (as defined in Section 2.7(d)) and
(y) is the total number of outstanding Shares.
(d) The acquisition price ("Acquisition Price") shall be
$2,600,000, which shall consist of $1,392,300 in cash, as adjusted as
set forth in Section 2.11 of this Agreement, (the "Cash Amount") and
120,770 newly issued shares of Parent's common stock, par value $0.01
per share ("Parent's Stock") valued at $10 per share and issued
directly to the Shareholders (the 120,770 shares of Parent Stock being
the "Stock Amount").
(e) Each share of the Company's common stock held in the
treasury of the Company immediately prior to the Effective Date 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.
(f) All of the Parent's Stock, when delivered pursuant to
the provisions of this Agreement, shall be validly issued, fully paid
and nonassessable.
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<PAGE> 5
(g) At Closing, Parent will pay to the Shareholders and
other holders of Shares, the total sum of the Acquisition Price.
$89180 and 92,820 shares of Parent Stock will be placed in escrow with
the Escrow Agent for a period of 10 months in accordance with the
Escrow Agreement (the "Escrow Amount"). The Escrow Amount shall be
approximately 7% of the Acquisition Price and shall consist of a
combination of cash and Parent Stock. The ratio of Parent Stock and
cash constituting the Escrow Amount shall be the same as the ratio of
the Parent Stock and cash constituting the Acquisition Price. At
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 the Share Price for each Share
surrendered.
(h) 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.
(i) No fractional shares of Parent Stock and no
certificates or scrip therefor shall be issued; instead, the dollar
value of any such fractional amount shall be added to the Cash Amount.
(j) All of the shares representing the Stock Amount will
be validly issued, fully paid and nonassessable.
(k) In the event that any shareholders of the Company are
determined in the sole discretion of Parent to not be an "Accredited
Investor" as defined in Rule 501(a) of Regulation D of the Securities
Act of 1933, such shareholders will be paid only from the Cash Amount.
2.8 Filing of Articles of Merger. Upon the terms and subject to
the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII hereof, the Company and the
Parent and Surviving Corporation shall execute and file a certificate of merger
in the manner required by the TBCA and the parties hereto shall take all such
other and further actions as may be required by law to make the Merger
effective. Prior to the filings referred to in this Section, the foregoing
will be confirmed at the Closing.
2.9 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 Surviving Corporation
shall be allocated to and vested in the Surviving Corporation without
reservation or impairment, without
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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
Surviving Corporation 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.
2.10 Proration. The parties shall prorate at the Closing the
current year's ad valorem taxes and prepaid expenses, based on the latest
available statements from taxing authorities, whether for the current tax year
or the preceding tax year. The Shareholders' pro rata share of such taxes
shall be the portion attributable to the period through the day preceding the
Effective Date, prorated by days. The prorated amounts shall be adjustments to
the Acquisition Price and shall be payable in a combination of Parent Stock and
cash in the same ratio in which the Acquisition Price is being paid. The
prorated amounts shall be payable in the manner set forth below:
(a) If a prorated amount is payable by Parent or
Surviving Corporation and determinable at the Closing, it shall be
added to the amount payable by Parent or Surviving Corporation at the
Closing.
(b) If a prorated amount is payable by Parent or
Surviving Corporation and not determinable at the Closing, it shall
be billed by the Shareholders when determinable and promptly paid by
Parent or Surviving Corporation to the Shareholders.
(c) If a prorated amount is payable by the Shareholders
and determinable at the Closing, it shall be deducted from the amount
otherwise payable by Parent or Surviving Corporation at the Closing.
(d) If a prorated amount is payable by the Shareholders
and not determinable at the Closing, it shall be billed by Parent or
Surviving Corporation when determinable and promptly paid by the
Shareholders to Parent.
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<PAGE> 7
2.11 Adjustment to Purchase Price. The Acquisition Price shall be
adjusted by the following (the "Adjustment Amount"):
(a) the Closing Date payoff amounts of all current and
long term interest bearing debt and current and long term Capital
Leases (including any unpaid interest and prepayment penalties). For
the purposes of this Section 2.11(a), all payments made by Surviving
Corporation or Parent to discharge all current and long term debt or
Capital Leases shall be paid from the Cash Amount;
(b) if the Company's ratio of current assets to current
liabilities is less than 1:1 at the Closing Date, the Acquisition
Price shall be reduced by an amount equal to the difference between
the current liabilities and the current assets. If the Company's
ratio of current assets to current liabilities is greater than 1:1 at
the Closing Date, the Acquisition Price shall be increased by an
amount equal to the difference of the current assets and the current
liabilities.
The Adjustment Amount will be estimated by the parties based on an
estimated Closing Date balance sheet to be prepared by the Company and
delivered to the parties at least one business day prior to the Closing Date
for purposes of determining the Cash Amount to be paid at Closing (the
"Estimated Adjustment Amount"). The Adjusted Amount will be finally determined
within 90 days after the Closing based on an audited balance sheet (the
"Closing Balance Sheet") of the Company as of the Closing Date. If the actual
Adjustment Amount is greater than the Estimated Adjustment Amount, the
Shareholders shall promptly pay the difference to Parent. If the actual
Adjustment Amount is less than the Estimated Adjustment Amount, Parent shall
promptly pay the difference to the Shareholders.
III. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent and
warrant to Parent and Surviving Corporation as follows:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida
and is in good standing and is duly qualified to do business in any foreign
jurisdiction in which it is currently conducting business operations. The
Company has full corporate power and authority to own or use the properties and
assets that it purports to own or use, and to perform all of its obligations
hereunder. All outstanding shares of stock of the Company are validly issued,
fully paid, nonassessable and a majority are owned, both beneficially and of
record, by the Shareholders. Other than this Agreement, there is no
subscription, option, warrant, call, right, agreement or commitment relating to
the issuance, sale, delivery, repurchase or transfer by the Shareholders or the
Company (including any right of conversion or exchange under any outstanding
security or other instrument) of any of
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<PAGE> 8
its capital stock or other securities. There are no voting trusts, proxies or
any other agreements or understandings with respect to the voting of the
Shares.
3.2 Execution, Delivery and Performance of Agreement. This
Agreement has been duly executed and delivered by the Company and the
Shareholders and constitutes the legal, valid and binding obligation of the
Company and the Shareholders, enforceable against them in accordance with its
terms. Upon the execution and delivery by the Shareholders of the Escrow
Agreement, Noncompetition Agreement and any other ancillary document required
hereunder (collectively, the "the Shareholders' Closing Documents"), the
Shareholders' Closing Documents will constitute the legal, valid, and binding
obligations of the Shareholders, enforceable against the 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 and the Company have held a the
Shareholders meeting (or have executed a consent) and all resolutions required
by law to approve the Merger have been duly adopted in accordance with Florida
law. Except as set forth on Section 3.2 of the Shareholders' Disclosure
Memorandum, the execution, delivery and performance of this Agreement by the
Company and the Shareholders and the consummation of the transactions
contemplated hereby will not require the consent, approval or authorization of
any person or governmental authority, and will not, with or without the giving
of notice, the passage of time, or both, violate, conflict with, result in a
default, breach or loss of rights under, or result in the creation of any lien,
claim or encumbrance pursuant to, any lien, encumbrance, instrument, agreement,
or understanding, or any law, regulation, rule, order, judgment or decree, to
which the Shareholders or the Company are a party or by which they are bound or
affected. All shareholders who are not parties to this Agreement have given all
required consents and waived all dissenters rights required by or provided by
Florida law.
3.3 Financial Statements. The Company has previously caused to be
furnished to Parent the Company's unaudited balance sheet as at December 31,
1996, and the related statements of income and statements of cash flow for the
fiscal year then ended, and the Company's unaudited balance sheet as of
December 31, 1997 (the "December 31, 1997 Balance Sheet") and the related
statements of income and cash flow for the fiscal year then ending. Such
balance sheets and related statements of income and cash flow referenced in
this Section 3.3 are unaudited and collectively referred to herein as the
"Financial Statements").
The Financial Statements taken as a whole present fairly the financial
position, results of operations, changes in the shareholders' equity, and cash
flow of the Company as the respective dates of and for the periods referred to
in such Financial Statements in a consistently applied manner.
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<PAGE> 9
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by the Company in the Shareholders'
Disclosure Memorandum and except for liabilities arising in the ordinary course
of business and consistent with past practice since the date of the Company's
December 31, 1997 Balance Sheet, the Company has operated the Business in the
ordinary course and has incurred no material liabilities which would be
required to be reflected in accordance with GAAP, on a balance sheet as of the
date hereof or disclosed in the notes thereto.
Since October 31, 1997 there has not been any material adverse change
in the business, operations, properties, prospects, assets or condition of the
Business, and no event has occurred, nor does a circumstance currently exist,
that may result in such a material adverse change. The Shareholders further
warrant and represent that the actual sales and expenses that relate to the
Company are accurately and truly reflected on the December 31, 1997 Financial
Statements.
3.4 Shareholders' Debt. Section 3.4 of the Shareholders'
Disclosure Memorandum sets forth all loans to the Company from the Shareholders
(the "Shareholders Debt"). The Shareholders represent and warrant that, in
connection with the Shareholders' Debt or otherwise, there are no other
Encumbrances held by the Shareholders whatsoever against the Company or the
Assets other than those amounts set forth.
3.5 Business Operations and Condition of Assets. All items
comprising the Assets have been used by the Company in connection with the
Business and are now in serviceable condition, subject to normal maintenance
and periodic repair, and are currently sufficient for the conduct of the
Company's business after the Closing, in substantially the same manner as
conducted prior to the Closing, unless expressly disclosed to the contrary by
the Company and the Shareholders in Section 3.5 of the Shareholders' Disclosure
Memorandum.
3.6 Title to Personal Property. Except as set forth in Section
3.6 of the Shareholders' Disclosure Memorandum, the Company has good, legal and
marketable title to all of the personal property comprising the Assets, free
and clear of Encumbrances.
3.7 Litigation. Except as set forth on Section 3.7 of the
Shareholders' Disclosure Memorandum, there is no pending claim, action, suit,
proceeding or investigation (judicial, governmental or otherwise), nor any
order, decree or judgment in effect, or, to the knowledge of the Company or the
Shareholders, threatened, against or relating to the Shareholders, the Company,
the Business, the Assets, or the transactions contemplated by this Agreement.
3.8 Compliance with Laws. the Shareholders and the Company have
materially complied with all laws, rules, regulations, ordinances, orders,
judgments and decrees relating to the Company, the Shares, the Assets, and the
Business.
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<PAGE> 10
3.9 Taxes.
(a) Except as set forth in Section 3.9 of the
Shareholders' Disclosure Memorandum, the Company has, within the time
and manner prescribed by law, filed all returns, declarations, reports
and statements required to be filed by it (collectively, "Returns") in
respect of any Taxes and each such Return has been prepared in
compliance in all material respects with all applicable laws and
regulations and is true and correct in all respects, and the Company
has, within the time and in the manner prescribed by applicable law,
paid all Taxes that are shown to be due and payable with respect to
the periods covered thereby.
(b) Section 3.9 of the Shareholders' Disclosure
Memorandum describes the status of the Company's election as an "S
corporation" under the Code. The Company is not liable for any
federal income taxes as a "C- corporation" under the Code.
(c) Except as set forth in Section 3.9 of the
Shareholders' Disclosure Memorandum (i) the Company has not requested
or been granted an extension of the time for filing any Return which
has not yet been filed; (ii) the Company has not consented to extend
to a date later than the date hereof the time in which any Tax may be
assessed or collected by any taxing authority; (iii) no deficiency or
proposed adjustment which has not been settled or otherwise resolved
for any amount of Tax has been proposed, asserted or assessed by any
taxing authority against the Company; (iv) there is no action, suit,
taxing authority proceeding, or audit now in progress, pending or, to
the Company's or the Shareholders' knowledge, threatened against or
with respect to the Company; (v) no claim has been made by a taxing
authority in a jurisdiction where the Company does not file Tax
Returns that the Company is subject to Taxes assessed by such
jurisdiction; (vi) there are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the Assets; (vii) the
Company will not be required to include any amount in taxable income
or exclude any item of deduction or loss from taxable income for any
taxable period (or a portion thereof) ending after the Closing Date as
a result of any of the following: (A) a change in method of accounting
for a taxable period ending on or prior to the Closing Date, (B) any
"closing agreement," as described in Code Section 7121 (or any
corresponding provision of state, local or foreign income Tax law)
entered into on or prior to the Closing Date, (C) any sale reported on
the installment method where such sale occurred on or prior to the
Closing Date, and (D) any prepaid amount received on or prior to the
Closing Date; and (viii) the Company does not have any obligation or
liability for the payment of Taxes of any other person as a result
from any expressed obligation to indemnify another person, or as a
result of such Company assuming or succeeding to the Tax liability of
any other person as successor, transferee or otherwise.
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(d) 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
Section 3.9 of the Shareholders' Disclosure Memorandum. No consent to
the application of Section 341(f)(2) of the Code 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 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 Code with respect to any transaction contemplated
hereby. The Company has not been a member of any affiliated group (as
defined in Code 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.
(e) Except as set forth in Section 3.9 of the
Shareholders' Disclosure Memorandum 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.
(f) Surviving Corporation 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 the 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 Surviving
Corporation 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) the Shareholders will pay their respective expenses,
if any, incurred in connection with the Merger.
(i) There is no intercompany indebtedness existing
between Parent and the Company or between Surviving Corporation and
the Company that was issued, acquired, or will be settled at a
discount.
(j) 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 Code.
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(k) The fair market value of the assets of the Company
transferred to Surviving Corporation will equal or exceed the sum of
the liabilities assumed by Surviving Corporation, plus the amount of
liabilities, if any, to which the transferred assets are subject.
(l) The Company is not an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.10 Environmental. The Company 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 concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to occupational health and safety, good manufacturing practices
fo food products, 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, the Company has obtained and been in material 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.
3.11 Insurance. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Business. The Company has not been refused any insurance with respect to
its assets or operations, and its coverage has not been limited, terminated or
canceled by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, during the last three (3)
years. Section 3.11 of the Shareholders' Disclosure Memorandum lists all
claims, which (including related claims which in the aggregate) exceed $5,000
which have been made by the Company or against any policy of the Company in the
last three years under any workers' compensation, general liability, property
or other insurance policy applicable to Company, any Assets of the Company or
the Business. Except as set forth on Section 3.11 of the Shareholders'
Disclosure Memorandum, there are no pending or threatened claims under any
insurance policy. Such claim information includes the following information
with respect to each accident, loss, or other event: (a) the identity of the
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claimant; (b) the nature of the claim; (c) the date of the occurrence; (d) the
status as of the report date and (e) the amounts paid or expected to be paid or
recovered.
3.12 Real Property.
(a) Section 3.12 of the Shareholders' Disclosure
Memorandum contains (i) a complete and accurate legal description of
each parcel of real property owned by, leased to or used by the
Company (the "Real Property") and (ii) a complete and accurate list of
all current leases, lease amendments, subleases, assignments, licenses
and other agreements to which the Real Property is subject
(collectively, the "Leases"). The Company has delivered to Parent and
Surviving Corporation true and complete copies of the Leases.
(b) Except as disclosed in Section 3.12 of the
Shareholders' Disclosure Memorandum (i) each of the Leases is in full
force and effect and has not been amended or modified; (ii) neither
the Company, nor any other party thereto, is in default thereunder,
nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder; (iii) the Company has received
no notice that any party to any Lease intends to cancel, terminate or
refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder; and (iv) no rental under the Leases
has been paid more than one month in advance.
(c) Except as disclosed in Section 3.12 of the
Shareholders' Disclosure Memorandum, (i) there are no tanks on or
below the surface of the Real Property, (ii) there is no hazardous or
toxic waste, substance or material or other contaminant or pollutant
(as determined under federal, state or local law) present on or below
the surface of the Real Property including, without limitation, in the
soil, subsoil, groundwater or surface water, which constitutes a
violation of any law, ordinance, rule or regulation of any
governmental entity having jurisdiction thereof or subjects or could
subject Parent or Surviving Corporation to any liability to third
parties, and (iii) the Real Property has never been used by the
Company or by any previous owners or operators to generate,
manufacture, refine, produce, store, handle, transfer, process or
transport any hazardous or toxic waste, substance or material or other
contaminant or pollutant.
(d) The zoning of each parcel of the Real Property
permits the improvements located thereon and the continuation of
business presently being conducted thereon. The Real Property is
served by utilities and services necessary for the normal and
continued operation of the business presently conducted thereon.
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3.13 Personal Property.
(a) Section 3.13 of the Shareholders' Disclosure
Memorandum is a complete and accurate Schedule as of the Closing Date
describing, and specifying the location of, all inventory, motor
vehicles, machinery, fixtures, equipment, furniture, supplies, tools,
Intangible Assets, and all other tangible or intangible personal
property owned by, in the possession of, or used by the Company as to
which the Company has an unamortized basis exceeding $1,000 (the
"Personal Property").
(b) Each lease, license, rental agreement, contract of
sale or other agreement applicable to any Personal Property is listed
in Section 3.14 of the Shareholders' Disclosure Memorandum and is in
full force and effect; neither the Company nor any other party thereto
is in material default thereunder, nor is there any event which with
notice or lapse of time, or both, would constitute a default
thereunder. The Company has received no notice that any party to any
such lease, license, rental agreement, contract of sale or other
agreement intends to cancel, terminate or refuse to renew the same or
to exercise or decline to exercise any option or other right
thereunder. Except as set forth in Section 3.13 of the Shareholders'
Disclosure Memorandum, no Personal Property is subject to any lease,
license, contract of sale or other agreement that is materially
adverse to the Business, Assets or financial condition of the Company.
(c) The inventory of the Company as reflected by the
Financial Statements and as described in Section 3.13 of the
Shareholders' Disclosure Memorandum consisted and consists of items
substantially all of which were and will be of the usual quality and
quantity necessary for the normal conduct of the Business and
reasonably expected to be usable or salable within a reasonable period
of time in the ordinary course of business of the Company, except
items of inventory which have been written down to realizable market
value or written off completely, and damaged or broken items in an
amount which does not materially affect the value of the inventory as
reflected on the Financial Statements. With respect to inventory in
the hands of suppliers for which the Company is committed as of the
date hereof, such inventory is reasonably expected to be usable in the
ordinary course of business of the Company as presently being
conducted.
(d) All accounts receivable of the Company that are
reflected on the December 31, 1997 Balance Sheet or on the Company's
accounting records as of the Closing Date (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
collectible net of the respective reserves shown on the December 31,
1997 Balance Sheet or on the accounting records of the Company as of
the Closing Date (which reserves are
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adequate and, in the case of the reserve as of the Closing Date, will
not be more than the reserve reflected in the December 31, 1997
Balance Sheet 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 date on which it was accrued. There is
no contest, claim, or right of set-off under any agreement with any
obligor of an Account Receivable relating to the amount or validity of
such Account Receivable.
3.14 Contracts. Section 3.14 of the Shareholders' Disclosure
Memorandum contains a complete and accurate list of all presently effective
material contracts, leases and other agreements ("Contracts") to which the
Company is a party and which affect or are applicable to the Assets or the
Company, true and complete copies (or summaries in the case of oral contracts)
of each of which have been delivered to Parent and Surviving Corporation by the
Company, including, without limitation, any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any
such obligation for the borrowing of money;
(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either
within or outside the United States relating to sharing of present or
future commissions, fees or other income or profits;
(d) lease, license, rental agreement, contract of sale or
other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract; or
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts
and/or rebates).
Except as disclosed in Section 3.14 of the Shareholders' Disclosure
Memorandum, each of the Contracts is in full force and effect and has not been
amended
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<PAGE> 16
or modified and neither the Company, nor any other party thereto, is in
material default thereunder, nor is there any event which with notice or lapse
of time, or both, would constitute a material default thereunder. The Company
has received no notice that any party intends to cancel, terminate or refuse to
renew any such Contract or to exercise or decline to exercise any option or
other right thereunder.
3.15 Labor Matters. There are no controversies pending or, to the
best knowledge of the Company or the Shareholders, threatened between the
Company and any employees of the Company. The Company has complied with all
laws relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining, immigration, safety and the
payment of withholding and social security and similar taxes, and the Company
has no liability for any arrears of wages or taxes or penalties for failure to
comply with any of the foregoing.
3.16 Absence of Sensitive Payments. To the best knowledge of the
Company, the Company has not made or maintained (i) any contributions, payments
or gifts of its funds or property to any governmental official, employee or
agent where either the payment or the purpose of such contribution, payment or
gift was or is illegal under the laws of the United States or any state
thereof, or any other jurisdiction (foreign or domestic); or (ii) any
contribution, or reimbursement of any political gift or contribution made by
any other person, to candidates for public office, whether federal, state,
local or foreign, where such contributions by the Company or the Shareholders
were or would be a violation of applicable law.
3.17 Employee Benefits. All employee benefit plans (whether or not
covered by ERISA), deferred compensation or executive compensation plans for
employees, directors or independent contractors, and all other employee or
independent contractor arrangements or programs that are maintained or
contributed to by the Company (collectively, the "Company Plans") have been
administered and operated in all material respects in compliance with their
terms, ERISA, if applicable, the Code and other applicable law. All Company
Plans that are intended to be qualified under Section 401(a) of the Code are so
qualified and a current favorable IRS determination letter exists for each such
plan and covers the amendments required by the Tax Reform Act of 1986. All
funded Company Plans are fully funded according to their terms and applicable
law. No prohibited transaction or breach of fiduciary duty under ERISA has been
committed by any fiduciary, disqualified person or party in interest of any
Company Plan. The Company has no liability, contingent or otherwise, under
Title IV of ERISA.
3.18 Capital Improvements. Section 3.18 of the Shareholders'
Disclosure Memorandum describes all of the capital improvements or purchases or
other capital expenditures which the Company has committed to or contracted for
which have not been completed prior to the date hereof and the cost and expense
reasonably estimated to complete such work and purchases.
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<PAGE> 17
3.19 No Undisclosed Liabilities. Except as set forth in Section
3.19 of the Shareholders' Disclosure Memorandum and obligations and liabilities
arising under the contracts disclosed in Section 3.14 of the Shareholders'
Disclosure Memorandum, the Company has no liabilities or obligations of the
type required to be reflected as liabilities on a balance sheet prepared in
accordance with Generally Accepted Accounting Principles (GAAP), except for
liabilities or obligations reflected or reserved against in the Financial
Statements and current liabilities incurred in the ordinary course of business
since the respective dates thereof.
3.20 Complete and Accurate Disclosure. No representation or
warranty made to Parent or Surviving Corporation in this Agreement or in
connection with this transaction contains or will contain an untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make such representation or warranty not misleading or necessary to enable
Parent and Surviving Corporation to make a fully informed decision with respect
to the Merger of the Company into Surviving Corporation. All documents and
information which have been or will be delivered to Parent and Surviving
Corporation or its representatives by or on behalf of the Company or the
Shareholders are and will be true, correct and complete copies of the documents
they purport to represent.
3.21 Intercompany and Affiliate Debt. As of the Closing Date all
intercompany and affiliated accounts of the Company to include, but not limited
to, all intercompany and affiliate notes payables and receivables, will be
settled and eliminated.
3.22 No Material Adverse Change. Since October 31, 1997, there has
not been any material adverse change in the Business or the 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.
3.23 Accredited Investors. All recipients of Parent's Stock are
accredited investors as defined in accordance with the Securities and Exchange
Commission Rule 501 of Regulation D as promulgated under the Securities Act of
1933.
IV. REPRESENTATIONS AND WARRANTIES
OF SURVIVING CORPORATION AND PARENT
4.1 Corporate Existence; Good Standing; Capitalization. Parent
and Surviving Corporation are corporations duly organized, validly existing,
and in good standing under the laws of the State of Texas and have all
requisite corporate power and authority to issue the Parent's Stock and to own
its properties and assets and to carry on its business as now conducted as
proposed to be conducted. Parent and Surviving Corporation are duly qualified
to transact business and are in good standing in the State of Florida. The
copies of the Articles of Incorporation and bylaws of Parent and Surviving
Corporation delivered to the Company and the Shareholders prior to the
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<PAGE> 18
execution of this Agreement are true and complete copies of the duly and
legally adopted Articles of Incorporation and bylaws of Parent and Surviving
Corporation in effect as of the date of this Agreement.
4.2 Power and Authority. Parent and Surviving Corporation have
the requisite corporate power and authority, and have been duly authorized, to
enter into this Agreement and all ancillary agreements, as applicable, and to
perform all of its obligations hereunder.
4.3 Court Orders, Decrees, Etc. To the best of Parent's and
Surviving Corporation's knowledge, there is no outstanding order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal
against or adversely affecting Parent or the Surviving Corporation or their
respective subsidiaries, or their respective properties or businesses or having
the effect of preventing, delaying, making illegal or otherwise interfering
with the transactions contemplated hereby.
4.4 Franchises, Permits, and Consents. Each of Parent, the
Surviving Corporation and their respective subsidiaries possesses all material:
governmental franchises, licenses, permits, consents, authorizations,
exemptions and orders, required by Parent, the Surviving Corporation and such
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 Parent, the Surviving Corporation
or such subsidiaries or in connection with the consummation of the transactions
by this Agreement have been made or obtained.
4.5 Disclosure. Parent and the Surviving Corporation have not
knowingly withheld from the Shareholders any material facts relating to the
assets, business, operations, financial condition or prospects of Parent or the
Surviving Corporation or their respective 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.
4.6 Parent SEC Reports. Since September 30, 1997, Parent has
filed on a timely basis all reports and statements, together with all
amendments required to be made with respect thereto that it is required to file
with the SEC. No Parent SEC Document with respect to periods beginning on or
after September 30, 1997, and until the Closing contained or will contain any
information that was false or misleading with respect to any material fact, or
omitted or will omit to state any material fact necessary in order to make
statements therein not misleading.
Parent's Offering Circular dated as of January 22, 1998 did not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not
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misleading, and the Shareholders and the Company are entitled to rely on the
statements therein as though made in this Agreement. The financial statements
and notes thereto included in such Offering Circular for Parent (a) are in
accordance with the books and records of Parent, which are complete in all
material respects and have been maintained in accordance with good business
practices and (b) present fairly the consolidated financial position and the
consolidated results of operations, changes in shareholders' equity and cash
flows of Parent as of the dates and for the periods indicated, in accordance
with generally accepted accounting principles.
4.7 Taxes.
(a) Prior to the proposed transaction, Parent will be in
control of Surviving Corporation within the meaning of Section 368(c) of the
Code.
(b) Surviving Corporation has no plan or intention to
issue additional shares of its stock following the proposed transaction that
would result in Parent losing control of Surviving Corporation within the
meaning of Section 368(c) of the Code.
(c) Parent has no plan or intention to reacquire any of
the Parent Stock interests issued to the Shareholders in the proposed
transaction.
(d) Following the proposed transaction, Parent will
continue the historic business of the Company or use a significant portion of
the Company's business assets in a business, as determined under the principles
of Treasury Regulation 1.368-1(d). Parent and Surviving Corporation have no
plan or intention to dispose of any of the assets of the Company acquired in
the proposed transaction other than transfers in the ordinary course of
business, and Parent and Surviving Corporation have no intention to transfer
any interest in any entity that would cause any of the assets of the Company
acquired in the transaction to no longer be deemed to be used by the Parent
under the principles of Treasury Regulation 1.368-1(d).
(e) The Surviving Corporation will not pay or assume any
expenses of the Company that are not solely and directly related to the
proposed transaction in accordance with the guidelines established in Rev. Rul.
73 - 54, 1973-1 C.B. 187. Parent and Surviving Corporation will pay their
respective expenses incurred in connection with the Merger.
(f) There is no intercorporate indebtedness existing
between Parent and the Company or between Surviving Corporation and the Company
that was issued, acquired or will be settled at a discount.
(g) Neither Parent nor Surviving Corporation are
investment companies as defined in Sections 368(a)(2)(F)(iii) and (iv) of the
Code.
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V. COVENANTS OF THE COMPANY AND SHAREHOLDERS
the Shareholders and the Company hereby, jointly and severally,
covenant and agree as follows:
5.1 Conduct of the Business Pending the Closing Date. The
Shareholders and the Company hereby agree that, from the date hereof to the
Closing Date, they will:
(a) maintain the Assets in normal good repair, order and
condition, and make such capital expenditures as necessary to maintain
the Business, in accordance with past practices and sound business
judgment;
(b) maintain insurance upon all of its properties and
with respect to the conduct of the Business in such amounts and of
such kinds to adequately safeguard and protect the Assets and the
Business;
(c) not issue or agree to issue any additional shares of
common stock or of any other voting security or any rights to acquire
any such additional common stock or voting security which would cause
a change of control of the Shareholders;
(d) use its best efforts to comply with all laws and
material contractual obligations applicable to it and to the conduct
of the Business;
(e) not (i) mortgage, pledge or, except in the ordinary
course of business, subject to any lien, charge, security interest or
other encumbrance any of the Assets (whether tangible or intangible),
(ii) sell, assign, transfer, convey, lease or otherwise dispose of, or
agree to sell, assign, transfer, convey, lease or otherwise dispose
of, any of the Assets outside the ordinary course of business other
than that expressly disclosed in the Shareholders' Disclosure
Memorandum;
(f) not authorize or consummate any dividends or
distributions of assets to its stockholders, any consolidation or
merger, purchase of all or substantially all of the assets of any
entity, or any other extraordinary corporate transaction other than
expressly disclosed in the Shareholders' Disclosure Memorandum;
(g) conduct its business in its usual and ordinary
manner.
5.2 Investigation by Parent and Surviving Corporation. Prior to
the Closing Date, the Company shall (i) give Parent and its authorized
representatives and advisors access, at reasonable times and on reasonable
notice, to all items of Real and Personal Property, books and records,
personnel, offices, and other facilities of the Company, (ii) permit Parent or
Surviving Corporation to make such inspections thereof as Parent or Surviving
Corporation may reasonably require, and (iii) cause its employees, and its
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advisors to furnish to Parent and its authorized representatives and advisors
such financial and operating data and other information with respect to the
Business prepared in the ordinary course of the Business as Parent or its agent
shall from time to time reasonably request.
5.3 Closing Conditions. the Shareholders and the Company will, to
the extent within their control, use their best reasonable efforts to cause the
conditions set forth in Section 8.1 to be satisfied by the Closing Date.
5.4 Confidentiality. From and after the date hereof, the
Shareholders will, and will cause the Company and its officers, employees,
representatives, consultants and advisors to hold in confidence all
confidential information in the possession of the Company, its affiliates or
its advisors concerning Parent, Surviving Corporation or the Company. the
Shareholders and the Company will not release or disclose any such information
to any person other than Parent and its authorized representatives.
Notwithstanding the foregoing, the confidentiality obligations of this Section
shall not apply to information:
(a) which the Shareholders or the Company are compelled
to disclose by judicial or administrative process, or, in the
reasonable opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to the
Company or the Shareholders by a third party who obtained such
information other than as a result of a breach of a confidential
relationship, known to the Company or the Shareholders.
5.5 Public Announcement. The Company, the Shareholders, Surviving
Corporation and Parent will cooperate in the public announcement of the
transactions contemplated by this Agreement, and, other than as may be required
by applicable law, no such announcement will be made by either party without
the consent of the other party, which consent shall not be unreasonably
withheld.
5.6 No Shopping. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither the Company nor the Shareholders shall (and the Company and the
Shareholders shall cause their respective affiliates, officers, directors,
employees, representatives and agents not to) directly or indirectly, solicit,
initiate or participate in discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent or an affiliate or an associate of Parent) concerning, or
enter into any agreement providing for, any merger, sale of material assets,
sale of stock or similar transactions involving the Company or the Assets.
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5.7 Further Assurances. The Shareholders and the Company will use
their best efforts to implement the provisions of this Agreement, and for such
purpose the Shareholders or the Company, at the request of Parent or Surviving
Corporation, at or after the Closing Date, will, without further consideration,
promptly execute and deliver, or cause to be executed and delivered, to Parent
and Surviving Corporation such deeds, assignments, bills of sale, consents,
documents evidencing title and other instruments in addition to those required
by this Agreement, in form and substance satisfactory to Parent and Surviving
Corporation, as Parent and Surviving Corporation may reasonably deem necessary
or desirable to implement any provision of this Agreement.
5.8 Insurance. the Shareholders shall cause the Company to
continue to maintain insurance through the Closing Date with financially sound
and reputable insurers unaffiliated with the Company or the Shareholders in
such amounts and against such risks as are adequate in the judgment of the
Shareholders to protect the Assets and the Business.
5.9 Investment Letter. At the Closing, the Shareholders shall
execute and deliver to Parent the investment letter in the form attached hereto
as Exhibit 5.9 (the "Investment Letter").
5.10 Escrow Agreement. At the Closing, the Shareholders shall
execute and deliver to Parent and Surviving Corporation the escrow agreement in
the form attached hereto as Exhibit 5.10 (the "Escrow Agreement").
5.11 Title Reports. Within ten (10) days after the date hereof,
the Shareholders, at the Shareholders' sole cost and expense, shall provide a
title report(s) for all real property owned by the Company ("Owned Real
Property") and current reports of searches made of the Uniform Commercial Code
Records of the County and State where each parcel of Owned Real Property is
located (the "Financing Statements") setting forth the state of liens affecting
the title to the personal property and real property to be conveyed hereunder.
The title report shall form the basis for a title insurance policy, issued by a
nationally known title policy issuer, to be delivered to Parent and Surviving
Corporation, at the Shareholders' sole expense, at the Closing in an amount
equal to $600,000. At the Closing, the Owned Real Property shall be subject to
no liens, charges, encumbrances, exceptions, or reservations of any kind or
character other than those specifically approved by Parent and Surviving
Corporation in writing (the "Permitted Exceptions").
5.12 Noncompetition Agreement. At the Closing, Arthur E. Biggs,
William E. Biggs and Arthur E. Biggs, III, will enter into the Noncompetition
Agreement attached hereto as Exhibit 5.12.
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5.13 Registration Rights Agreement. Registration Rights Agreement.
At the Closing, the Shareholders shall enter into the Registration Rights
Agreement attached hereto as Exhibit 5.13.
5.14 Shareholder Documents. At the Closing, the Shareholders shall
enter into and deliver the Shareholder Documents attached hereto as Exhibit
5.14 to Parent.
5.15 Employment Agreement. At the Closing, William E. Biggs will
enter into the Employment Agreement attached hereto as Exhibit 5.15.
VI. COVENANTS OF PARENT AND SURVIVING CORPORATION
6.1 Closing Conditions. Parent and Surviving Corporation will, to
the extent within their control, use their best reasonable efforts to cause the
conditions set forth in Section 8.2 to be satisfied by the Closing Date.
6.2 Ancillary Agreements. At the Closing, Parent and Surviving
Corporation will enter into the Noncompetition Agreement, the Escrow Agreement,
and all other ancillary documents required hereunder.
6.3 Investigation by the Shareholders. Prior to the Closing Date,
Parent and Surviving Corporation shall (i) give the Shareholders and their
authorized representatives and advisors access, at reasonable times and on
reasonable notice, to all items of Real and Personal Property, books and
records, personnel, offices, and other facilities of Parent and the
Shareholders, (ii) permit the Shareholders to make such inspections thereof as
the Shareholders may reasonably require, and (iii) cause their respective
employees, and their respective advisors to furnish to the Shareholders and
their authorized representatives and advisors such financial and operating data
and other information with respect to Parent and Surviving Corporation prepared
in the ordinary course of business as the Shareholders or their agent shall
from time to time reasonably request.
6.4 Confidentiality. From and after the date hereof, Parent and
Surviving Corporation will, and will cause their respective officers,
employees, representatives, consultants and advisors to hold in confidence all
confidential information in the possession of either Parent or Surviving
Corporation, respectively, their affiliates or their advisors concerning the
Shareholders. Parent and Surviving Corporation will not release or disclose
any such information to any person other than the Shareholders or their
authorized representatives. Notwithstanding the foregoing, the confidentiality
obligations of this Section shall not apply to information:
(a) which the Parent or Surviving Corporation are
compelled to disclose by judicial or administrative process, or, in
the reasonable opinion of counsel, by other mandatory requirements of
law;
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(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to Parent or
Surviving Corporation by a third party who obtained such information
other than as a result of a breach of a confidential relationship,
known to the Parent or the Surviving Corporation.
6.5 Registration Rights Agreement. At the Closing, Parent and
Surviving Corporation shall enter into the Registration Rights Agreement
attached hereto as Exhibit 5.13.
VII. THE CLOSING
7.1 The Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at a mutually
agreeable time and date. The date of the closing shall herein be referred to
as the "Closing Date." Subject to the provisions of Article X, failure to
consummate the transaction set forth in this Agreement on the date and time and
place determined by this Section 7.1 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this
Agreement.
7.2 Closing Obligations. At the Closing, subject to the terms,
covenants and conditions contained herein:
(a) the Shareholders will deliver to Parent and Surviving
Corporation:
(i) certificates representing the Shares, to be
surrendered to Surviving Corporation or Parent;
(ii) a certificate executed by the Shareholders
representing and warranting to Parent and Surviving
Corporation that the Shareholders' and the Company's
representations and warranties in this Agreement are accurate
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 Memorandum which was delivered by
the Shareholders to Parent and Surviving Corporation prior to
the Closing Date); and
(iii) investment letter executed by the
Shareholders in the form attached hereto as Exhibit 5.9, (the
"Investment Letter").
(iv) an escrow agreement (the "Escrow Agreement"
as set forth in Exhibit 5.10).
(v) an opinion of counsel as referred to in
Section 8.1(f);
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(vi) letters of resignation of the officers and
directors of the Company;
(vii) executed counterparts of all other documents,
including the Shareholder Documents, and certificates required
to be delivered to Parent and Surviving Corporation pursuant
to this Agreement including, but not limited to the
Undertaking Agreement, the Noncompetition Agreement,
satisfactory evidence that all third party creditors of the
Company have been satisfied and the title insurance policy as
set forth in Section 8.1(k) in the amount of $600,000 has been
delivered to Surviving Corporation.
(b) Parent and Surviving Corporation will deliver to the
Shareholders:
(i) the Stock Amount, issued to the Shareholders;
(ii) the Cash Amount (less the amounts due to
third party creditors and less the estimated adjustment
amount, and less the amount to be placed in escrow) by bank,
cashier's or certified check payable to the order of the
Shareholders or other holders of the Shares or wire transfer
in immediately available funds to an account designated by the
Shareholders or other holders of Shares, as may be selected by
them;
(iii) a certificate executed by Parent and
Surviving Corporation to the effect that, except as otherwise
stated in such certificate, each of Parent and Surviving
Corporation's representations and warranties in this Agreement
is accurate in all respect as of the Closing Date as if made
on the Closing Date ("Parent and Surviving Corporation's
Certificate"); and
(c) Surviving Corporation and the Company will execute
articles of merger and file the same with the Secretaries of State of
the State of Texas and the State of Florida.
(d) Parent will place 92,820 shares of Parent Stock and
$89,180 in cash of the Acquisition Price into escrow.
VIII. CONDITIONS TO CLOSING
8.1 Conditions to Obligations of Parent and Surviving Corporation.
The obligations of Parent and Surviving Corporation to complete the
transactions contemplated at the Closing shall be subject to the satisfaction
on or prior to the Closing Date of the following conditions:
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(a) Performance. Each agreement and obligation of the
Shareholders or the Company to be performed or complied with on or
before the Closing Date shall have been duly performed or complied
with in all material respects and the Shareholders shall deliver to
Parent and Surviving Corporation a certificate signed by the
Shareholders and an officer of the Company to such effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of the
Shareholders and the Company contained herein shall be true and
correct, in all material respects, on the Closing Date with the same
force and effect as though such representations and warranties had
been made on the Closing Date, and since the date hereof there shall
have occurred no material adverse change in the Business, and the
Shareholders shall deliver to Parent and Surviving Corporation a
certificate signed by the Shareholders and an officer of the Company
to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Parent and Surviving
Corporation from consummating the transactions contemplated hereby.
(d) Third Party Creditors. All third party creditors of
the Business will be paid in full, and all Encumbrances against the
Shares, Assets and the Business will be paid or discharged.
(e) Capital Leases. All Capital Leases shall be paid in
full and the personal property subject thereto shall be conveyed to
the Company free and clear of Encumbrances.
(f) Opinion of Counsel for the Shareholders and the
Company. Parent and Surviving Corporation shall have received the
opinion of Broad & Cassel dated as of the Closing Date, in form and
substance satisfactory to Surviving Corporation's and Parent's
counsel, subject to reasonable qualifications and exceptions, as set
forth on Exhibit 8.1(f). This Opinion of Counsel shall also set forth
that any shareholders who are not parties to this Agreement have given
all required consents and waived all dissenters rights required by or
provided by Florida law.
(g) Due Diligence Inspection Complete. Parent and
Surviving Corporation shall have completed and are satisfied with
their due diligence inspection of the Company.
(i) Ancillary Agreements. the Shareholders shall have
executed the Noncompetition Agreement, the Escrow Agreement,
Investment Letter and all other ancillary documents required
hereunder.
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(j) Mergers. The contemplated mergers agreements whereby
Artic Ice Corporation and Dolphin Ice Co., Inc. will merge into
Surviving Corporation and Surviving Corporation will remain as the
surviving entity have occurred contemporaneously with the execution of
this Agreement.
(k) Conveyance of Real Property. At or prior to this
Closing, Arthur E. Biggs shall have conveyed by general warranty deed
the real property and improvements comprising the Artic Ice
Corporation ice manufacturing facilities located at 335 N. Congress,
Del Ray Beach, Florida to Surviving Corporation with a title insurance
policy issued by a nationally known title insurance issuer insuring
title to the real property in the amount of $600,000. The effect of
the conveyance of this real property by Arthur E. Biggs will be to
convey a fee simple interest in the aforementioned real property
comprising the Artic Ice Corporation ice manufacturing facility to
Surviving Corporation free and clear of any and all Encumbrances
unless excepted to in writing by Surviving Corporation.
(l) Registration Rights Agreement. the Shareholders
shall have entered into the Registration Rights Agreement attached
hereto as Exhibit 5.13.
(m) Shareholder Documents. the Shareholders shall have
entered into and delivered the Shareholder Documents to Parent.
(n) All shareholders who are not parties to this
Agreement have given all required consents and waived all dissenters
rights required by or provided by Florida law.
8.2 Conditions to Obligations of the Company and the Shareholders.
The obligation of the Company and the Shareholders to complete the transactions
contemplated at the Closing shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of Parent
and Surviving Corporation to be performed or complied with on or
before the Closing Date shall have been duly performed or complied
with in all material respects and Parent and Surviving Corporation
shall deliver to the Shareholders a certificate signed by an officer
of Parent and Surviving Corporation to such effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Parent and
Surviving Corporation contained herein shall be true and correct on
the Closing Date with the same force and effect as though such
representations and covenants had been made on the Closing Date, since
the date hereof there shall have occurred no material adverse change
in Parent's or Surviving Corporation's business operations and Parent
and Surviving Corporation shall deliver to the Shareholders a
certificate signed by an officer of Parent and Surviving Corporation
to such effect.
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(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining the Company from
consummating the transactions contemplated hereby.
(d) Due Diligence Inspection Complete. the Shareholders
have completed and are satisfied with their due diligence inspection
of Parent and Surviving Corporation.
(e) Registration Rights Agreement. Parent shall have
entered into the Registration Rights Agreement attached hereto as
Exhibit 5.13.
IX. INDEMNIFICATION
9.1 Indemnification of Parent and Surviving Corporation by the
Shareholders. the Shareholders agree to indemnify, defend and hold harmless
Parent and Surviving Corporation and Parent's and Surviving Corporation's
employees, agents, heirs, legal representatives, and assigns from and against
any and all claims, suits, losses, expenses (legal, accounting, investigation
and otherwise), damages and liabilities, including, without limitation, tax
liabilities (hereinafter, collectively "Damages"), arising out of or relating
to (i) any inaccuracy of any representation or warranty of the Company or the
Shareholders set forth in this Agreement or in any document or certificate
furnished or required to be furnished to Parent or the Surviving Corporation or
the breach of any covenant made by the Company in or pursuant to this
Agreement; or (ii) any claim or cause of action arising with respect to the
conduct or condition of the Business or Assets prior to the Closing.
Except for events requiring indemnification under Sections 3.3, 3.4,
3.6, 3.9, 3.11 and Article XI of this Agreement and Sections 3.3, 3.4, 3.6,
3.9, 3.11 and any disclosures relating to Article XI in the Shareholders'
Disclosure Memorandum, if an event occurs that otherwise requires
indemnification hereunder and said event is disclosed in the Shareholders'
Disclosure Memorandum, the Shareholders shall not be required to indemnify
Surviving Corporation or Parent for any such event. In the event that the
Shareholders fail or neglect to disclose any such items requiring
indemnification in the Shareholders' Disclosure Memorandum, the Shareholders
shall be required to fully indemnify Surviving Corporation and Parent as
required herein whether Surviving Corporation or Parent had knowledge of such
event or not.
9.2 Indemnification of the Company and the Shareholders by Parent
and Surviving Corporation. Parent and Surviving Corporation agree to
indemnify, defend and hold harmless the Company and the Shareholders from and
against any and all Damages arising out of or relating to any inaccuracy or any
representation or warranty set forth in this Agreement or the breach of any
covenant made by Parent or Surviving Corporation in or pursuant to this
Agreement.
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9.3 Claims for Indemnification. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party. In addition to all other
remedies provided hereunder or by law, Parent and Surviving Corporation shall
have the right to make a claim against the Escrow Amount for any of Parent's or
Surviving Corporation's Damages. Parent and Surviving Corporation agree that
any claims for indemnification by Parent and/or Surviving Corporation made
against the Shareholders shall first be satisfied with any amounts that have
been paid into escrow in accordance with the terms set forth in this Agreement.
9.4 Right to Defend. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within sixty (60) days after receipt of the Notice of Claim
that the Indemnifying Party intends to assume the defense of such claim and
acknowledges its liability to indemnify the Indemnified Party for any losses
resulting from such claim; provided, however, that if the Indemnifying Party
does not elect to assume the defense of any claim, then (a) the Indemnifying
Party shall have the right to participate in the defense of such claim or
demand at its expense through counsel of its own choosing, provided the
Indemnified Party shall control the defense of such claim, (b) the Indemnified
Party may settle any such claim without the consent of the Indemnifying Party,
however, the Indemnifying Party may not settle any such claim without the prior
written consent of the Indemnified Party; and (c) Section 9.5 hereof shall be
inapplicable. Whether or not the Indemnifying Party does choose to so defend
such claim, the parties hereto shall cooperate in the defense thereof and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be requested in
connection therewith. To the extent Parent or Surviving Corporation is the
Indemnified Party for any actual or threatened claim or demand by any third
party, Parent and Surviving Corporation shall have the right to control the
prosecution of any counterclaim or right related to such a claim or demand,
provided that Parent and Surviving
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Corporation agree to reasonably cooperate with the Company or the Shareholders
with respect to the prosecution of such counterclaim or right.
9.5 Settlement. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld and (ii) the Indemnifying
Party can settle without the consent of the Indemnified Party only if the
settlement involves only the payment of money for which the Indemnifying Party
will be fully liable. No other settlement of any claim may be made without the
prior written consent of both the Indemnified Party and the Indemnifying Party,
which consent shall not be unreasonably withheld.
9.6 Effect of Termination. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
9.7 Limitations on Amount. Neither party hereto will have any
liability (for indemnification or otherwise) with respect to the matters
described in Section 9.1 (as to the Shareholders) or 9.2 (as to Parent and
Surviving Corporation) until the total of all Damages of the Indemnified Party
with respect to such matters exceeds $75,000 in the aggregate (the "Basket"),
and then the Indemnifying Party shall be responsible to the Indemnified Party
for all Damages based thereon from the first dollar of Damages without regard
to the Basket; provided, however, the Basket (as it applies to the Shareholders
as the Indemnifying Party) shall not apply to any claim for indemnification
arising out of a breach of any representations, warranties or covenants
contained in Sections 3.3, 3.4, 3.6, 3.9, 3.12(b-d) or 3.19, and the
Shareholders' obligation to discharge all liabilities not assumed by Parent or
Surviving Corporation. The maximum liability, that will payable by either
party hereto to the other party, respectively, with respect to the matters
described in Section 9.1 or 9.2, respectively, will be limited to Two Million
Dollars ($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 or the Shareholders representations, warranties or covenants
contained in Sections 3.4, 3.6, 3.7, 3.9, 3.10, 3.11, 3.12(b-d) or 3.19,
Damages resulting from willful or intentional misrepresentations and the
Shareholders' obligation to discharge all liabilities not assumed by Parent or
Surviving Corporation.
9.8 Applicability of Insurance. 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.
9.9 Payment of Indemnification. Any payment made by the
Indemnifying Party to the Indemnified Party as set forth in this Article IX may
be paid, in the sole
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discretion of the Indemnifying Party, in either cash or common stock of Parent
so long as any such payments do not threaten to defeat the tax-free treatment
of this transaction. If such a case arises whereby the payment of any amounts
to an Indemnified Party threatens to defeat the tax-free treatment of this
Agreement, then said amounts shall be made in such a ratio Parent common stock
to cash as the payment of the Purchase Price hereunder. The shares of the
common stock of Parent used for the payment of any amounts under this Article
IX shall be valued at $10.00 per share. In the event that the Parent and
Surviving Corporation are the Indemnifying Party, any payments made pursuant to
this Article IX shall be made in cash. In the event that the Shareholders are
the Indemnifying Party, the Shareholders shall have the right to pay all claims
in cash. In the even that there is an insufficient amount of cash in the
Escrow Amount, the Shareholders shall have the right to pay any such claims for
indemnification to Parent and Surviving Corporation and preserve the
Shareholders ownership of the Parent Stock comprising the Escrow Amount. The
shares of Parent Stock shall be valued at $10.00 per share for purposes of the
payment of any claims pursuant to this Article IX.
X. TERMINATION
10.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of the
Shareholders, Company, Parent and Surviving Corporation;
(b) Misrepresentation or Breach. By the Company, the
Shareholders, or Parent and Surviving Corporation, if there has been a
material misrepresentation or a material breach of a warranty or
covenant herein or in any agreement required to be delivered pursuant
hereto on the part of the other party hereto;
(c) Failure of Condition to Parent's and Surviving
Corporation's Obligations. By Parent and Surviving Corporation, if
all of the conditions set forth in Section 8.1 have not been
satisfied;
(d) Failure of Condition to the Company's and the
Shareholders' Obligations. By the Company or the Shareholders, if all
of the conditions set forth in Section 8.2 have not been satisfied;
(e) Court Order. By the Company and the Shareholders or
Parent and Surviving Corporation, if consummation of the transactions
contemplated hereby shall violate any non-appealable final order,
decree or judgment of any court or governmental body having competent
jurisdiction;
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(f) Material Adverse Change. By Parent and Surviving
Corporation, in the reasonable judgment of their respective board of
directors, or by the Shareholders if any event has occurred after the
date hereof which is, or will result in a material adverse change in
the Business or condition of the Assets of the Company or Parent
and/or Surviving Corporation, respectively;
(g) Drop Dead Date. This Agreement shall terminate if it
has not been consummated by March 12, 1998.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of the Company, the
Shareholders and Parent and Surviving Corporation under this Agreement shall
terminate without further liability of the Company, the Shareholders, Parent or
Surviving Corporation, except that the mutual provisions contained herein
relating to confidentiality shall survive any such termination.
10.3 Right to Proceed. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or Section 8.2 has
not been satisfied, the Company, the Shareholders or Parent and Surviving
Corporation, in addition to any other rights which may be available to it,
shall have the right to waive any such condition that is for its benefit and to
require the other party hereto to proceed with the Closing.
XI. TAX MATTERS.
11.1 Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the
Code.
"Final Determination" shall mean (i) with respect to Federal
Taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by the
Company or the Shareholders, whichever are responsible for payment of such Tax
under applicable law, with respect to any item disallowed or adjusted by a
Taxing Authority, provided that such responsible party determines that no
action should be taken to recoup such payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion
thereof) beginning after the close of business on the Closing Date.
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"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax,
gross income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign).
"Tax Indemnification Period", means with respect to any Tax,
any Pre-Closing Tax Period of the Company.
11.2 Filing of Short Period Returns. Parent and Surviving
Corporation and the Shareholders shall treat and cause the Company to treat the
day of the Closing as the last day of the taxable period in which the Company
is an S corporation, as defined under the Code. All Tax returns 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 Code, the books of the Company shall be closed
effective the day of the Closing. The Shareholders will cause its accounting
firm to prepare, at the Shareholders' sole expense, the S Short Year Returns.
11.3 Covenants.
(a) Without the prior written consent of Parent and
Surviving Corporation, and as it relates to the Pre-Closing Tax
Period, the Shareholders shall not cause the Company to make or change
any tax election, change any annual tax accounting period, adopt or
change any method of tax accounting, file any amended 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 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 Parent or Surviving Corporation.
Without the prior written consent of the
Shareholders, and as it relates to the Pre-Closing Tax Period, Parent
and Surviving Corporation shall not cause the Company to make or
change any tax election, change any annual tax accounting period,
adopt or change any method of tax accounting, file any amended 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
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waiver 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 Shareholders.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) will be filed when
due in accordance with all applicable laws. The parties agree that
any final Return relating to the Pre-Closing Tax Period shall be
timely filed by the Shareholders on behalf of the Company and with
Parent's and Surviving Corporation's prior written consent, such
consent not to be unreasonably withheld or delayed.
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees incurred in
connection with this Agreement (including any real property transfer
Tax and any similar Tax) shall be accrued by the Shareholders and be
paid by the Shareholders when due (including any applicable
extensions), and the Shareholders will, at the Shareholders' sole
expense, file all necessary Tax returns and other documentation with
respect to all such Taxes and fees.
11.4 Cooperation on Tax Matters.
(a) Parent, Surviving Corporation and the Shareholders
shall cooperate fully, 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 6043 of the Code and all Treasury Regulations
promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention
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. Parent and Surviving Corporation and
the Shareholders shall cause the Company to: (i) to retain 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 requirements of any Taxing Authority or any record retention
agreements entered into with any Taxing Authority, and (ii) to give
the Shareholders reasonable written notice prior to destroying or
discarding any such books and records and, if the Shareholders so
requests, Parent and Surviving Corporation shall allow the
Shareholders to take possession of such books and records.
(b) Parent and Surviving Corporation and the Shareholders
further 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 (including, but not limited to, with
respect to the transactions contemplated hereby).
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11.5 Tax Indemnification.
(a) The Company and the Shareholders hereby jointly and
severally indemnify Parent and Surviving Corporation against, and
agree to hold Parent and Surviving Corporation harmless from, any
loss, liability or expense attributable to (i) any Tax with respect to
income (including, to the extent based on income, state franchise
Taxes), transfer Tax, employment or withholding Tax related to
employee tips income (actual and allocated) and related reporting
requirements, and gross receipts or royalty Tax in respect of any
franchise operation and any other Tax of the Company related to the
Tax Indemnification Period, (ii) any Tax resulting from a breach of
the provisions of Sections 3.9, 11.2, 11.3, and 11.4, and (iii) any
liabilities, costs, expenses (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees
and expenses), losses, damages, assessments, settlements or judgments
arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the
contest in good faith in appropriate proceedings relating to the
imposition, assessment or assertion of any such Tax, and any liability
as transferee or successor (the sum of (i), (ii), and (iii) being
referred to herein as a "Loss"). Parent and Surviving Corporation
shall give the Shareholders ten days notice of any claim of Loss, and
the Shareholders shall have the opportunity to defend Parent and
Surviving Corporation in accordance with Section 9.4 hereof.
(b) If a claim is made against Parent and/or Surviving
Corporation for any Loss as defined in Section 11.5(a) hereof, Parent
or the Surviving Corporation shall notify the Shareholders as provided
in Section 11.4(a). Parent and/or Surviving Corporation shall, at the
Shareholders' expense, take such action as the Shareholders may
reasonably request in writing with respect to such Loss, and if
reasonably requested by the Shareholders and upon the prior payment to
the Parent or Surviving Corporation of an amount equal to such Loss,
any payment by Parent or Surviving Corporation shall be made under
protest. If protest is made, Parent and/or Surviving Corporation
shall, the Shareholders' expense, take such action as the Shareholders
may reasonably request to recover such payment and shall, if
requested, permit the Shareholders in Parent's and/or Surviving
Corporation's name to file a claim or prosecute an action to recover
such payment.
(c) For the purposes of this Section 11.4, the parties
hereby agree that all notices to the Shareholders shall be delivered
to Arthur E. Biggs.
(d) The indemnity set forth in this Section 11.4 shall
terminate upon the expiration of the applicable statutory period of
limitations.
11.6 Acquisition Price Adjustment. Any amount paid by the Company,
Parent, Surviving Corporation or the Shareholders under Section 11.5 will be
treated as an
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adjustment to the relevant purchase price for all Tax purposes unless a Final
Determination causes any such amount not to constitute an adjustment to the
relevant purchase price. In the event of such a Final Determination, Parent
and Surviving Corporation or the Shareholders, as the case may be, shall pay an
amount that reflects the hypothetical Tax consequences of the receipt or
accrual of such payment, using the maximum statutory rate (or rates, in the
case of an item that affects more than one Tax) applicable to the recipient of
such payment for the relevant year, reflecting for example, the effect of
deductions available for interest paid or accrued and for Taxes such as state
and local income Taxes. Any payment required to be made by Parent and
Surviving Corporation or the Shareholders under Section 11.5 that is not made
when due shall bear interest at the rate per annum determined, from time to
time, under the provision of Section 6621(a)(2) of the Code for each day until
paid.
11.7 Survival. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
XII. MISCELLANEOUS
12.1 Expenses. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 Survival of Representations and Warranties. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing for the applicable statute of limitations
period.
12.3 Inurement; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the prior written consent of
the other parties hereto.
12.4 Entire Agreement; Amendment. This Agreement, the Schedules
and Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof. This Agreement may
not be amended except by a written agreement executed by all of the parties
hereto.
12.5 Severability. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the remaining provisions
hereof and without affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
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12.6 Incorporation of Exhibits and Schedules. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 Captions and Headings; Use of term "Person". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, Section or subsection
cross-references are to articles, Sections and subsections within this
Agreement. As used herein, the term "person" shall mean any corporation,
limited liability company, partnership, venture, proprietorship, trust, benefit
plan or other entity or enterprise.
12.8 Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
12.9 Notices. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to the Company: 3210 St. Charles Place
Boca Raton, Florida 33434
to the Shareholders: Arthur E. Biggs
3210 St. Charles Place
Boca Raton, Florida 33434
William E. Biggs
3210 St. Charles Place
Boca Raton, Florida 33434
Arthur E. Biggs, III
3210 St. Charles Place
Boca Raton, Florida 33434
with a copy to: Nina S. Gordon, P.A.
Broad and Cassel
201 S. Biscayne Blvd.
Miami, Florida 33131
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to Parent and
Surviving Corporation: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis, III, President
with a copy to: Alan Schoenbaum
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St., Suite 1500
San Antonio, Texas 78205
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
12.10 Agents or Brokers. The Company and the Shareholders and
Parent and Surviving Corporation mutually represent and agree with each other
that no agents or brokers have been utilized in the solicitation or negotiation
of the sale of the Business and no fees, commissions or expenses of any type
shall be due or payable out of the proceeds of the Acquisition Price by any
party to this Agreement.
12.11 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities laws, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in San Antonio, Texas and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof, and shall not be appealable. The prevailing party in any such
arbitration shall be entitled to recover its reasonable attorneys' fees and
expenses in connection with any such arbitration. Judicial proceedings may be
commenced only to enforce this arbitration agreement or to enforce the results
of arbitration; provided that such prohibition shall not apply in the event
that a court ordered injunction is an appropriate remedy for a breach of this
Agreement.
12.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
[ARTIC CRYSTAL ICE CORPORATION AGREEMENT AND PLAN OF
MERGER SIGNATURE PAGE FOLLOWS]
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[ARTIC CRYSTAL ICE CORPORATION AGREEMENT AND
PLAN OF MERGER SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE, INC.
By:
------------------------------------------
Print Name:
-------------------------
Print Title:
------------------------
PACKAGED ICE SOUTHEAST, INC.
By:
------------------------------------------
Print Name:
-------------------------
Print Title:
------------------------
ARTIC CRYSTAL ICE CORPORATION
By:
------------------------------------------
Print Name:
-------------------------
Print Title:
------------------------
SHAREHOLDERS
- ---------------------------------------------
ARTHUR E. BIGGS
- ---------------------------------------------
WILLIAM E. BIGGS
- ---------------------------------------------
ARTHUR E. BIGGS, III
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<PAGE> 40
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets of the Company
Exhibit B Assets subject to Capital Leases
Exhibit 5.9 Investment Letter
Exhibit 5.10 Escrow Agreement
Exhibit 5.12 Noncompetition Agreement
Exhibit 5.13 Registration Rights Agreement
Exhibit 5.14 Shareholder Documents
Exhibit 5.15 Employment Agreement
Exhibit 8.1(f) Opinion of Counsel
the Shareholders' Disclosure Memorandum
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<PAGE> 1
EXHIBIT 10.9
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as
of the March 11, 1998, by and among Packaged Ice, Inc., a Texas corporation
("Parent"), Packaged Ice Southeast, Inc., a Texas corporation wholly owned by
Parent ("Surviving Corporation"), Dolphin Ice Co., Inc., a Florida corporation
(the "Company") and Arthur Biggs and First Union National Bank as Trustee of
the Denis Gagnon Revocable Trust (the "the Shareholders") who collectively own
a majority of the outstanding shares of capital stock of the Company.
PRELIMINARY STATEMENTS
The respective Boards of Directors of Parent, Surviving Corporation
and the Company have each approved the merger of the Company with and into
Surviving Corporation (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:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Article I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and the plural forms of any of the
terms herein defined.
"Acquisition Price" shall have the meaning set forth in Section 2.7(d)
of this Agreement.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible which shall include, but not be limited to,
those items described more fully in Exhibit A attached hereto.
"Business" shall mean all of the operations of Company including the
production, storage, distribution, storage and sale of packaged ice products
and other items.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business for the direct manufacturing, distribution and
sale of packaged ice products which shall include, but not be limited to, those
items more fully described in Exhibit B, attached hereto. The equipment
comprising the Capital Leases shall be free and clear of the Capital Leases,
liens, claims and other Encumbrances at the Closing. Title to the assets that
are subject to Capital Leases shall be conveyed to the Surviving Corporation as
a result of this Agreement.
"Closing Date" shall mean the date on which this Agreement is
consummated.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
<PAGE> 2
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage, lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, or adverse claim or
restriction on transfer of any nature whatsoever other than those held by
Parent or Surviving Corporation or granted by the Company at Parent's or
Surviving Corporation's request.
"Escrow Agent" shall mean First Union National Bank.
"Escrow Agreement" shall have the meaning set forth in Section 5.10 of
this Agreement.
"Financial Statements" shall have the meaning set forth in Section 3.3
of this Agreement.
"Financing Statements" shall have the meaning as set forth in Section
5.11 of this Agreement.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Investment Letter" shall have the meaning set forth in Section 5.9 of
this Agreement.
"Liabilities" shall have the meaning set forth in Section 2.11 of this
Agreement.
"Merger" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Personal Property" shall have the meaning set forth in Section 3.13
of this Agreement.
"Real Property" shall have the meaning set forth in Section 3.12 of
this Agreement.
"the Shareholders' Disclosure Memorandum" shall mean that Schedule
attached hereto and incorporated herein by reference that lists and describes
all disclosures by the
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<PAGE> 3
Shareholders and Company concerning the Assets and the Business which are the
subject of this Agreement.
"Shareholder Documents" shall mean the Amended and Restated the
Shareholders Agreement (September 20, 1995); the Amendment No. 1 to Amended and
Restated the Shareholders Agreement (dated as of January 17, 1997); Amendment
No. 2 to Amended and Restated the Shareholders Agreement (dated as of March 14,
1997); Amended and Restated Voting Agreement (dated September 20, 1995);
Amendment NO. 1 to Amended and Restated Voting Agreement (dated as of January
17, 1997); Amendment No. 2 to Amended and Restated Voting Agreement (dated as
of March 14, 1997); Amendment No. 3 to Amended and Restated Voting Agreement
(dated as of November 4, 1997); and Culligan Voting Agreement (dated December
2, 1997).
"Shares" shall mean all of the capital stock of Company outstanding on
the Closing Date.
"Taxes" shall have the meaning set forth in Section 11.1 hereof.
II. THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the corporation laws of Texas and Florida, the
Company shall be merged (the "Merger") with and into Surviving Corporation and
Surviving Corporation shall be 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 Section 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code
(the "Code").
2.2 Continuing Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of Surviving
Corporation, with all its purposes, powers, franchises, privileges, rights and
immunities, and shall continue unaffected and unimpaired by the Merger. 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 Surviving Corporation, and Surviving Corporation
shall be vested fully therewith and the separate corporate existence and
identity of the Company shall cease except to the extent continued by statute.
2.3 Effective Date. The Merger shall become effective upon the
occurrence of the issuance of certificates of merger (the "Effective Date") by
the Secretary of State of the State of Texas and the Secretary of State of
Florida upon filing on the Closing Date of articles of merger with the
Secretary of the State of Texas pursuant to Article 5.04 of the Texas Business
Corporation Act ("TBCA") and the Secretary of State of Florida pursuant to
Section 607.1105 of the Florida Business Corporation Act.
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<PAGE> 4
2.4 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of Surviving Corporation as in effect on the Effective
Date shall be the Articles of Incorporation and Bylaws of the Surviving
Corporation following the Merger.
2.5 Directors. The members of the Board of Directors of Surviving
Corporation at the Effective Date shall be the directors of the Surviving
Corporation immediately following the Merger.
2.6 Officers. The officers of Surviving Corporation at the
Effective Date shall be the officers of the Surviving Corporation immediately
following the Merger.
2.7 Conversion of Shares.
(a) Each share of the Company's $1 par value common stock
("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 automatically into the
right to receive the Share Price (as hereinafter defined) which shall
be payable, without interest thereon, upon the surrender of the
certificates formerly representing such Share, in accordance with
Section 2.7(g).
(b) Each Share shall, by virtue of the Merger and without
any action on the part of the holder, be canceled and retired and
cease to exist.
(c) The "Share Price" for each Share will be (x)/(y)
where (x) is the Acquisition Price (as defined in Section 2.7(d)) and
(y) is the total number of outstanding Shares.
(d) The acquisition price ("Acquisition Price") shall be
$2,200,000, which shall consist of $1,027,300 in cash, as adjusted as
set forth in Section 2.11 of this Agreement, (the "Cash Amount") and
117,270 newly issued shares of Parent's common stock, par value $0.01
per share ("Parent's Stock") valued at $10 per share and issued
directly to the Shareholders (the 117,270 shares of Parent Stock being
the "Stock Amount").
(e) Each share of the Company's common stock held in the
treasury of the Company immediately prior to the Effective Date 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.
(f) All of the Parent's Stock, when delivered pursuant to
the provisions of this Agreement, shall be validly issued, fully paid
and nonassessable.
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<PAGE> 5
(g) At Closing, Parent will pay to the Shareholders and
other holders of Shares, the total sum of the Acquisition Price.
$71,920 and 82,080 shares of Parent Stock will be placed in escrow
with the Escrow Agent for a period of 10 months in accordance with the
Escrow Agreement (the "Escrow Amount"). The Escrow Amount shall be
approximately 7% of the Acquisition Price and shall consist of a
combination of cash and Parent Stock. The ratio of Parent Stock and
cash constituting the Escrow Amount shall be the same as the ratio of
the Parent Stock and cash constituting the Acquisition Price. At
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 the Share Price for each Share
surrendered.
(h) 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.
(i) No fractional shares of Parent Stock and no
certificates or scrip therefor shall be issued; instead, the dollar
value of any such fractional amount shall be added to the Cash Amount.
(j) All of the shares representing the Stock Amount will
be validly issued, fully paid and nonassessable.
(k) In the event that any shareholders of the Company are
determined in the sole discretion of Parent to not be an "Accredited
Investor" as defined in Rule 501(a) of Regulation D of the Securities
Act of 1933, such shareholders will be paid only from the Cash Amount.
2.8 Filing of Articles of Merger. Upon the terms and subject to
the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII hereof, the Company and the
Parent and Surviving Corporation shall execute and file a certificate of merger
in the manner required by the TBCA and the parties hereto shall take all such
other and further actions as may be required by law to make the Merger
effective. Prior to the filings referred to in this Section, the foregoing
will be confirmed at the Closing.
2.9 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 Surviving Corporation
shall be allocated to and vested in the Surviving Corporation without
reservation or impairment, without
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<PAGE> 6
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
Surviving Corporation 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.
2.10 Proration. To the extent such items are not reflected on the
Company's balance sheet, the parties shall prorate at the Closing the current
year's ad valorem taxes and prepaid expenses, based on the latest available
statements from taxing authorities, whether for the current tax year or the
preceding tax year. The Shareholders' pro rata share of such taxes shall be
the portion attributable to the period through the day preceding the Effective
Date, prorated by days. The prorated amounts shall be adjustments to the
Acquisition Price and shall be payable in a combination of Parent Stock and
cash in the same ratio in which the Acquisition Price is being paid. The
prorated amounts shall be payable in the manner set forth below:
(a) If a prorated amount is payable by Parent or
Surviving Corporation and determinable at the Closing, it shall be
added to the amount payable by Parent or Surviving Corporation at the
Closing.
(b) If a prorated amount is payable by Parent or
Surviving Corporation and not determinable at the Closing, it shall
be billed by the Shareholders when determinable and promptly paid by
Parent or Surviving Corporation to the Shareholders.
(c) If a prorated amount is payable by the Shareholders
and determinable at the Closing, it shall be deducted from the amount
otherwise payable by Parent or Surviving Corporation at the Closing.
(d) If a prorated amount is payable by the Shareholders
and not determinable at the Closing, it shall be billed by Parent or
Surviving Corporation when determinable and promptly paid by the
Shareholders to Parent.
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<PAGE> 7
2.11 Adjustment to Purchase Price. The Acquisition Price shall be
adjusted by the following (the "Adjustment Amount"):
(a) the Closing Date payoff amounts of all current and
long term interest bearing debt and current and long term Capital
Leases (including any unpaid interest and prepayment penalties). For
the purposes of this Section 2.11(a), all payments made by Surviving
Corporation or Parent to discharge all current and long term debt or
Capital Leases shall be paid from the Cash Amount;
(b) if the Company's ratio of current assets to current
liabilities is less than 1:1 at the Closing Date, the Acquisition
Price shall be reduced by an amount equal to the difference between
the current liabilities and the current assets. If the Company's
ratio of current assets to current liabilities is greater than 1:1 at
the Closing Date, the Acquisition Price shall be increased by an
amount equal to the difference of the current assets and the current
liabilities.
The Adjustment Amount will be estimated by the parties based on an
estimated Closing Date balance sheet to be prepared by the Company and
delivered to the parties at least one business day prior to the Closing Date
for purposes of determining the Cash Amount to be paid at Closing (the
"Estimated Adjustment Amount"). The Adjusted Amount will be finally determined
within 90 days after the Closing based on an audited balance sheet (the
"Closing Balance Sheet") of the Company as of the Closing Date. If the actual
Adjustment Amount is greater than the Estimated Adjustment Amount, the
Shareholders shall promptly pay the difference to Parent. If the actual
Adjustment Amount is less than the Estimated Adjustment Amount, Parent shall
promptly pay the difference to the Shareholders.
III. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent and
warrant to Parent and Surviving Corporation as follows:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida
and is in good standing and is duly qualified to do business in any foreign
jurisdiction in which it is currently conducting business operations. The
Company has full corporate power and authority to own or use the properties and
assets that it purports to own or use, and to perform all of its obligations
hereunder. All outstanding shares of stock of the Company are validly issued,
fully paid, nonassessable and a majority are owned, both beneficially and of
record, by the Shareholders. Other than this Agreement, there is no
subscription, option, warrant, call, right, agreement or commitment relating to
the issuance, sale, delivery, repurchase or transfer by the Shareholders or the
Company (including any right of conversion or exchange under any outstanding
security or other instrument) of any of
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<PAGE> 8
its capital stock or other securities. There are no voting trusts, proxies or
any other agreements or understandings with respect to the voting of the
Shares.
3.2 Execution, Delivery and Performance of Agreement. This
Agreement has been duly executed and delivered by the Company and the
Shareholders and constitutes the legal, valid and binding obligation of the
Company and the Shareholders, enforceable against them in accordance with its
terms. Upon the execution and delivery by the Shareholders of the Escrow
Agreement, Noncompetition Agreement and any other ancillary document required
hereunder (collectively, the "the Shareholders' Closing Documents"), the
Shareholders' Closing Documents will constitute the legal, valid, and binding
obligations of the Shareholders, enforceable against the 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 and the Company have held a the
Shareholders meeting (or have executed a consent) and all resolutions required
by law to approve the Merger have been duly adopted in accordance with Florida
law. Except as set forth on Section 3.2 of the Shareholders' Disclosure
Memorandum, the execution, delivery and performance of this Agreement by the
Company and the Shareholders and the consummation of the transactions
contemplated hereby will not require the consent, approval or authorization of
any person or governmental authority, and will not, with or without the giving
of notice, the passage of time, or both, violate, conflict with, result in a
default, breach or loss of rights under, or result in the creation of any lien,
claim or encumbrance pursuant to, any lien, encumbrance, instrument, agreement,
or understanding, or any law, regulation, rule, order, judgment or decree, to
which the Shareholders or the Company are a party or by which they are bound or
affected. All shareholders who are not parties to this Agreement have given all
required consents and waived all dissenters rights required by or provided by
Florida law.
3.3 Financial Statements. The Company has previously caused to be
furnished to Parent the Company's unaudited balance sheet as at December 31,
1996, and the related statements of income and statements of cash flow for the
fiscal year then ended, and the Company's unaudited balance sheet as of
December 31, 1997 (the "December 31, 1997 Balance Sheet") and the related
statements of income and cash flow for the fiscal year then ending. Such
balance sheets and related statements of income and cash flow referenced in
this Section 3.3 are unaudited and collectively referred to herein as the
"Financial Statements").
The Financial Statements taken as a whole present fairly the financial
position, results of operations, changes in shareholders' equity, and cash flow
of the Company as the respective dates of and for the periods referred to in
such Financial Statements in a consistently applied manner.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by the Company in the Shareholders'
Disclosure
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<PAGE> 9
Memorandum and except for liabilities arising in the ordinary course of
business and consistent with past practice since the date of the Company's
December 31, 1997 Balance Sheet, the Company has operated the Business in the
ordinary course and has incurred no material liabilities which would be
required to be reflected in accordance with GAAP, on a balance sheet as of the
date hereof or disclosed in the notes thereto.
Since October 31, 1997 there has not been any material adverse change
in the business, operations, properties, prospects, assets or condition of the
Business, and no event has occurred, nor does a circumstance currently exist,
that may result in such a material adverse change. The Shareholders further
warrant and represent that the actual sales and expenses that relate to the
Company are accurately and truly reflected on the December 31, 1997 Financial
Statements.
3.4 Shareholders' Debt. Section 3.4 of the Shareholders'
Disclosure Memorandum sets forth all loans to the Company from the Shareholders
("the Shareholders Debt"). The Shareholders represent and warrant that, in
connection with the Shareholders' Debt or otherwise, there are no other
Encumbrances held by the Shareholders whatsoever against the Company or the
Assets other than those amounts set forth.
3.5 Business Operations and Condition of Assets. All items
comprising the Assets have been used by the Company in connection with the
Business and are now in serviceable condition, subject to normal maintenance
and periodic repair, and are currently sufficient for the conduct of the
Company's business after the Closing, in substantially the same manner as
conducted prior to the Closing, unless expressly disclosed to the contrary by
the Company and the Shareholders in Section 3.5 of the Shareholders' Disclosure
Memorandum.
3.6 Title to Personal Property. Except as set forth in Section
3.6 of the Shareholders' Disclosure Memorandum, the Company has good, legal and
marketable title to all of the personal property comprising the Assets, free
and clear of Encumbrances.
3.7 Litigation. Except as set forth on Section 3.7 of the
Shareholders' Disclosure Memorandum, there is no pending claim, action, suit,
proceeding or investigation (judicial, governmental or otherwise), nor any
order, decree or judgment in effect, or, to the knowledge of the Company or the
Shareholders, threatened, against or relating to the Shareholders, the Company,
the Business, the Assets, or the transactions contemplated by this Agreement.
3.8 Compliance with Laws. the Shareholders and the Company have
materially complied with all laws, rules, regulations, ordinances, orders,
judgments and decrees relating to the Company, the Shares, the Assets, and the
Business.
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<PAGE> 10
3.9 Taxes.
(a) Except as set forth in Section 3.9 of the
Shareholders' Disclosure Memorandum, the Company has, within the time
and manner prescribed by law, filed all returns, declarations, reports
and statements required to be filed by it (collectively, "Returns") in
respect of any Taxes and each such Return has been prepared in
compliance in all material respects with all applicable laws and
regulations and is true and correct in all respects, and the Company
has, within the time and in the manner prescribed by applicable law,
paid all Taxes that are shown to be due and payable with respect to
the periods covered thereby.
(b) Section 3.9 of the Shareholders' Disclosure
Memorandum describes the status of the Company's election as an "S
corporation" under the Code. The Company is not liable for any
federal income taxes as a "C- corporation" under the Code.
(c) Except as set forth in Section 3.9 of the
Shareholders' Disclosure Memorandum (i) the Company has not requested
or been granted an extension of the time for filing any Return which
has not yet been filed; (ii) the Company has not consented to extend
to a date later than the date hereof the time in which any Tax may be
assessed or collected by any taxing authority; (iii) no deficiency or
proposed adjustment which has not been settled or otherwise resolved
for any amount of Tax has been proposed, asserted or assessed by any
taxing authority against the Company; (iv) there is no action, suit,
taxing authority proceeding, or audit now in progress, pending or, to
the Company's or the Shareholders' knowledge, threatened against or
with respect to the Company; (v) no claim has been made by a taxing
authority in a jurisdiction where the Company does not file Tax
Returns that the Company is subject to Taxes assessed by such
jurisdiction; (vi) there are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the Assets; (vii) the
Company will not be required to include any amount in taxable income
or exclude any item of deduction or loss from taxable income for any
taxable period (or a portion thereof) ending after the Closing Date as
a result of any of the following: (A) a change in method of accounting
for a taxable period ending on or prior to the Closing Date, (B) any
"closing agreement," as described in Code Section 7121 (or any
corresponding provision of state, local or foreign income Tax law)
entered into on or prior to the Closing Date, (C) any sale reported on
the installment method where such sale occurred on or prior to the
Closing Date, and (D) any prepaid amount received on or prior to the
Closing Date; and (viii) the Company does not have any obligation or
liability for the payment of Taxes of any other person as a result
from any expressed obligation to indemnify another person, or as a
result of such Company assuming or succeeding to the Tax liability of
any other person as successor, transferee or otherwise.
(d) 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
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Company's liability for Taxes. There exists no proposed tax
assessment against the company except as disclosed in Section 3.9 of
the Shareholders' Disclosure Memorandum. No consent to the
application of Section 341(f)(2) of the Code 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 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 Code with respect to any transaction contemplated
hereby. The Company has not been a member of any affiliated group (as
defined in Code 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.
(e) Except as set forth in Section 3.9 of the
Shareholders' Disclosure Memorandum, 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.
(f) Surviving Corporation 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 the 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 Surviving
Corporation 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) the Shareholders will pay their respective expenses,
if any, incurred in connection with the Merger.
(i) There is no intercompany indebtedness existing
between Parent and the Company or between Surviving Corporation and
the Company that was issued, acquired, or will be settled at a
discount.
(j) 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 Code.
(k) The fair market value of the assets of the Company
transferred to Surviving Corporation will equal or exceed the sum of
the liabilities assumed by
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Surviving Corporation, plus the amount of liabilities, if any, to
which the transferred assets are subject.
(l) The Company is not an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.10 Environmental. The Company 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 concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to occupational health and safety, good manufacturing practices
for food products, 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, the Company has obtained and been in material 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.
3.11 Insurance. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Business. The Company has not been refused any insurance with respect to
its assets or operations, and its coverage has not been limited, terminated or
canceled by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance, during the last three (3)
years. Section 3.11 of the Shareholders' Disclosure Memorandum lists all
claims, which (including related claims which in the aggregate) exceed $5,000
which have been made by the Company or against any policy of the Company in the
last three years under any workers' compensation, general liability, property
or other insurance policy applicable to Company, any Assets of the Company or
the Business. Except as set forth on Section 3.11 of the Shareholders'
Disclosure Memorandum, there are no pending or threatened claims under any
insurance policy. Such claim information includes the following information
with respect to each accident, loss, or other event: (a) the identity of the
claimant; (b) the nature of the claim; (c) the date of the occurrence; (d) the
status as of the report date and (e) the amounts paid or expected to be paid or
recovered.
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3.12 Real Property.
(a) Section 3.12 of the Shareholders' Disclosure
Memorandum contains (i) a complete and accurate legal description of
each parcel of real property owned by, leased to or used by the
Company (the "Real Property") and (ii) a complete and accurate list of
all current leases, lease amendments, subleases, assignments, licenses
and other agreements to which the Real Property is subject
(collectively, the "Leases"). The Company has delivered to Parent and
Surviving Corporation true and complete copies of the Leases.
(b) Except as disclosed in Section 3.12 of the
Shareholders' Disclosure Memorandum (i) each of the Leases is in full
force and effect and has not been amended or modified; (ii) neither
the Company, nor any other party thereto, is in default thereunder,
nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder; (iii) the Company has received
no notice that any party to any Lease intends to cancel, terminate or
refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder; and (iv) no rental under the Leases
has been paid more than one month in advance.
(c) Except as disclosed in Section 3.12 of the
Shareholders' Disclosure Memorandum, (i) there are no tanks on or
below the surface of the Real Property, (ii) there is no hazardous or
toxic waste, substance or material or other contaminant or pollutant
(as determined under federal, state or local law) present on or below
the surface of the Real Property including, without limitation, in the
soil, subsoil, groundwater or surface water, which constitutes a
violation of any law, ordinance, rule or regulation of any
governmental entity having jurisdiction thereof or subjects or could
subject Parent or Surviving Corporation to any liability to third
parties, and (iii) the Real Property has never been used by the
Company or by any previous owners or operators to generate,
manufacture, refine, produce, store, handle, transfer, process or
transport any hazardous or toxic waste, substance or material or other
contaminant or pollutant.
(d) The zoning of each parcel of the Real Property
permits the improvements located thereon and the continuation of
business presently being conducted thereon. The Real Property is
served by utilities and services necessary for the normal and
continued operation of the business presently conducted thereon.
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3.13 Personal Property.
(a) Section 3.13 of the Shareholders' Disclosure
Memorandum is a complete and accurate Schedule as of the Closing Date
describing, and specifying the location of, all inventory, motor
vehicles, machinery, fixtures, equipment, furniture, supplies, tools,
Intangible Assets, and all other tangible or intangible personal
property owned by, in the possession of, or used by the Company as to
which the Company has an unamortized basis exceeding $1,000 (the
"Personal Property").
(b) Each lease, license, rental agreement, contract of
sale or other agreement applicable to any Personal Property is listed
in Section 3.14 of the Shareholders' Disclosure Memorandum and is in
full force and effect; neither the Company nor any other party thereto
is in material default thereunder, nor is there any event which with
notice or lapse of time, or both, would constitute a default
thereunder. The Company has received no notice that any party to any
such lease, license, rental agreement, contract of sale or other
agreement intends to cancel, terminate or refuse to renew the same or
to exercise or decline to exercise any option or other right
thereunder. Except as set forth in Section 3.13 of the Shareholders'
Disclosure Memorandum, no Personal Property is subject to any lease,
license, contract of sale or other agreement that is materially
adverse to the Business, Assets or financial condition of the Company.
(c) The inventory of the Company as reflected by the
Financial Statements and as described in Section 3.13 of the
Shareholders' Disclosure Memorandum consisted and consists of items
substantially all of which were and will be of the usual quality and
quantity necessary for the normal conduct of the Business and
reasonably expected to be usable or salable within a reasonable period
of time in the ordinary course of business of the Company, except
items of inventory which have been written down to realizable market
value or written off completely, and damaged or broken items in an
amount which does not materially affect the value of the inventory as
reflected on the Financial Statements. With respect to inventory in
the hands of suppliers for which the Company is committed as of the
date hereof, such inventory is reasonably expected to be usable in the
ordinary course of business of the Company as presently being
conducted.
(d) All accounts receivable of the Company that are
reflected on the December 31, 1997 Balance Sheet or on the Company's
accounting records as of the Closing Date (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
collectible net of the respective reserves shown on the December 31,
1997 Balance Sheet or on the accounting records of the Company as of
the Closing Date (which reserves are adequate and, in the case of the
reserve as of the Closing Date, will not be more
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<PAGE> 15
than the reserve reflected in the December 31, 1997 Balance Sheet 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 date on which it was accrued. There is no
contest, claim, or right of set-off under any agreement with any
obligor of an Account Receivable relating to the amount or validity of
such Account Receivable.
3.14 Contracts. Section 3.14 of the Shareholders' Disclosure
Memorandum contains a complete and accurate list of all presently effective
material contracts, leases and other agreements ("Contracts") to which the
Company is a party and which affect or are applicable to the Assets or the
Company, true and complete copies (or summaries in the case of oral contracts)
of each of which have been delivered to Parent and Surviving Corporation by the
Company, including, without limitation, any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any
such obligation for the borrowing of money;
(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either
within or outside the United States relating to sharing of present or
future commissions, fees or other income or profits;
(d) lease, license, rental agreement, contract of sale or
other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract; or
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts
and/or rebates).
Except as disclosed in Section 3.14 of the Shareholders' Disclosure
Memorandum, each of the Contracts is in full force and effect and has not been
amended or modified and neither the Company, nor any other party thereto, is in
material default
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<PAGE> 16
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a material default thereunder. The Company has received no
notice that any party intends to cancel, terminate or refuse to renew any such
Contract or to exercise or decline to exercise any option or other right
thereunder.
3.15 Labor Matters. There are no controversies pending or, to the
best knowledge of the Company or the Shareholders, threatened between the
Company and any employees of the Company. The Company has complied with all
laws relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining, immigration, safety and the
payment of withholding and social security and similar taxes, and the Company
has no liability for any arrears of wages or taxes or penalties for failure to
comply with any of the foregoing.
3.16 Absence of Sensitive Payments. To the best knowledge of the
Company, the Company has not made or maintained (i) any contributions, payments
or gifts of its funds or property to any governmental official, employee or
agent where either the payment or the purpose of such contribution, payment or
gift was or is illegal under the laws of the United States or any state
thereof, or any other jurisdiction (foreign or domestic); or (ii) any
contribution, or reimbursement of any political gift or contribution made by
any other person, to candidates for public office, whether federal, state,
local or foreign, where such contributions by the Company or the Shareholders
were or would be a violation of applicable law.
3.17 Employee Benefits. All employee benefit plans (whether or not
covered by ERISA), deferred compensation or executive compensation plans for
employees, directors or independent contractors, and all other employee or
independent contractor arrangements or programs that are maintained or
contributed to by the Company (collectively, the "Company Plans") have been
administered and operated in all material respects in compliance with their
terms, ERISA, if applicable, the Code and other applicable law. All Company
Plans that are intended to be qualified under Section 401(a) of the Code are so
qualified and a current favorable IRS determination letter exists for each such
plan and covers the amendments required by the Tax Reform Act of 1986. All
funded Company Plans are fully funded according to their terms and applicable
law. No prohibited transaction or breach of fiduciary duty under ERISA has been
committed by any fiduciary, disqualified person or party in interest of any
Company Plan. The Company has no liability, contingent or otherwise, under
Title IV of ERISA.
3.18 Capital Improvements. Section 3.18 of the Shareholders'
Disclosure Memorandum describes all of the capital improvements or purchases or
other capital expenditures which the Company has committed to or contracted for
which have not been completed prior to the date hereof and the cost and expense
reasonably estimated to complete such work and purchases.
3.19 No Undisclosed Liabilities. Except as set forth in Section
3.19 of the Shareholders' Disclosure Memorandum and obligations and liabilities
arising under the contracts disclosed in Section 3.14 of the Shareholders'
Disclosure Memorandum, the
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<PAGE> 17
Company has no liabilities or obligations of the type required to be reflected
as liabilities on a balance sheet prepared in accordance with Generally
Accepted Accounting Principles (GAAP), except for liabilities or obligations
reflected or reserved against in the Financial Statements and current
liabilities incurred in the ordinary course of business since the respective
dates thereof.
3.20 Complete and Accurate Disclosure. No representation or
warranty made to Parent or Surviving Corporation in this Agreement or in
connection with this transaction contains or will contain an untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make such representation or warranty not misleading or necessary to enable
Parent and Surviving Corporation to make a fully informed decision with respect
to the Merger of the Company into Surviving Corporation. All documents and
information which have been or will be delivered to Parent and Surviving
Corporation or its representatives by or on behalf of the Company or the
Shareholders are and will be true, correct and complete copies of the documents
they purport to represent.
3.21 Intercompany and Affiliate Debt. As of the Closing Date all
intercompany and affiliated accounts of the Company to include, but not limited
to, all intercompany and affiliate notes payable and receivable, will be
settled and eliminated.
3.22 No Material Adverse Change. Since October 31, 1997, there has
not been any material adverse change in the Business or the 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.
3.23 Accredited Investors. All recipients of Parent's Stock are
accredited investors as defined in accordance with the Securities and Exchange
Commission Rule 501 of Regulation D as promulgated under the Securities Act of
1933.
IV. REPRESENTATIONS AND WARRANTIES
OF SURVIVING CORPORATION AND PARENT
4.1 Corporate Existence; Good Standing; Capitalization. Parent
and Surviving Corporation are corporations duly organized, validly existing,
and in good standing under the laws of the State of Texas and have all
requisite corporate power and authority to issue the Parent's Stock and to own
its properties and assets and to carry on its business as now conducted as
proposed to be conducted. Parent and Surviving Corporation are duly qualified
to transact business and are in good standing in the State of Florida. The
copies of the Articles of Incorporation and bylaws of Parent and Surviving
Corporation delivered to the Company and the Shareholders prior to the
execution of this Agreement are true and complete copies of the duly and
legally adopted Articles of Incorporation and bylaws of Parent and Surviving
Corporation in effect as of the date of this Agreement.
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<PAGE> 18
4.2 Power and Authority. Parent and Surviving Corporation have
the requisite corporate power and authority, and have been duly authorized, to
enter into this Agreement and all ancillary agreements, as applicable, and to
perform all of its obligations hereunder.
4.3 Court Orders, Decrees, Etc. To the best of Parent's and
Surviving Corporation's knowledge, there is no outstanding order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal
against or adversely affecting Parent or the Surviving Corporation or their
respective subsidiaries, or their respective properties or businesses or having
the effect of preventing, delaying, making illegal or otherwise interfering
with the transactions contemplated hereby.
4.4 Franchises, Permits, and Consents. Each of Parent, the
Surviving Corporation and their respective subsidiaries possesses all material:
governmental franchises, licenses, permits, consents, authorizations,
exemptions and orders, required by Parent, the Surviving Corporation and such
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 Parent, the Surviving Corporation
or such subsidiaries or in connection with the consummation of the transactions
by this Agreement have been made or obtained.
4.5 Disclosure. Parent and the Surviving Corporation have not
knowingly withheld from the Shareholders any material facts relating to the
assets, business, operations, financial condition or prospects of Parent or the
Surviving Corporation or their respective 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.
4.6 Parent SEC Reports. Since September 30, 1997, Parent has
filed on a timely basis all reports and statements, together with all
amendments required to be made with respect thereto that it is required to file
with the SEC. No Parent SEC Document with respect to periods beginning on or
after September 30, 1997, and until the Closing contained or will contain any
information that was false or misleading with respect to any material fact, or
omitted or will omit to state any material fact necessary in order to make
statements therein not misleading.
Parent's Offering Circular dated as of January 22, 1998 did not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Shareholders and the Company are
entitled to rely on the statements therein as though made in this Agreement.
The financial statements and notes thereto included in such Offering Circular
for Parent (a) are in accordance with the books and records of Parent, which
are complete in all material respects and have been maintained in accordance
with good business practices and (b) present fairly the consolidated
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<PAGE> 19
financial position and the consolidated results of operations, changes in
shareholders' equity and cash flows of Parent as of the dates and for the
periods indicated, in accordance with generally accepted accounting principles.
4.7 Taxes.
(a) Prior to the proposed transaction, Parent will be in
control of Surviving Corporation within the meaning of Section 368(c) of the
Code.
(b) Surviving Corporation has no plan or intention to
issue additional shares of its stock following the proposed transaction that
would result in Parent losing control of Surviving Corporation within the
meaning of Section 368(c) of the Code.
(c) Parent has no plan or intention to reacquire any of
the Parent Stock interests issued to the Shareholders in the proposed
transaction.
(d) Following the proposed transaction, Parent will
continue the historic business of the Company or use a significant portion of
the Company's business assets in a business, as determined under the principles
of Treasury Regulation 1.368-1(d). Parent and Surviving Corporation have no
plan or intention to dispose of any of the assets of the Company acquired in
the proposed transaction other than transfers in the ordinary course of
business, and Parent and Surviving Corporation have no intention to transfer
any interest in any entity that would cause any of the assets of the Company
acquired in the transaction to no longer be deemed to be used by the Parent
under the principles of Treasury Regulation 1.368-1(d).
(e) The Surviving Corporation will not pay or assume any
expenses of the Company that are not solely and directly related to the
proposed transaction in accordance with the guidelines established in Rev. Rul.
73- 54, 1973-1 C.B. 187. Parent and Surviving Corporation will pay their
respective expenses incurred in connection with the Merger.
(f) There is no intercorporate indebtedness existing
between Parent and the Company or between Surviving Corporation and the Company
that was issued, acquired or will be settled at a discount.
(g) Neither Parent nor Surviving Corporation are
investment companies as defined in Sections 368(a)(2)(F)(iii) and (iv) of the
Code.
V. COVENANTS OF THE COMPANY AND SHAREHOLDERS
the Shareholders and the Company hereby, jointly and severally,
covenant and agree as follows:
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5.1 Conduct of the Business Pending the Closing Date. The
Shareholders and the Company hereby agree that, from the date hereof to the
Closing Date, they will:
(a) maintain the Assets in normal good repair, order and
condition, and make such capital expenditures as necessary to maintain
the Business, in accordance with past practices and sound business
judgment;
(b) maintain insurance upon all of its properties and
with respect to the conduct of the Business in such amounts and of
such kinds to adequately safeguard and protect the Assets and the
Business;
(c) not issue or agree to issue any additional shares of
common stock or of any other voting security or any rights to acquire
any such additional common stock or voting security which would cause
a change of control of the Shareholders;
(d) use its best efforts to comply with all laws and
material contractual obligations applicable to it and to the conduct
of the Business;
(e) not (i) mortgage, pledge or, except in the ordinary
course of business, subject to any lien, charge, security interest or
other encumbrance any of the Assets (whether tangible or intangible),
(ii) sell, assign, transfer, convey, lease or otherwise dispose of, or
agree to sell, assign, transfer, convey, lease or otherwise dispose
of, any of the Assets outside the ordinary course of business other
than that expressly disclosed in the Shareholders' Disclosure
Memorandum;
(f) not authorize or consummate any dividends or
distributions of assets to its stockholders, any consolidation or
merger, purchase of all or substantially all of the assets of any
entity, or any other extraordinary corporate transaction other than
expressly disclosed in the Shareholders' Disclosure Memorandum;
(g) conduct its business in its usual and ordinary
manner.
5.2 Investigation by Parent and Surviving Corporation. Prior to
the Closing Date, the Company shall (i) give Parent and its authorized
representatives and advisors access, at reasonable times and on reasonable
notice, to all items of Real and Personal Property, books and records,
personnel, offices, and other facilities of the Company, (ii) permit Parent or
Surviving Corporation to make such inspections thereof as Parent or Surviving
Corporation may reasonably require, and (iii) cause its employees, and its
advisors to furnish to Parent and its authorized representatives and advisors
such financial and operating data and other information with respect to the
Business prepared in the ordinary course of the Business as Parent or its agent
shall from time to time reasonably request.
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5.3 Closing Conditions. the Shareholders and the Company will, to
the extent within their control, use their best reasonable efforts to cause the
conditions set forth in Section 8.1 to be satisfied by the Closing Date.
5.4 Confidentiality. From and after the date hereof, the
Shareholders will, and will cause the Company and its officers, employees,
representatives, consultants and advisors to hold in confidence all
confidential information in the possession of the Company, its affiliates or
its advisors concerning Parent, Surviving Corporation or the Company. the
Shareholders and the Company will not release or disclose any such information
to any person other than Parent and its authorized representatives.
Notwithstanding the foregoing, the confidentiality obligations of this Section
shall not apply to information:
(a) which the Shareholders or the Company are compelled
to disclose by judicial or administrative process, or, in the
reasonable opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to the
Company or the Shareholders by a third party who obtained such
information other than as a result of a breach of a confidential
relationship, known to the Company or the Shareholders.
5.5 Public Announcement. The Company, the Shareholders, Surviving
Corporation and Parent will cooperate in the public announcement of the
transactions contemplated by this Agreement, and, other than as may be required
by applicable law, no such announcement will be made by either party without
the consent of the other party, which consent shall not be unreasonably
withheld.
5.6 No Shopping. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither the Company nor the Shareholders shall (and the Company and the
Shareholders shall cause their respective affiliates, officers, directors,
employees, representatives and agents not to) directly or indirectly, solicit,
initiate or participate in discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent or an affiliate or an associate of Parent) concerning, or
enter into any agreement providing for, any merger, sale of material assets,
sale of stock or similar transactions involving the Company or the Assets.
5.7 Further Assurances. The Shareholders and the Company will use
their best efforts to implement the provisions of this Agreement, and for such
purpose the Shareholders or the Company, at the request of Parent or Surviving
Corporation, at or after the Closing Date, will, without further consideration,
promptly execute and deliver, or cause to be executed and delivered, to Parent
and Surviving Corporation such deeds,
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assignments, bills of sale, consents, documents evidencing title and other
instruments in addition to those required by this Agreement, in form and
substance satisfactory to Parent and Surviving Corporation, as Parent and
Surviving Corporation may reasonably deem necessary or desirable to implement
any provision of this Agreement.
5.8 Insurance. the Shareholders shall cause the Company to
continue to maintain insurance through the Closing Date with financially sound
and reputable insurers unaffiliated with the Company or the Shareholders in
such amounts and against such risks as are adequate in the judgment of the
Shareholders to protect the Assets and the Business.
5.9 Investment Letter. At the Closing, the Shareholders shall
execute and deliver to Parent the investment letter in the form attached hereto
as Exhibit 5.9 (the "Investment Letter").
5.10 Escrow Agreement. At the Closing, the Shareholders shall
execute and deliver to Parent and Surviving Corporation the escrow agreement in
the form attached hereto as Exhibit 5.10 (the "Escrow Agreement").
5.11 Title Reports. Within ten (10) days after the date hereof,
the Shareholders, at the Shareholders' sole cost and expense, shall provide a
title report(s) for all real property owned by the Company ("Owned Real
Property") and current reports of searches made of the Uniform Commercial Code
Records of the County and State where each parcel of Owned Real Property is
located (the "Financing Statements") setting forth the state of liens affecting
the title to the personal property and real property to be conveyed hereunder.
The title report shall form the basis for a title insurance policy, issued by a
nationally known title policy issuer, to be delivered to Parent and Surviving
Corporation, at the Shareholders' sole expense, at the Closing in an amount
equal to $600,000. At the Closing, the Owned Real Property shall be subject to
no liens, charges, encumbrances, exceptions, or reservations of any kind or
character other than those specifically approved by Parent and Surviving
Corporation in writing (the "Permitted Exceptions").
5.12 Noncompetition Agreement. At the Closing, Arthur E. Biggs and
Denis Gagnon will enter into the Noncompetition Agreement attached hereto as
Exhibit 5.12.
5.13 Registration Rights Agreement. At the Closing, the
Shareholders shall enter into the Registration Rights Agreement attached hereto
as Exhibit 5.13.
5.14 Shareholder Documents. At the Closing, the Shareholders shall
enter into and deliver the Shareholder Documents attached hereto as Exhibit
5.14 to Parent.
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VI. COVENANTS OF PARENT AND SURVIVING CORPORATION
6.1 Closing Conditions. Parent and Surviving Corporation will, to
the extent within their control, use their best reasonable efforts to cause the
conditions set forth in Section 8.2 to be satisfied by the Closing Date.
6.2 Ancillary Agreements. At the Closing, Parent and Surviving
Corporation will enter into the Noncompetition Agreement, the Escrow Agreement,
and all other ancillary documents required hereunder.
6.3 Investigation by the Shareholders. Prior to the Closing Date,
Parent and Surviving Corporation shall (i) give the Shareholders and their
authorized representatives and advisors access, at reasonable times and on
reasonable notice, to all items of Real and Personal Property, books and
records, personnel, offices, and other facilities of Parent and the
Shareholders, (ii) permit the Shareholders to make such inspections thereof as
the Shareholders may reasonably require, and (iii) cause their respective
employees, and their respective advisors to furnish to the Shareholders and
their authorized representatives and advisors such financial and operating data
and other information with respect to Parent and Surviving Corporation prepared
in the ordinary course of business as the Shareholders or their agent shall
from time to time reasonably request.
6.4 Confidentiality. From and after the date hereof, Parent and
Surviving Corporation will, and will cause their respective officers,
employees, representatives, consultants and advisors to hold in confidence all
confidential information in the possession of either Parent or Surviving
Corporation, respectively, their affiliates or their advisors concerning the
Shareholders. Parent and Surviving Corporation will not release or disclose
any such information to any person other than the Shareholders or their
authorized representatives. Notwithstanding the foregoing, the confidentiality
obligations of this Section shall not apply to information:
(a) which the Parent or Surviving Corporation are
compelled to disclose by judicial or administrative process, or, in
the reasonable opinion of counsel, by other mandatory requirements of
law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to Parent or
Surviving Corporation by a third party who obtained such information
other than as a result of a breach of a confidential relationship,
known to the Parent or the Surviving Corporation.
6.5 Registration Rights Agreement. At the Closing, Parent and
Surviving Corporation shall enter into the Registration Rights Agreement
attached hereto as Exhibit 5.13.
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VII. THE CLOSING
7.1 The Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at a mutually
agreeable time and date. The date of the closing shall herein be referred to
as the "Closing Date." Subject to the provisions of Article X, failure to
consummate the transaction set forth in this Agreement on the date and time and
place determined by this Section 7.1 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this
Agreement.
7.2 Closing Obligations. At the Closing, subject to the terms,
covenants and conditions contained herein:
(a) the Shareholders will deliver to Parent and Surviving
Corporation:
(i) certificates representing the Shares, to be
surrendered to Surviving Corporation or Parent;
(ii) a certificate executed by the Shareholders
representing and warranting to Parent and Surviving
Corporation that the Shareholders' and the Company's
representations and warranties in this Agreement are accurate
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 Memorandum which was delivered by
the Shareholders to Parent and Surviving Corporation prior to
the Closing Date); and
(iii) investment letter executed by the
Shareholders in the form attached hereto as Exhibit 5.9, (the
"Investment Letter").
(iv) an escrow agreement (the "Escrow Agreement"
as set forth in Exhibit 5.10).
(v) an opinion of counsel as referred to in
Section 8.1(f);
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(vi) letters of resignation of the officers and
directors of the Company;
(vii) executed counterparts of all other documents,
including the Shareholder Documents, and certificates required
to be delivered to Parent and Surviving Corporation pursuant
to this Agreement including, but not limited to the
Undertaking Agreement, the Noncompetition Agreement,
satisfactory evidence that all third party creditors of the
Company have been satisfied and the title insurance policy as
set forth in Section 8.1(k) in the amount of $600,000 has been
delivered to Surviving Corporation.
(b) Parent and Surviving Corporation will deliver to the
Shareholders:
(i) the Stock Amount, issued to the Shareholders;
(ii) the Cash Amount (less the amounts due to
third party creditors and less the estimated adjustment
amount, and less the amount to be placed in escrow) by bank,
cashier's or certified check payable to the order of the
Shareholders or other holders of the Shares or wire transfer
in immediately available funds to an account designated by the
Shareholders or other holders of Shares, as may be selected by
them;
(iii) a certificate executed by Parent and
Surviving Corporation to the effect that, except as otherwise
stated in such certificate, each of Parent and Surviving
Corporation's representations and warranties in this Agreement
is accurate in all respect as of the Closing Date as if made
on the Closing Date ("Parent and Surviving Corporation's
Certificate"); and
(c) Surviving Corporation and the Company will execute
articles of merger and file the same with the Secretaries of State of
the State of Texas and the State of Florida.
(d) Parent will place 82,080 shares of Parent Stock and
$71,920 in cash of the Acquisition Price into escrow.
VIII. CONDITIONS TO CLOSING
8.1 Conditions to Obligations of Parent and Surviving Corporation.
The obligations of Parent and Surviving Corporation to complete the
transactions contemplated at the Closing shall be subject to the satisfaction
on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of the
Shareholders or the Company to be performed or complied with on or
before the Closing Date
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shall have been duly performed or complied with in all
material respects and the Shareholders shall deliver to Parent and
Surviving Corporation a certificate signed by the Shareholders and an
officer of the Company to such effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of the
Shareholders and the Company contained herein shall be true and
correct, in all material respects, on the Closing Date with the same
force and effect as though such representations and warranties had
been made on the Closing Date, and since the date hereof there shall
have occurred no material adverse change in the Business, and the
Shareholders shall deliver to Parent and Surviving Corporation a
certificate signed by the Shareholders and an officer of the Company
to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Parent and Surviving
Corporation from consummating the transactions contemplated hereby.
(d) Third Party Creditors. All third party creditors of
the Business will be paid in full, and all Encumbrances against the
Shares, Assets and the Business will be paid or discharged.
(e) Capital Leases. All Capital Leases shall be paid in
full and the personal property subject thereto shall be conveyed to
the Company free and clear of Encumbrances.
(f) Opinion of Counsel for the Shareholders and the
Company. Parent and Surviving Corporation shall have received the
opinion of Broad and Cassel dated as of the Closing Date, in form and
substance satisfactory to Surviving Corporation's and Parent's
counsel, subject to reasonable qualifications and exceptions, as set
forth on Exhibit 8.1(f). This Opinion of Counsel shall also set forth
that any shareholders who are not parties to this Agreement have given
all required consents and waived all dissenters rights required by or
provided by Florida law.
(g) Due Diligence Inspection Complete. Parent and
Surviving Corporation shall have completed and are satisfied with
their due diligence inspection of the Company.
(i) Ancillary Agreements. Arthur E. Biggs and Denis
Gagnon have executed the Noncompetition Agreement, the Escrow
Agreement and all other ancillary documents required hereunder.
(j) Mergers. The contemplated mergers agreements whereby
Artic Ice Corporation and Artic Crystal Corporation will merge into
Surviving Corporation
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and Surviving Corporation will remain as the surviving entity have
occurred contemporaneously with the execution of this Agreement.
(k) Conveyance of Real Property. At or prior to this
Closing, Arthur E. Biggs shall have conveyed by general warranty deed
the real property and improvements comprising the Artic Ice
Corporation ice manufacturing facilities located at 335 N. Congress,
Del Ray Beach, Florida to Surviving Corporation with a title insurance
policy issued by a nationally known title insurance issuer insuring
title to the real property in the amount of $600,000. The effect of
the conveyance of this real property by Arthur E. Biggs will be to
convey a fee simple interest in the aforementioned real property
comprising the Artic Ice Corporation ice manufacturing facility to
Surviving Corporation free and clear of any and all Encumbrances
unless excepted to in writing by Surviving Corporation.
(l) Registration Rights Agreement. the Shareholders
shall have entered into the Registration Rights Agreement attached
hereto as Exhibit 5.13.
(m) Shareholder Documents. the Shareholders shall have
entered into and delivered the Shareholder Documents to Parent.
(n) All shareholders who are not parties to this
Agreement have given all required consents and waived all dissenters
rights required by or provided by Florida law.
8.2 Conditions to Obligations of the Company and the Shareholders.
The obligation of the Company and the Shareholders to complete the transactions
contemplated at the Closing shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of Parent
and Surviving Corporation to be performed or complied with on or
before the Closing Date shall have been duly performed or complied
with in all material respects and Parent and Surviving Corporation
shall deliver to the Shareholders a certificate signed by an officer
of Parent and Surviving Corporation to such effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Parent and
Surviving Corporation contained herein shall be true and correct on
the Closing Date with the same force and effect as though such
representations and covenants had been made on the Closing Date, since
the date hereof there shall have occurred no material adverse change
in Parent's or Surviving Corporation's business operations and Parent
and Surviving Corporation shall deliver to the Shareholders a
certificate signed by an officer of Parent and Surviving Corporation
to such effect.
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(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining the Company from
consummating the transactions contemplated hereby.
(d) Due Diligence Inspection Complete. the Shareholders
have completed and are satisfied with their due diligence inspection
of Parent and Surviving Corporation.
(e) Registration Rights Agreement. Parent shall have
entered into the Registration Rights Agreement attached hereto as
Exhibit 5.13.
IX. INDEMNIFICATION
9.1 Indemnification of Parent and Surviving Corporation by the
Shareholders. the Shareholders agree to indemnify, defend and hold harmless
Parent and Surviving Corporation and Parent's and Surviving Corporation's
employees, agents, heirs, legal representatives, and assigns from and against
any and all claims, suits, losses, expenses (legal, accounting, investigation
and otherwise), damages and liabilities, including, without limitation, tax
liabilities (hereinafter, collectively "Damages"), arising out of or relating
to (i) any inaccuracy of any representation or warranty of the Company or the
Shareholders set forth in this Agreement or in any document or certificate
furnished or required to be furnished to Parent or the Surviving Corporation or
the breach of any covenant made by the Company in or pursuant to this
Agreement; or (ii) any claim or cause of action arising with respect to the
conduct or condition of the Business or Assets prior to the Closing, whether or
not disclosed to Parent or the Surviving Corporation on or before the Closing
Date.
Except for events requiring indemnification under Sections 3.3, 3.4,
3.6, 3.9, and Article XI of this Agreement and Sections 3.3, 3.4, 3.6, 3.9, and
any disclosures relating to Article XI in the Shareholders' Disclosure
Memorandum, if an event occurs that otherwise requires indemnification
hereunder and said event is disclosed in the Shareholders' Disclosure
Memorandum, the Shareholders shall not be required to indemnify Surviving
Corporation or Parent for any such event. In the event that the Shareholders
fail or neglect to disclose any such items requiring indemnification in the
Shareholders' Disclosure Memorandum, the Shareholders shall be required to
fully indemnify Surviving Corporation and Parent as required herein whether
Surviving Corporation or Parent had knowledge of such event or not.
9.2 Indemnification of the Company and the Shareholders by Parent
and Surviving Corporation. Parent and Surviving Corporation agree to
indemnify, defend and hold harmless the Company and the Shareholders from and
against any and all Damages arising out of or relating to any inaccuracy or any
representation or warranty set forth in this Agreement or the breach of any
covenant made by Parent or Surviving Corporation in or pursuant to this
Agreement.
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9.3 Claims for Indemnification. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party. In addition to all other
remedies provided hereunder or by law, Parent and Surviving Corporation shall
have the right to make a claim against the Escrow Amount for any of Parent's or
Surviving Corporation's Damages. Parent and Surviving Corporation agree that
any claims for indemnification by Parent and/or Surviving Corporation made
against the Shareholders shall first be satisfied with any amounts that have
been paid into escrow in accordance with the terms set forth in this Agreement.
9.4 Right to Defend. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within sixty (60) days after receipt of the Notice of Claim
that the Indemnifying Party intends to assume the defense of such claim and
acknowledges its liability to indemnify the Indemnified Party for any losses
resulting from such claim; provided, however, that if the Indemnifying Party
does not elect to assume the defense of any claim, then (a) the Indemnifying
Party shall have the right to participate in the defense of such claim or
demand at its expense through counsel of its own choosing, provided the
Indemnified Party shall control the defense of such claim, (b) the Indemnified
Party may settle any such claim without the consent of the Indemnifying Party,
however, the Indemnifying Party may not settle any such claim without the prior
written consent of the Indemnified Party; and (c) Section 9.5 hereof shall be
inapplicable. Whether or not the Indemnifying Party does choose to so defend
such claim, the parties hereto shall cooperate in the defense thereof and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be requested in
connection therewith. To the extent Parent or Surviving Corporation is the
Indemnified Party for any actual or threatened claim or demand by any third
party, Parent and Surviving Corporation shall have the right to control the
prosecution of any counterclaim or right related to such a claim or demand,
provided that Parent and Surviving Corporation agree to reasonably cooperate
with the Company or the Shareholders with respect to the prosecution of such
counterclaim or right.
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9.5 Settlement. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld and (ii) the Indemnifying
Party can settle without the consent of the Indemnified Party only if the
settlement involves only the payment of money for which the Indemnifying Party
will be fully liable. No other settlement of any claim may be made without the
prior written consent of both the Indemnified Party and the Indemnifying Party,
which consent shall not be unreasonably withheld.
9.6 Effect of Termination. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
9.7 Limitations on Amount. Neither party hereto will have any
liability (for indemnification or otherwise) with respect to the matters
described in Section 9.1 (as to the Shareholders) or 9.2 (as to Parent and
Surviving Corporation) until the total of all Damages of the Indemnified Party
with respect to such matters exceeds $75,000 in the aggregate (the "Basket"),
and then the Indemnifying Party shall be responsible to the Indemnified Party
for all Damages based thereon from the first dollar of Damages without regard
to the Basket; provided, however, the Basket (as it applies to the Shareholders
as the Indemnifying Party) shall not apply to any claim for indemnification
arising out of a breach of any representations, warranties or covenants
contained in Sections 3.3, 3.4, 3.6, 3.9, 3.12(b-d) or 3.19, and the
Shareholders' obligation to discharge all liabilities not assumed by Parent or
Surviving Corporation. The maximum liability, that will payable by either
party hereto to the other party, respectively, with respect to the matters
described in Section 9.1 or 9.2, respectively, will be limited to Two Million
Dollars ($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 or the Shareholders representations, warranties or covenants
contained in Sections 3.4, 3.6, 3.7, 3.9, 3.10, 3.11, 3.12(b-d) or 3.19,
Damages resulting from willful or intentional misrepresentations and the
Shareholders' obligation to discharge all liabilities not assumed by Parent or
Surviving Corporation.
9.8 Applicability of Insurance. 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.
9.9 Payment of Indemnification. Any payment made by the
Indemnifying Party to the Indemnified Party as set forth in this Article IX may
be paid, in the sole discretion of the Indemnifying Party, in either cash or
common stock of Parent so long as any such payments do not threaten to defeat
the tax-free treatment of this transaction. If such a case arises whereby the
payment of any amounts to an Indemnified Party threatens
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to defeat the tax-free treatment of this Agreement, then said amounts shall be
made in such a ratio Parent common stock to cash as the payment of the Purchase
Price hereunder. The shares of the common stock of Parent used for the
payment of any amounts under this Article IX shall be valued at $10.00 per
share. In the event that the Parent and Surviving Corporation are the
Indemnifying Party, any payments made pursuant to this Article IX shall be made
in cash. In the event that the Shareholders are the Indemnifying Party, the
Shareholders shall have the right to pay all claims in cash. In the event that
there is an insufficient amount of cash in the Escrow Amount, the Shareholders
shall have the right to pay any such claims for indemnification to Parent and
Surviving Corporation and preserve the Shareholders ownership of the Parent
Stock comprising the Escrow Amount. The shares of Parent Stock shall be valued
at $10 per share for purposes of the payment of any claims pursuant to this
Article IX.
X. TERMINATION
10.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of the
Shareholders, Company, Parent and Surviving Corporation;
(b) Misrepresentation or Breach. By the Company, the
Shareholders, or Parent and Surviving Corporation, if there has been a
material misrepresentation or a material breach of a warranty or
covenant herein or in any agreement required to be delivered pursuant
hereto on the part of the other party hereto;
(c) Failure of Condition to Parent's and Surviving
Corporation's Obligations. By Parent and Surviving Corporation, if
all of the conditions set forth in Section 8.1 have not been
satisfied;
(d) Failure of Condition to the Company's and the
Shareholders' Obligations. By the Company or the Shareholders, if all
of the conditions set forth in Section 8.2 have not been satisfied;
(e) Court Order. By the Company and the Shareholders or
Parent and Surviving Corporation, if consummation of the transactions
contemplated hereby shall violate any non-appealable final order,
decree or judgment of any court or governmental body having competent
jurisdiction;
(f) Material Adverse Change. By Parent and Surviving
Corporation, in the reasonable judgment of their respective board of
directors, or by the Shareholders if any event has occurred after the
date hereof which is, or will result in a material adverse change in
the Business or condition of the Assets of the Company or Parent
and/or Surviving Corporation, respectively;
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(g) Drop Dead Date. This Agreement shall terminate if it
has not been consummated by March 12, 1998.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of the Company, the
Shareholders and Parent and Surviving Corporation under this Agreement shall
terminate without further liability of the Company, the Shareholders, Parent or
Surviving Corporation, except that the mutual provisions contained herein
relating to confidentiality shall survive any such termination.
10.3 Right to Proceed. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or Section 8.2 has
not been satisfied, the Company, the Shareholders or Parent and Surviving
Corporation, in addition to any other rights which may be available to it,
shall have the right to waive any such condition that is for its benefit and to
require the other party hereto to proceed with the Closing.
XI. TAX MATTERS.
11.1 Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the
Code.
"Final Determination" shall mean (i) with respect to Federal
Taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by the
Company or the Shareholders, whichever are responsible for payment of such Tax
under applicable law, with respect to any item disallowed or adjusted by a
Taxing Authority, provided that such responsible party determines that no
action should be taken to recoup such payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion
thereof) beginning after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax,
gross income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license,
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withholding on amounts paid to or by the Company, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom duty or other governmental fee, assessment or charge of any
kind whatsoever, together with any interest, penalty, addition to tax or
additional amount imposed by any governmental authority (a "Taxing Authority")
responsible for the imposition of any such tax (domestic or foreign).
"Tax Indemnification Period", means with respect to any Tax,
any Pre-Closing Tax Period of the Company.
11.2 Filing of Short Period Returns. Parent and Surviving
Corporation and the Shareholders shall treat and cause the Company to treat the
day of the Closing as the last day of the taxable period in which the Company
is an S corporation, as defined under the Code. All Tax returns 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 Code, the books of the Company shall be closed
effective the day of the Closing. The Shareholders will cause its accounting
firm to prepare, at the Shareholders' sole expense, the S Short Year Returns.
11.3 Covenants.
(a) Without the prior written consent of Parent and
Surviving Corporation, and as it relates to the Pre-Closing Tax
Period, the Shareholders shall not cause the Company to make or change
any tax election, change any annual tax accounting period, adopt or
change any method of tax accounting, file any amended 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 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 Parent or Surviving Corporation.
Without the prior written consent of the
Shareholders, and as it relates to the Pre-Closing Tax Period, Parent
and Surviving Corporation shall not cause the Company to make or
change any tax election, change any annual tax accounting period,
adopt or change any method of tax accounting, file any amended 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 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 Shareholders.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) will be filed when
due in accordance with all applicable laws. The parties agree that
any final Return relating to the Pre-Closing
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Tax Period shall be timely filed by the Shareholders on behalf of the
Company and with Parent's and Surviving Corporation's prior written
consent, not to be unreasonably withheld or delayed.
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees incurred in
connection with this Agreement (including any real property transfer
Tax and any similar Tax) shall be accrued by the Shareholders and be
paid by the Shareholders when due (including any applicable
extensions), and the Shareholders will, at the Shareholders' sole
expense, file all necessary Tax returns and other documentation with
respect to all such Taxes and fees.
11.4 Cooperation on Tax Matters.
(a) Parent, Surviving Corporation and the Shareholders
shall cooperate fully, 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 6043 of the Code and all Treasury Regulations
promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention
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. Parent and Surviving Corporation and
the Shareholders shall cause the Company to: (i) to retain 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 requirements of any Taxing Authority or any record retention
agreements entered into with any Taxing Authority, and (ii) to give
the Shareholders reasonable written notice prior to destroying or
discarding any such books and records and, if the Shareholders so
requests, Parent and Surviving Corporation shall allow the
Shareholders to take possession of such books and records.
(b) Parent and Surviving Corporation and the Shareholders
further 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 (including, but not limited to, with
respect to the transactions contemplated hereby).
11.5 Tax Indemnification.
(a) The Company and the Shareholders hereby jointly and
severally indemnify Parent and Surviving Corporation against, and
agree to hold Parent and Surviving Corporation harmless from, any
loss, liability or expense attributable to (i) any Tax with respect to
income (including, to the extent based on income, state franchise
Taxes), transfer Tax, employment or withholding Tax related to
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employee tips income (actual and allocated) and related reporting
requirements, and gross receipts or royalty Tax in respect of any
franchise operation and any other Tax of the Company related to the
Tax Indemnification Period, (ii) any Tax resulting from a breach of
the provisions of Sections 3.9, 11.2, 11.3, and 11.4, and (iii) any
liabilities, costs, expenses (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees
and expenses), losses, damages, assessments, settlements or judgments
arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the
contest in good faith in appropriate proceedings relating to the
imposition, assessment or assertion of any such Tax, and any liability
as transferee or successor (the sum of (i), (ii), and (iii) being
referred to herein as a "Loss"). Parent and Surviving Corporation
shall give the Shareholders ten days notice of any claim of Loss, and
the Shareholders shall have the opportunity to defend Parent and
Surviving Corporation in accordance with Section 9.4 hereof.
(b) If a claim is made against Parent and/or Surviving
Corporation for any Loss as defined in Section 11.5(a) hereof, Parent
or the Surviving Corporation shall notify the Shareholders as provided
in Section 11.4(a). Parent and/or Surviving Corporation shall, at the
Shareholders' expense, take such action as the Shareholders may
reasonably request in writing with respect to such Loss, and if
reasonably requested by the Shareholders and upon the prior payment to
the Parent or Surviving Corporation of an amount equal to such Loss,
any payment by Parent or Surviving Corporation shall be made under
protest. If protest is made, Parent and/or Surviving Corporation
shall, the Shareholders' expense, take such action as the Shareholders
may reasonably request to recover such payment and shall, if
requested, permit the Shareholders in Parent's and/or Surviving
Corporation's name to file a claim or prosecute an action to recover
such payment.
(c) For the purposes of this Section 11.4, the parties
hereby agree that all notices to the Shareholders shall be delivered
to Arthur E. Biggs.
(d) The indemnity set forth in this Section 11.4 shall
terminate upon the expiration of the applicable statutory period of
limitations.
11.6 Acquisition Price Adjustment. Any amount paid by the Company,
Parent, Surviving Corporation or the Shareholders under Section 11.5 will be
treated as an adjustment to the relevant purchase price for all Tax purposes
unless a Final Determination causes any such amount not to constitute an
adjustment to the relevant purchase price. In the event of such a Final
Determination, Parent and Surviving Corporation or the Shareholders, as the
case may be, shall pay an amount that reflects the hypothetical Tax
consequences of the receipt or accrual of such payment, using the maximum
statutory rate (or rates, in the case of an item that affects more than one
Tax) applicable to the recipient of such payment for the relevant year,
reflecting for example, the effect of deductions available for interest paid or
accrued and for Taxes such as state and local income Taxes. Any payment
required to be made by Parent and Surviving
35
<PAGE> 36
Corporation or the Shareholders under Section 11.5 that is not made when due
shall bear interest at the rate per annum determined, from time to time, under
the provision of Section 6621(a)(2) of the Code for each day until paid.
11.7 Survival. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
XII. MISCELLANEOUS
12.1 Expenses. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 Survival of Representations and Warranties. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing for the applicable statute of limitations
period.
12.3 Inurement; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the prior written consent of
the other parties hereto.
12.4 Entire Agreement; Amendment. This Agreement, the Schedules
and Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof. This Agreement may
not be amended except by a written agreement executed by all of the parties
hereto.
12.5 Severability. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the remaining provisions
hereof and without affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
12.6 Incorporation of Exhibits and Schedules. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 Captions and Headings; Use of term "Person". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, Section or subsection
cross-references are to articles, Sections and subsections
36
<PAGE> 37
within this Agreement. As used herein, the term "person" shall mean any
corporation, limited liability company, partnership, venture, proprietorship,
trust, benefit plan or other entity or enterprise.
12.8 Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
12.9 Notices. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to the Company: 3210 St. Charles Place
Boca Raton, Florida 33434
to the Shareholders: Arthur Biggs
3210 St. Charles Place
Boca Raton, Florida 33434
Denis Gagnon
c/o Arthur E. Biggs
3210 St. Charles Place
Boca Raton, Florida 33434
with a copy to: Nina S. Gordon, P.A.
Broad & Cassel
201 S. Biscayne Blvd., Suite 3000
Miami, Florida 33131
to Parent and
Surviving Corporation: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis, III, President
with a copy to: Alan Schoenbaum
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St., Suite 1500
San Antonio, Texas 78205
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
37
<PAGE> 38
12.10 Agents or Brokers. The Company and the Shareholders and
Parent and Surviving Corporation mutually represent and agree with each other
that no agents or brokers have been utilized in the solicitation or negotiation
of the sale of the Business and no fees, commissions or expenses of any type
shall be due or payable out of the proceeds of the Acquisition Price by any
party to this Agreement.
12.11 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities laws, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in San Antonio, Texas and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof, and shall not be appealable. The prevailing party in any such
arbitration shall be entitled to recover its reasonable attorneys' fees and
expenses in connection with any such arbitration. Judicial proceedings may be
commenced only to enforce this arbitration agreement or to enforce the results
of arbitration; provided that such prohibition shall not apply in the event
that a court ordered injunction is an appropriate remedy for a breach of this
Agreement.
12.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
[DOLPHIN ICE COMPANY AGREEMENT AND PLAN OF MERGER
SIGNATURE PAGE FOLLOWS]
38
<PAGE> 39
[DOLPHIN ICE COMPANY AGREEMENT
AND PLAN OF MERGER SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE, INC.
By:
---------------------------------------------
Print Name:
----------------------------
Print Title:
---------------------------
PACKAGED ICE SOUTHEAST, INC.
By:
---------------------------------------------
Print Name:
----------------------------
Print Title:
---------------------------
DOLPHIN ICE CO., INC.
By:
---------------------------------------------
Print Name:
----------------------------
Print Title:
---------------------------
SHAREHOLDERS
- ------------------------------------------------
ARTHUR BIGGS
- ------------------------------------------------
DENIS GAGON
39
<PAGE> 40
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets of the Company
Exhibit B Assets subject to Capital Leases
Exhibit 5.9 Investment Letter
Exhibit 5.10 Escrow Agreement
Exhibit 5.12 Noncompetition Agreement
Exhibit 5.13 Registration Rights Agreements
Exhibit 5.14 Shareholder Documents
Exhibit 8.1(f) Opinion of Counsel
the Shareholders' Disclosure Memorandum
40
<PAGE> 1
EXHIBIT 10.10
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as
of the 2th day of March, 1998, by and among Packaged Ice, Inc., a Texas
corporation ("Parent"), Packaged Ice Southeast, Inc., a Texas corporation
wholly owned by Parent (the "Surviving Corporation"), Anniston Ice & Coal
Company, Inc., an Alabama corporation (the "Company") and Juliet M.
Scarbrough, Elaine Scarbrough, and Wilkes L. Scarbrough (individually a
"Shareholder" and collectively the "Shareholders").
PRELIMINARY STATEMENTS
The respective Boards of Directors of Parent, the Surviving
Corporation and the Company have each approved the merger of the Company with
and into the Surviving Corporation, 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:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Article I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and the plural forms of any of the
terms herein defined.
"Acquisition Price" shall have the meaning set forth in Section 2.7(d)
of this Agreement.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible (including the good will of the Company)
which shall include, but not be limited to, those items described more fully in
Exhibit A attached hereto.
"Business" shall mean all of the operations of Company including the
production, storage, distribution and sale of packaged ice products and other
items.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business which are used in the direct manufacturing,
distribution and sale of packaged ice products which shall include, but not be
limited to, those items more fully described in Exhibit B, attached hereto.
"Closing" shall mean the consummation of this Agreement.
"Closing Date" shall mean the date on which this Agreement is
consummated. The Closing Date shall not occur before the Effective Date.
<PAGE> 2
"Company Plans" shall have the meaning set forth in Section 3.17 of
this Agreement.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage, lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, or adverse claim or
restriction on transfer of any nature whatsoever other than those held by
Parent or the Surviving Corporation or granted by the Company at Parent's or
the Surviving Corporation's request.
"Environmental Action" shall have the meaning set forth in Section
3.10 of this Agreement.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"Escrow Agreement" shall have the meaning set forth in Section 5.10 of
this Agreement.
"Escrow Agent" shall mean Regions Bank, Anniston, Alabama.
"Financial Statements" shall have the meaning set forth in Section 3.3
of this Agreement.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Hazardous Materials" shall have the meaning set forth in Section 3.10
of this Agreement.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
of this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
<PAGE> 3
"Investment Letter" shall have the meaning set forth in Section 5.9 of
this Agreement.
"Leases" shall have the meaning set forth in Section 3.12 of this
Agreement.
"Liabilities" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"Noncompetition Agreement" shall have the meaning set forth in Section
5.9 of this Agreement
"Merger" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Note Receivable--SBW" shall mean the approximately $1,380,385 note
receivable that is owned by the Company and represents funds that were borrowed
by the Company on behalf of Southern Bottled Water Company, Inc. The Note
Receivable--SBW will be discharged in connection with the purchase by Surviving
Corporation of all of the outstanding stock of Southern Bottled Water Company,
Inc. which will occur contemporaneously with the closing of this Agreement.
"Note Receivable--Stockholder" shall mean the approximately $502,867
note receivable that is owned by the Company and represents funds that were
lent by the Company to the stockholders of the Company. Approximately $150,000
of this note receivable was used to facilitate the borrowing of funds on behalf
of Southern Bottled Water Company, Inc. The remaining $352,867 was used to
purchase stock in the company that was held by the estate of a deceased
stockholder, which stock is now held by the Company as treasury stock, and will
be forgiven by the Company as of the Closing Date. The $150,000 that was used
to facilitate the borrowing of funds on behalf of Southern Bottled Water
Company, Inc. will be discharged in connection with the purchase by Surviving
Corporation of all of the outstanding stock of Southern Bottled Water Company,
Inc. which will occur contemporaneously with the closing of this Agreement.
"Personal Property" shall have the meaning set forth in Section 3.13
of this Agreement.
"Real Property" shall have the meaning set forth in Section 3.12 of
this Agreement.
"Shareholders' Disclosure Memorandum" shall mean that schedule
attached hereto and incorporated herein by reference that lists and describes
all disclosures by Shareholders and Company concerning the Assets and the
Business which are the subject of this Agreement. The Shareholders' Disclosure
Memorandum shall be delivered to Parent and Surviving Corporation no later than
two business days prior to the Closing.
"Shareholder Documents" shall mean the Amended and Restated
Shareholders Agreement (September 20, 1995); the Amendment No. 1 to Amended and
Restated Shareholders Agreement (dated as of January 17, 1997); Amendment No. 2
to Amended
<PAGE> 4
and Restated Shareholders Agreement (dated as of March 14, 1997); Amended and
Restated Voting Agreement (dated September 20, 1995); Amendment No. 1 to
Amended and Restated Voting Agreement (dated as of January 17, 1997); Amendment
No. 2 to Amended and Restated Voting Agreement (dated as of March 14, 1997);
Amendment No. 3 to Amended and Restated Voting Agreement (dated as of November
4, 1997); and Culligan Voting Agreement (dated December 2, 1997).
"Shares" shall mean all of the capital stock of Company outstanding on
the Closing Date.
"Tax or Taxes" shall have the meaning set forth in Section 11.1
hereof.
"Trade Accounts Payable" shall mean those accounts payable accrued by
the Company which relate directly to the manufacture, storage, distribution and
sale of ice.
"UCC Reports" shall have the meaning as set forth in Section 5.10 of
this Agreement.
"Undertaking Agreement" shall have the meaning set forth in Section
2.11.
II. THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the corporation laws of Texas and Alabama, the
Company shall be merged (the "Merger") with and into the Surviving Corporation
and the Surviving Corporation shall be 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 Section 368(a)(1)(A) and Section (a)(2)(D) of the
Internal Revenue Code (the "Code").
2.2 CONTINUING CORPORATE EXISTENCE. Except as may otherwise be
set forth herein, the corporate existence and identity of the Surviving
Corporation, with all its purposes, powers, franchises, privileges, rights and
immunities, shall continue unaffected and unimpaired by the Merger. 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 the Surviving Corporation, and the Surviving
Corporation shall be vested fully therewith and the separate corporate
existence and identity of the Company shall cease except to the extent
continued by statute.
2.3 EFFECTIVE DATE. The Merger shall become effective upon the
occurrence of the issuance of certificates of merger (the "Effective Date") by
the Secretary of State of the State of Texas and the Secretary of State of
Alabama upon filing on the Closing Date of articles of merger with the
Secretary of the State of Texas pursuant to Article 5.04 of the
<PAGE> 5
Texas Business Corporation Act ("TBCA") and the Secretary of State of Alabama
pursuant to applicable Alabama law.
2.4 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of the Surviving Corporation as in effect on the
Effective Date shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation following the Merger.
2.5 DIRECTORS. The members of the Board of Directors of the
Surviving Corporation at the Effective Date shall be the directors of the
Surviving Corporation immediately following the Merger.
2.6 OFFICERS. The officers of the Surviving Corporation at the
Effective Date shall be the officers of the Surviving Corporation immediately
following the Merger.
2.7 CONVERSION OF SHARES.
(a) Each share of the Company's $100 par value common
stock 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 automatically into the right to receive the Share Price
(as hereinafter defined) which shall be payable, without interest thereon, upon
the surrender of the certificates formerly representing such Share, in
accordance with Section 2.7(g).
(b) Each Share shall, by virtue of the Merger and without
any action on the part of the holder, be canceled and retired and cease to
exist.
(c) The "Share Price" for each Share will be (x)/(y)
where (x) is the Acquisition Price (as defined in Section 2.7(d)) and (y) is
the total number of outstanding Shares.
(d) The acquisition price ("Acquisition Price") shall be
$4,000,000, which shall consist of $1,499,996 in cash, less adjustments as set
forth in Section 2.11 of this Agreement (the "Cash Amount"), and 192,308 shares
of Parent's common stock, par value $0.01 per share ("Parent's Stock") valued
at $13 per share (rounded up to the nearest $13) and issued directly to the
Shareholders (the 192,308 shares of Parent Stock being the "Stock Amount").
(e) Each share of the Company's common stock held in the
treasury of the Company immediately prior to the Effective Date 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.
(f) All of the Parent's Stock, when delivered pursuant to
the provisions of this Agreement, shall be validly issued, fully paid and
nonassessable.
<PAGE> 6
(g) At Closing, Parent will pay to Shareholders, the
total sum of the Acquisition Price, less $162,200 of the Cash Amount which will
be placed in escrow with the Escrow Agent for a period of twelve (12) months in
accordance with the Escrow Agreement (the "Escrow Amount"). At 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 the
Share Price for each Share surrendered.
(h) 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.
(i) No fractional shares of Parent Stock and no
certificates or scrip therefor shall be issued.
2.8 FILING OF ARTICLES OF MERGER. Upon the terms and subject to
the conditions hereof, as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII hereof, the Company and the
Surviving Corporation shall execute and file a certificate of merger in the
manner required by the TBCA and the parties hereto shall take all such other
and further actions as may be required by law to make the Merger effective.
Prior to the filings referred to in this Section, the foregoing will be
confirmed at the Closing.
2.9 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 the Surviving Corporation 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
the Surviving Corporation 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.
<PAGE> 7
2.10 PRORATION. To the extent not reflected on the Company's
balance sheet, the parties shall prorate at the Closing the current year's ad
valorem taxes and prepaid expenses, based on the latest available statements
from taxing authorities, whether for the current tax year or the preceding tax
year. The Shareholders' pro rata share of such taxes shall be the portion
attributable to the period through the day of Closing Date, prorated by days.
Any adjustments to the Acquisition Price shall be payable in the same ratio of
Parent Stock to Cash as the Acquisition Price. The prorated amounts shall be
adjustments to the cash portion of the Acquisition Price and shall be payable
in the manner set forth below:
(a) If a prorated amount is payable by Parent or the
Surviving Corporation and determinable at the Closing, it shall be added to
the amount payable by Parent or the Surviving Corporation at the Closing.
(b) If a prorated amount is payable by Parent or the
Surviving Corporation and not determinable at the Closing, it shall be billed
by Shareholders when determinable and promptly paid by Parent or the Surviving
Corporation to Shareholders.
(c) If a prorated amount is payable by Shareholders and
determinable at the Closing, it shall be deducted from the amount otherwise
payable by Parent or the Surviving Corporation at the Closing.
(d) If a prorated amount is payable by Shareholders and
not determinable at the Closing, it shall be billed by Parent or the Surviving
Corporation when determinable and promptly paid by Shareholders to Parent.
2.11 ADJUSTMENT TO ACQUISITION PRICE. The Cash Amount of the
Acquisition Price shall be adjusted as follows:
(a) The Cash Amount of the Acquisition Price shall be
reduced by all of the Company's debts, obligations and other liabilities
including, without limitation, all current liabilities (save and except the
Trade Accounts Payable and accrued expenses), and accrued expenses, all long
term liabilities, all interest bearing debt, Encumbrances, and Capital Leases
(collectively, the "Liabilities") as of the Closing Date. Prior to the Closing
the parties will estimate the amount of Liabilities and the cash payable to the
Shareholders at the Closing will be reduced by the amount of estimated
Liabilities as of the Closing Date, and such amount will be paid directly to
the Company's creditors to discharge Encumbrances.
(b) The Cash Amount remaining after the estimated
Liabilities have been paid and discharged shall be paid directly to the
Shareholders . The intent and effect of this Section 2.11 is that the Merger
shall be consummated with there being no Liabilities (except Trade Accounts
Payables and accrued expenses) or other Encumbrances immediately after Closing.
Shareholders hereby agree all Liabilities (except Trade Accounts Payable and
accrued expenses) which are not discharged at Closing shall be
<PAGE> 8
assumed by the Shareholders through an Undertaking Agreement in the form
attached hereto as Exhibit 2.11.
(c) Moreover, if as of the Closing Date the Company's
current assets, including cash, accounts receivable and inventory, are less
than the sum of its Trade Accounts Payable and accrued expenses, the Purchase
Price shall be reduced by an amount equal to the sum of its Trade Accounts
Payable and accrued expense minus current assets; if the Company's current
assets exceed the sum of its Trade Accounts Payable and accrued expenses, the
Purchase Price shall be increased by the amount equal to the current assets
minus Trade Accounts Payable and accrued expenses.
(d) On or before 30 days after the Closing Date,
Shareholders shall deliver to Surviving Corporation the balance sheet of the
Company as of the Closing Date compiled by a certified public accountant (the
"Closing Date Balance Sheet) certified by Shareholders to be true and correct.
The Closing Date Balance Sheet shall (i) fairly present the financial position
of the Company as of the close of business on the Closing Date compiled in a
consistently applied manner, and (ii) include a detailed schedule of
Liabilities. The Closing Date Balance Sheet shall be used to calculate any
post closing adjustments to the Purchase Price as of the Closing Date and the
amount of any Liabilities to be paid by Shareholders, all in accordance with
the terms and conditions set forth in this Agreement.
(e) To the extent the Shareholders received at Closing an
amount of cash in excess of what they are entitled to hereunder, Shareholders
shall pay to Surviving Corporation such amount within five (5) days after such
determination. To the extent Shareholders are entitled to a greater amount of
cash than they received at Closing, then Surviving Corporation shall pay such
amount within five (5) days after such determination.
III. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent and
warrant to Parent and the Surviving Corporation as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Alabama
and is in good standing and is duly qualified to do business in any foreign
jurisdiction in which it is currently conducting business operations. The
Company has full corporate power and authority to own or use the properties and
assets that it purports to own or use, and to perform all of its obligations
hereunder. All necessary corporate action that needs to be taken pursuant to
applicable state law to enable the Company to operate as an ice manufacturing,
sale and distribution operation has been taken and is in full force and effect.
All outstanding shares of stock of the Company are validly issued, fully paid,
nonassessable and owned, both beneficially and of record, by Shareholders.
Other than this Agreement, there is no subscription, option, warrant, call,
right, agreement or commitment relating to
<PAGE> 9
the issuance, sale, delivery, repurchase or transfer by Shareholders or the
Company (including any right of conversion or exchange under any outstanding
security or other instrument) of any of its capital stock or other securities.
There are no voting trusts, proxies or any other agreements or understandings
with respect to the voting of the Shares.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. This
Agreement has been duly executed and delivered by the Company and Shareholders
and constitutes the legal, valid and binding obligation of the Company and
Shareholders, enforceable against them in accordance with its terms. Upon the
execution and delivery by Shareholders of the Escrow Agreement, Noncompetition
Agreement, the Investment Letter and any other ancillary document required
hereunder (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 perform
their respective obligations under this Agreement and the Shareholders' Closing
Documents. The Shareholders and the Company have held a Shareholders meeting
(or have executed a consent) and all resolutions required by law to approve the
Merger have been duly adopted by a unanimous vote in accordance with Alabama
law. Except as set forth on Section 3.2 of Shareholders' Disclosure
Memorandum, the execution, delivery and performance of this Agreement by the
Company and Shareholders and the consummation of the transactions contemplated
hereby will not require the consent, approval or authorization of any person or
governmental authority, and will not, with or without the giving of notice, the
passage of time, or both, violate, conflict with, result in a default, breach
or loss of rights under, or result in the creation of any lien, claim or
encumbrance pursuant to, any lien, encumbrance, instrument, agreement, or
understanding, or any law, regulation, rule, order, judgment or decree, to
which Shareholders or the Company are a party or by which they are bound or
affected.
3.3 FINANCIAL STATEMENTS. The Company and the Shareholders have
previously caused to be furnished to Parent the Company's unaudited, compiled
balance sheet as of December 31, 1997, and the related statements of income and
statements of cash flow for the fiscal year then ended, and the unaudited
balance sheet of the Company as of February 28, 1998 and the related unaudited
statement of income and statement of cash flow for the 2-month period ending
February 28, 1998 (such balance sheets and related statements are collectively
referred to herein as the "Financial Statements"). The Financial Statements
taken as a whole present fairly the financial position of the Company and the
Business as of December 31, 1997 and February 28, 1998, respectively, and the
results of operations for such periods, compiled in a consistently applied
manner.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by Shareholders in Shareholders'
Disclosure Memorandum and except for trade accounts payable arising in the
ordinary course of business and consistent with past practice since the date of
the Company's February 28, 1998 Balance Sheet, Shareholders have operated the
Company in the ordinary course and the Company has incurred no
<PAGE> 10
liabilities which would be required to be reflected on a balance sheet of the
Company as of the date hereof or disclosed in the notes thereto. Since December
31, 1997 there has not been any adverse change in the Business, operations,
properties, prospects, Assets or condition of the Company, and no event has
occurred or circumstance exists that may result in such an adverse change.
3.4 SHAREHOLDERS' DEBT. There are no Encumbrances or other debts
whatsoever of Shareholders against the Company or the Assets.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. All items
comprising the Assets have been continuously used by the Company in connection
with the Business and are now in serviceable condition and 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, unless
expressly disclosed to the contrary by the Company and Shareholders in Section
3.5 of Shareholders' Disclosure Memorandum.
3.6 GOOD TITLE. Except as set forth in Section 3.6 of
Shareholders' Disclosure Memorandum, the Company has good, legal and marketable
title to all of the Assets, free and clear of Encumbrances. Except as set
forth in Section 3.6 of Shareholders Disclosure Memorandum, all items of
Personal Property or Real Property used in the Business are owned by the
Company.
3.7 LITIGATION. Except as set forth on Section 3.7 of
Shareholders' Disclosure Memorandum, there is no claim, action, suit,
proceeding or investigation (judicial, governmental or otherwise), nor any
order, decree or judgment in effect, and, to Shareholders' knowledge, none is
threatened, against or relating to Shareholders, the Company or the Assets, or
the transactions contemplated by this Agreement. Neither the Company nor any
of the Shareholders is aware of any event or circumstance that will, or is
reasonably likely to, give rise to or serve as a basis for the commencement of
any claim, action, suit or proceeding against the Company or the Assets.
3.8 COMPLIANCE WITH LAWS. Except as set forth in Section 3.8 of
Shareholders' Disclosure Memorandum, and to Shareholders' knowledge,
Shareholders and the Company have complied with all laws, rules, regulations,
ordinances, orders, judgments and decrees relating to the Company and the
Assets. To the Shareholders' knowledge, the ownership and use of the Assets
and the conduct of the Business as it specifically relates to the Assets does
not conflict with the rights of any other person.
3.9 TAXES.
(a) Except as set forth in Section 3.9 of Shareholders'
Disclosure Memorandum, the Company has, within the time and manner
prescribed by law, filed all returns, declarations, reports and
statements required to be filed by it (collectively, "Returns") in
respect of any Taxes and each such Return has been prepared in
compliance in all respects with all applicable laws and regulations
and is
<PAGE> 11
true and correct in all respects, and the Company has, within the time
and in the manner prescribed by applicable law, paid all Taxes that
are shown to be due and payable with respect to the periods covered
thereby.
(b) Except as set forth in Section 3.9 of Shareholders'
Disclosure Memorandum (i) the Company has not requested or been
granted an extension of the time for filing any Return which has not
yet been filed; (ii) the Company has not consented to extend to a date
later than the date hereof the time in which any Tax may be assessed
or collected by any taxing authority; (iii) no deficiency or proposed
adjustment which has not been settled or otherwise resolved for any
amount of Tax has been proposed, asserted or assessed by any taxing
authority against the Company; (iv) there is no action, suit, taxing
authority proceeding, or audit now in progress, pending or, to
Shareholders' knowledge, threatened against or with respect to the
Company; (v) no claim has been made by a taxing authority in a
jurisdiction where the Company does not file Tax Returns that the
Company is subject to Taxes assessed by such jurisdiction; (vi) there
are no liens for Taxes (other than for current Taxes not yet due and
payable) upon the Assets; (vii) the Company will not be required to
include any amount in taxable income or exclude any item of deduction
or loss from taxable income for any taxable period (or a portion
thereof) ending after the Closing Date as a result of any of the
following: (A) a change in method of accounting for a taxable period
ending on or prior to the Closing Date, (B) any "closing agreement,"
as described in Code Section 7121 (or any corresponding provision of
state, local or foreign income Tax law) entered into on or prior to
the Closing Date, (C) any sale reported on the installment method
where such sale occurred on or prior to the Closing Date, and (D) any
prepaid amount received on or prior to the Closing Date; and (viii)
the Company does not have any obligation or liability for the payment
of Taxes of any other person as a result from any expressed obligation
to indemnify another person, or as a result of such Company assuming
or succeeding to the Tax liability of any other person as successor,
transferee or otherwise.
(c) The charges, accruals, and reserves with respect to
Taxes on the books of the Company are adequate and are at least equal
to the Company's liability for Taxes. There exists no proposed tax
assessment against the company except as disclosed in Section 3.9 of
the Shareholders' Disclosure Memorandum. No consent to the
application of Section 341(f)(2) of the Code 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 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 Code with respect to any transaction contemplated
hereby. The Company has not been a member of any affiliated group (as
defined in Code Section 1504(a)) or consolidated, combined or unitary
group for purposes of any other Taxes. None of the property used by
the Company is subject to a lease, other than a "true" lease for
federal income tax purposes.
<PAGE> 12
(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.
(e) There is no plan or intention by the 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) The Surviving Corporation 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 the
Surviving Corporation 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, the Surviving Corporation, the Company and
the Shareholders will pay their respective expenses, if any, incurred
in connection with the Merger.
(i) There is no intercompany indebtedness existing
between Parent and the Company or between the Surviving Corporation
and the Company that was issued, acquired, or will be settled at a
discount.
(j) 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 Code.
(k) The fair market value of the assets of the Company
transferred to the Surviving Corporation will equal or exceed the sum
of the liabilities assumed by the
<PAGE> 13
Surviving Corporation, plus the amount of liabilities, if any, to
which the transferred assets are subject.
(l) The Company is not an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
3.10 ENVIRONMENTAL. To the Shareholders' knowledge, the Company
has complied in all 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 concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to occupational safety and health, good
manufacturing practices for food products, wetlands, emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes (collectively, "Hazardous
Materials") 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 Hazardous Materials,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice ("Environmental Action") has been filed or commenced
against any of them alleging any failure so to comply, nor is the Company or
any Shareholder aware of any circumstance or conditions which may cause any
such Environmental Action to be filed or commenced against the Company.
Without limiting the generality of the preceding sentence, and to the
Shareholders' knowledge, the Company has obtained and been in compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under any applicable law or regulation, and
has complied, in all respects, with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in such laws.
3.11 INSURANCE. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Business and provide adequate coverage of the Company, the Business and the
Assets to enable the Company to continue its anticipated operations. The
Company has not been refused any insurance with respect to its assets or
operations, and its coverage has not been limited, terminated or canceled by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance, during the last three (3) years. Section 3.11
of Shareholders' Disclosure Memorandum lists all claims, which (including
related claims which in the aggregate) exceed $5,000 which have been made by
the Company or against any policy of the Company in the last three years under
any workers' compensation, general liability, property or other insurance
policy applicable to Company, any Assets of the Company or the Business.
Except as set forth on Section 3.11 of Shareholders' Disclosure Memorandum,
there are no pending or threatened claims under any insurance policy. Such
claim information includes the following information with respect to each
accident, loss, or other event: (a) the identity of the
<PAGE> 14
claimant; (b) the nature of the claim; (c) the date of the occurrence; (d) the
status as of the report date and (e) the amounts paid or expected to be paid or
recovered.
3.12 REAL PROPERTY.
(a) Section 3.12 of Shareholders' Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel of real
property owned by, leased to or used by the Company (the "Real Property") and
(ii) a complete and accurate list of all current leases, lease amendments,
subleases, assignments, licenses and other agreements to which the Real
Property is subject (collectively, the "Leases"), together with the name and
address of each tenant, the commencement and expiration date of each lease, the
monthly rent and additional rent payable under each lease and the date to which
such rent has been paid, the amount of any deposits, security or otherwise made
under such lease and whether the consent of any party to the lease (or their
mortgage) is required to consummate the transactions contemplated hereby. The
Company has delivered to Parent and the Surviving Corporation true and
complete copies of the Leases.
(b) Except as disclosed in Section 3.12 of Shareholders'
Disclosure Memorandum, and to the best of Shareholders' knowledge, (i) each of
the Leases is in full force and effect and has not been amended or modified;
(ii) neither the Company, nor any other party thereto, is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder; (iii) the Company has received no notice
that any party to any Lease intends to cancel, terminate or refuse to renew the
same or to exercise or decline to exercise any option or other right
thereunder; and (iv) no rental under the Leases has been paid more than one
month in advance.
(c) To the Shareholders' knowledge, there are no pending
or threatened condemnation or similar proceedings or assessments affecting the
Real Property, lawsuits by adjoining landowners or others, nor is there any
belief by the Company or Shareholders that any such lawsuit is contemplated by
any person, nor is any condemnation or assessment contemplated by any
governmental entity. The improvements to the Real Property do not encroach on
any other parcels of real property. The Real Property does not violate any
zoning, easement, setback or other restrictive covenants applicable to the Real
Property. Except as set forth in the title commitments provided to Surviving
Corporation, since November 18, 1996, there have been no materially adverse
actions that have or will affect the title to the Real Property or the use of
the Real Property as contemplated by Parent and Surviving Corporation
hereunder. The title commitments to the Real Property that were provided to
Parent and Surviving Corporation are materially true and correct as of the
Closing Date.
(d) At the time of Closing the Real Property will not in
whole or in part be subject to any lease, other than the Leases described above.
(e) The Company has not entered, and will not enter, into
any written contracts, agreements, or listings, or be a party to any oral
understandings or agreements
<PAGE> 15
affecting the Real Property or the Leases which may become binding upon
Surviving Corporation.
(f) To Shareholders' knowledge, the Company has complied
with all applicable laws, ordinances, regulations, statutes and rules relating
to the Real Property or any part thereof.
(g) Except as disclosed in Section 3.12 of the
Shareholders' Disclosure Memorandum, and to the Shareholders' knowledge, there
has been no storage, production, transportation, disposal, treatment or release
of any Hazardous Materials on or about the Real Property, and the Company has
complied with all applicable local, state or federal environmental laws and
regulations. There are no wells, underground storage tanks, cesspools, covered
surface impoundments or other sources of environmental pollutants or
contaminants on the Real Property.
Prior to the Company's acquisition of the Real Property, to
the Shareholders' knowledge, there was no storage, production, transportation,
disposal, treatment or release of any Hazardous Materials on or about the Real
Property. To the Shareholders' knowledge, there have been no Hazardous
Materials on or in the neighboring properties which, through soil or
groundwater migration, could have moved to the Real Property.
(h) The Company shall not and the Shareholders shall
cause the Company to not change or make alterations to the Real Property
between the date of this Agreement and the Closing. Such prohibited changes
shall include, but shall not be limited to, removal or relocation of site
improvements, buildings and landscaping.
(i) The zoning of each parcel of the Real Property
permits the improvements located thereon and the continuation of business
presently being conducted thereon. The Real Property is served by utilities
and services necessary for the normal and continued operation of the business
presently conducted thereon. None of the real property constituting the Real
Property is subject to any zoning or historical preservation rulings or
ordinances that will prohibit the Surviving Corporation from continuing its
intended use as an ice manufacturing and/or distribution facility.
(j) The Real Property and the real property owned by
Southern Bottled Water Company, Inc., includes all of the real property
utilized by the Company in the Business. At the Closing, the Real Property
shall be free and clear of all liens of other Encumbrances and will enable
Surviving Corporation to continue conducting the same Business on the Real
Property as was conducted prior to the Closing Date.
3.13 PERSONAL PROPERTY.
(a) To the Shareholders' knowledge, Section 3.13 of
Shareholders' Disclosure Memorandum is a complete and accurate schedule as of
the Closing Date
<PAGE> 16
describing, and specifying the location of, all inventory, motor vehicles,
machinery, fixtures, equipment, furniture, supplies, tools, Intangible Assets,
and all other tangible or intangible personal property owned by, in the
possession of, or used by the Company (the "Personal Property").
(b) Each lease, license, rental agreement, contract of
sale or other agreement applicable to any Personal Property is listed in
Section 3.14 of Shareholders' Disclosure Memorandum and is in full force and
effect; neither the Company nor any other party thereto is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. The Company has received no notice that
any party to any such lease, license, rental agreement, contract of sale or
other agreement intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. No
Personal Property is subject to any lease, license, contract of sale or other
agreement that is adverse to the Business, Assets or financial condition of the
Company.
(c) The inventory of the Company as reflected by the
Financial Statements and as described in Section 3.13 of Shareholders'
Disclosure Memorandum consisted and consists of items substantially all of
which were and will be of the usual quality and quantity necessary for the
normal conduct of the Company and reasonably expected to be usable or salable
within a reasonable period of time in the ordinary course of business of the
Company, except items of inventory which have been written down to realizable
market value or written off completely, and damaged or broken items in an
amount which does not affect the value of the inventory as reflected on the
Financial Statements. With respect to inventory in the hands of suppliers for
which the Company is committed as of the date hereof, such inventory is
reasonably expected to be usable in the ordinary course of business of the
Company as presently being conducted.
3.14 CONTRACTS. Section 3.14 of Shareholders' Disclosure Memorandum
contains a complete and accurate list of all presently effective contracts,
leases and other agreements ("Contracts") to which the Company is a party and
which affect or are applicable to the Assets or the Company, true and complete
copies (or summaries in the case of oral contracts) of each of which have been
delivered to Parent and the Surviving Corporation by the Company, including,
without limitation, any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any such
obligation for the borrowing of money;
(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either within or
outside the United States relating to sharing of present or future commissions,
fees or other income or profits;
<PAGE> 17
(d) service agreement, lease, license, rental agreement,
contract of sale or other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract;
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts and/or
rebates);
(j) collective bargaining, employment or consulting
agreement;
(k) supply agreement or requirements contract; and
(l) construction contract, contract to purchase capital
equipment, or otherwise make capital expenditures.
Except as disclosed in Section 3.14 of Shareholders' Disclosure
Memorandum, each of the Contracts is in full force and effect and has not been
amended or modified and neither the Company, nor any other party thereto, is in
default thereunder, nor is there any event which with notice or lapse of time,
or both, would constitute a default thereunder. The Company has received no
notice that any party intends to cancel, terminate or refuse to renew any such
Contract or to exercise or decline to exercise any option or other right
thereunder. There are no contracts to which the Company is a party that cannot
be terminated unilaterally by the Company without a material penalty being
assessed against the Company.
3.15 LABOR MATTERS. To the Shareholders' knowledge, there are no
controversies pending or threatened between the Company and any employees of
the Company. The Company has complied with all laws relating to the employment
of labor, including any provisions thereof relating to wages, hours, collective
bargaining, immigration, safety and the payment of withholding and social
security and similar taxes, and the Company has no liability for any arrears of
wages or taxes or penalties for failure to comply with any of the foregoing.
None of the Company's employees is a member of a labor union, and neither the
Company nor any of the Shareholders is aware of any effort (past or current) by
any labor union to organize the Company's employees.
3.16 ABSENCE OF SENSITIVE PAYMENTS. The Company has not made or
maintained (i) any contributions, payments or gifts of its funds or property to
any official, employee or agent of any vendor, customer or supplier, or of any
governmental entity, where either the payment or the purpose of such
contribution, payment or gift was or is
<PAGE> 18
illegal under the laws of the United States or any state thereof, or any other
jurisdiction (foreign or domestic); or (ii) any contribution, or reimbursement
of any political gift or contribution made by any other person, to candidates
for public office, whether federal, state, local or foreign, where such
contributions by the Company or Shareholders were or would be a violation of
applicable law.
3.17 EMPLOYEE BENEFITS. To the Shareholders' knowledge, all
employee benefit plans including, but not limited to health benefit plans,
(whether or not covered by ERISA), deferred compensation or executive
compensation plans for employees, directors or independent contractors, and all
other employee or independent contractor arrangements or programs that are
maintained or contributed to by the Company (collectively, the "Company Plans")
have been administered and operated in all respects in compliance with their
terms, ERISA, if applicable, the Code and other applicable law. All Company
Plans that are intended to be qualified under Section 401(a) of the Code are so
qualified and a current favorable IRS determination letter exists for each such
plan and covers the amendments required by the Tax Reform Act of 1986. All
funded Company Plans are fully funded according to their terms and applicable
law. No prohibited transaction or breach of fiduciary duty under ERISA has been
committed by any fiduciary, disqualified person or party in interest of any
Company Plan. To the Shareholders' knowledge, the Company has no liability,
contingent or otherwise, under Title IV of ERISA or any other aspect of ERISA.
All Company Plans are set forth in Section 3.17 of Shareholders Disclosure
Memorandum which is attached hereto and incorporated herein by reference. All
Company Plans will be terminated as of the Closing Date and the liability of
all such Company Plans, including, but not limited to any obligations to fund
such plans, is and will remain the sole liability of the Shareholders. All
Company Plans will be terminated as of the Closing Date and the liability of
all such Company Plans, including, but not limited to any obligations to fund
such plans, is and will remain the sole liability of the Shareholders.
3.18 CAPITAL IMPROVEMENTS. Section 3.18 of Shareholders'
Disclosure Memorandum describes all of the capital improvements or purchases or
other capital expenditures (as determined in accordance with GAAP) which the
Company has committed to or contracted for which have not been completed prior
to the date hereof and the cost and expense reasonably estimated to complete
such work and purchases.
3.19 NO UNDISCLOSED LIABILITIES. To the Shareholders' knowledge,
except for the obligations and liabilities arising under the contracts
disclosed in Section 3.14 of the Shareholders' Disclosure Memorandum, 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 Financial
Statements and current liabilities incurred in the ordinary course of business
since the respective dates thereof.
3.20 ACCOUNTS RECEIVABLE. Except as otherwise indicated in
Section 3.20 of the Shareholders' Disclosure Memorandum, all accounts
receivable of the Company have arisen out of bona fide transactions in the
ordinary course of business, and each such
<PAGE> 19
account receivable constitutes a valid and binding obligation of the obligor,
maker, co-maker, guarantor, endorser or debtor thereof or thereunder and is
collectible in full within 60 days.
3.21 COMPLETE AND ACCURATE DISCLOSURE. No representation or
warranty made to Parent or the Surviving Corporation in this Agreement or in
connection with this transaction contains or will contain an untrue statement
of a fact, or omits or will omit to state a fact necessary to make such
representation or warranty not misleading or necessary to enable Parent and the
Surviving Corporation to make a fully informed decision with respect to the
Merger of the Company into the Surviving Corporation. All documents and
information which have been or will be delivered to Parent and the Surviving
Corporation or its representatives by or on behalf of the Company or
Shareholders are and will be true, correct and complete copies of the documents
they purport to represent.
3.22 LOANS TO SOUTHERN BOTTLED WATER COMPANY, INC. Shareholders
warrant and represent that the funds borrowed by the Company from First Alabama
Bank were borrowed and subsequently relent Southern Bottled Water Company, Inc.
("SBWC") for the benefit of SBWC. Since Surviving Corporation is also
purchasing all of the outstanding capital stock of SBWC from its shareholders,
contemporaneously with the closing of this Agreement, Surviving Corporation
will pay all amounts owed to First Alabama Bank in connection with Surviving
Corporation's purchase of all of the outstanding capital stock of SBWC. Except
as set forth in Section 3.22, as of the Closing Date, there are no intercompany
or affiliate debts to which the Company is a party.
3.23 SHAREHOLDER AGREEMENTS. Notwithstanding anything to the
contrary contained in this Agreement or the Shareholders' Disclosure
Memorandum, there are no obligations by the Company to pay to any shareholder
of the Company any sums that would constitute compensation, deferred
compensation, employment benefits, retirement benefits or any other type
payment. All shareholder agreements amongst all shareholders of the company
including but not limited to all agreements or contracts involving Juliet M.
Scarbrough, Elaine Scarbrough, Wilkes L. Scarbrough and/or Juliet S. DuSel
relating to any employment, retirement, agreement to purchase or sell shares in
the company or any other type of contract, agreement or understanding are
hereby terminated and are of no further force or effect.
IV. REPRESENTATIONS AND WARRANTIES
OF THE SURVIVING CORPORATION AND PARENT
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Parent
and the Surviving Corporation are corporations duly organized, validly
existing, and in good standing under the laws of the State of Texas. All
outstanding shares of stock of Parent are validly issued, fully paid and
nonassessable.
<PAGE> 20
4.2 POWER AND AUTHORITY. Parent and the Surviving Corporation
have the requisite corporate power and authority, and have been duly
authorized, to enter into this Agreement and to perform all of its obligations
hereunder.
4.3 EFFECT OF THIS AGREEMENT. The execution, delivery and
performance by Surviving Corporation of this Agreement, and each Ancillary
Document to which Surviving Corporation is or will be a party, the consummation
by Surviving Corporation of the transactions contemplated hereby and thereby,
and the compliance by Surviving Corporation with the provisions hereof or
thereof, will not, with or without the giving of notice or the passage of time,
(a) violate any law, ordinance, rule or regulation applicable to Surviving
Corporation, (b) violate any judgment, writ, injunction, order or decree of any
court, arbitrator or governmental authority applicable to Surviving
Corporation, or (c) result in the breach of or conflict with any term,
covenant, condition or provision of the articles of incorporation or by-laws of
Surviving Corporation.
4.4 APPROVALS, CONSENTS, ETC.. No consent, authorization or
approval of, or waiver or exemption by, or filing or registration with, any
governmental agency or any other person is required to be obtained or made in
connection with the execution, delivery or performance by Surviving Corporation
of this Agreement or any Ancillary Document, or the consummation by Surviving
Corporation of the transactions contemplated hereby or thereby.
V. COVENANTS OF THE COMPANY AND SHAREHOLDERS
Shareholders hereby, jointly and severally, covenant and agree as
follows:
5.1 CONDUCT OF BUSINESS. From the date hereof through the Closing
Date, Shareholders shall, and shall cause the Company to, use all reasonable
efforts to (i) preserve substantially the relationships with the Company's
employees, suppliers, customers and others doing business with it, (ii) perform
its obligations under all contracts, leases and permits in all material
respects, (iii) comply with all applicable laws, (iv) confer with Parent
regarding operational matters of a material nature, (v) report periodically to
Parent regarding the status of the business and the results of operations of
the Company, and (vi) conduct Company's business in the ordinary course and
consistent with past practices. Without limiting the foregoing, except as
otherwise required or permitted by this Agreement or listed in Section 5.1 of
Shareholder's Disclosure Memorandum from the date hereof through the Closing
Date, the Shareholders shall not, without Parent's prior written consent,
permit the Company to:
(a) amend its articles of incorporation or bylaws;
(b) (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the Company's
capital stock, (ii) redeem, purchase or otherwise acquire directly or
indirectly any shares of the capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any
<PAGE> 21
such shares or other securities; (iii) authorize for issuance, issue, sell,
pledge, deliver or agree to commit to issue, sell, pledge or deliver (whether
through the issuance or granting of any options, warrants, calls,
subscriptions, stock appreciation rights or other rights or other agreements)
or otherwise encumber any shares of capital stock of any class of the Company
or any securities convertible into or exchangeable for shares of capital stock
of any class of the Company; or (iv) split, combine or reclassify the
outstanding capital stock of the Company or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of the
capital stock of the Company;
(c) acquire or agree to acquire (including, without
limitation, by merger, consolidation or acquisition of stock or assets) any
business, corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof;
(d) sell, lease, license, transfer, mortgage or subject
to any Encumbrance or otherwise dispose of any assets of the Company other than
sales of inventory in the ordinary course of business and consistent with past
practice;
(e) except as disclosed in Section 5.4(e) of
Shareholder's Disclosure Memorandum, make or agree to make any new capital
expenditure or expenditures;
(f) except as required to comply with applicable law or
with contracts existing on the date hereof, (i) adopt, enter into, terminate or
amend in any material respect any employment contract, collective bargaining
agreement or employee benefit plan, (ii) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any director, officer
or employee, (iii) pay any benefit not provided for under any employee benefit
plan, (iv) increase in any manner the severance or termination pay of any
officer or employee, (v) grant any awards under any employee benefit plan
(including the grant of stock options, stock appreciation rights, stock-based
or stock-related awards, performance units or restricted stock or the removal
of existing restrictions in any employee benefit plans or agreements or awards
made thereunder), or (vi) take any action to fund or in any other way secure
the payment of compensation or benefits under any employee, contract or
employee benefit plan;
(g) amend, terminate or enter into any material contract;
(h) (i) incur or assume any debt, other than trade and
accounts payable incurred in the ordinary course of business in amounts
consistent with past practice, (ii) issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company; (iii)
enter into any arrangement to maintain any financial condition of another
person; (iv) guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person; or (v) make any loans, advances or capital contributions to, or
investments in, any other person;
<PAGE> 22
(i) make any material change in accounting methods,
principles or practices unless required by GAAP;
(j) compromise or settle any material claim or action;
(k) take, or agree to commit to take, any action that
would or is reasonably likely to result in any of the conditions set forth in
Article VIII not being satisfied, or would make any representation or warranty
of Shareholders contained herein inaccurate in any respect at, or as of any
time prior to, the Closing, or that would impair the ability of Shareholders to
consummate the transactions contemplated hereby in accordance with the terms
hereof or delay such consummation;
(l) make or rescind any Tax election or settle or
compromise any Tax liability or refund or change in any material respect any of
the methods of reporting income or deductions for federal income tax purposes;
(m) permit any material insurance policy naming the
Company as a beneficiary or a loss payable payee to be canceled or terminated,
except in the ordinary course of business and consistent with past practice;
(n) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company;
(o) enter into any related party contract; or
(p) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or authorize, recommend, propose or
announce an intention to do any of the foregoing.
5.2 INVESTIGATION BY PARENT AND THE SURVIVING CORPORATION. Prior
to the Closing Date, the Company shall (i) give Parent and its authorized
representatives and advisors access, at reasonable times and on reasonable
notice, to all items of Real and Personal Property, books and records,
personnel, offices, and other facilities of the Company, (ii) permit Parent or
the Surviving Corporation to make such inspections thereof as Parent or the
Surviving Corporation may reasonably require, and (iii) cause its employees,
and its advisors to furnish to Parent and its authorized representatives and
advisors such financial and operating data and other information with respect
to the Business prepared in the ordinary course of the Business as Parent or
its agent shall from time to time reasonably request.
5.3 CLOSING CONDITIONS. Shareholders and the Company will, to the
extent within their control, use their best efforts to cause the conditions set
forth in Section 8.1 to be satisfied by the Closing Date.
<PAGE> 23
5.4 CONFIDENTIALITY. From and after the date hereof, Shareholders
will, and will cause the Company and its officers, employees, representatives,
consultants and advisors to hold in confidence all confidential information in
the possession of the Company, its affiliates or its financial advisor
concerning Parent, the Surviving Corporation or the Company. Shareholders and
the Company will not release or disclose any such information to any person
other than Parent and its authorized representatives. Notwithstanding the
foregoing, the confidentiality obligations of this Section shall not apply to
information:
(a) which the Shareholders or the Company are compelled
to disclose by judicial or administrative process, or, in the reasonable
opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to the
Company or Shareholders by a third party who obtained such information other
than as a result of a breach of a confidential relationship.
5.5 PUBLIC ANNOUNCEMENT. The Company, Shareholders, the Surviving
Corporation and Parent will cooperate in the public announcement of the
transactions contemplated by this Agreement, and, other than as may be required
by applicable law, no such announcement will be made by either party without
the consent of the other party, which consent shall not be unreasonably
withheld.
5.6 NO SHOPPING. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither the Company nor Shareholders shall (and the Company and Shareholders
shall cause their respective affiliates, officers, directors, employees,
representatives and agents not to) directly or indirectly, solicit, initiate or
participate in discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group (other than
Parent or an affiliate or an associate of Parent) concerning, or enter into any
agreement providing for, any merger, sale of material assets, sale of stock or
similar transactions involving the Company or the Assets.
5.7 FURTHER ASSURANCES. The Shareholders and the Company will use
their best efforts to implement the provisions of this Agreement, and for such
purpose the Shareholders or the Company, at the request of Parent or the
Surviving Corporation, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Parent and the Surviving Corporation such deeds, assignments,
bills of sale, consents, documents evidencing title and other instruments in
addition to those required by this Agreement, in form and substance
satisfactory to Parent and the Surviving Corporation, as Parent and the
Surviving Corporation may reasonably deem necessary or desirable to implement
any provision of this Agreement.
<PAGE> 24
5.8 INSURANCE. Shareholders shall cause the Company to continue
to maintain insurance through the Closing Date with financially sound and
reputable insurers unaffiliated with the Company or Shareholders in such
amounts and against such risks as are adequate to protect the Assets and the
Business.
5.9 INVESTMENT LETTER. At the Closing, Shareholders shall execute
and deliver to Parent the investment letter in the form attached hereto as
Exhibit 5.9 (the "Investment Letter").
5.10 ESCROW AGREEMENT. At the Closing, Shareholders shall execute
and deliver to Parent and the Surviving Corporation the escrow agreement in the
form attached hereto as Exhibit 5.10 (the "Escrow Agreement").
5.11 TITLE REPORTS. Within ten (10) days after the date hereof,
Shareholders, at Shareholders' sole cost and expense, shall provide a title
report(s) for all real property owned by the Company and current reports of
searches made of the Uniform Commercial Code Records of the County and State
where each parcel of Real Property is located (the "Financing Statements")
setting forth the state of liens affecting the title to the personal property
and real property to be conveyed hereunder. The title report shall form the
basis for a title insurance policy, issued by a nationally known title policy
issuer, to be delivered to Parent and the Surviving Corporation, at
Shareholders' sole expense, at the Closing in an amount equal to $250,000. At
the Closing, the Real Property shall be subject to no liens, charges,
encumbrances, exceptions, or reservations of any kind or character.
5.12 NONCOMPETITION AGREEMENT. At the Closing, Shareholders will
enter into the Noncompetition Agreement attached hereto as Exhibit 5.12.
5.13 EMPLOYMENT AGREEMENT. At the Closing, Wilkes Scarbrough will
enter into the Employment Agreement attached hereto as Exhibit 5.13.
5.14 SHAREHOLDER DOCUMENTS. At the Closing, Shareholders will
execute the Shareholder Documents attached hereto as Exhibit 5.14.
5.15 TERMINATION OF PROFIT SHARING AND PENSION PLANS. Prior to the
Closing, the Company Plans will be terminated by resolution of the board of
directors of the Company and amended as appropriate to effect such termination.
It is understood and agreed that the Company Plans will be terminated and wound
up in accordance with their respective terms and applicable law.
In the event that as of the Closing Date there are additional sums
that have accrued to the Company Plans but such amounts have not been paid,
then Shareholders shall remain jointly and severally liable for such amounts
and shall reimburse the Company for any amounts that the Company is required to
make in this regard.
<PAGE> 25
VI. COVENANTS OF PARENT AND THE SURVIVING CORPORATION
6.1 CLOSING CONDITIONS. Parent and the Surviving Corporation
will, to the extent within their control, use reasonable efforts to cause the
conditions set forth in Section 8.2 to be satisfied by the Closing Date.
6.2 ANCILLARY AGREEMENTS. At the Closing, Parent and the
Surviving Corporation will enter into the Noncompetition Agreement, the Escrow
Agreement, and all other ancillary documents required hereunder.
VII. THE CLOSING
7.1 THE CLOSING. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at a mutually
agreeable time and date on or before March 24. The date of the closing shall
herein be referred to as the "Closing Date."
7.2 CLOSING OBLIGATIONS. At the Closing, subject to the terms,
covenants and conditions contained herein:
(a) Shareholders will deliver to Parent and the Surviving
Corporation:
(i) certificates representing the Shares, to be
surrendered to the Surviving Corporation or Parent;
(ii) a certificate executed by Shareholders
representing and warranting to Parent and the Surviving
Corporation that Shareholders' and the Company's
representations and warranties in this Agreement are accurate
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 Memorandum which was delivered by
Shareholders to Parent and the Surviving Corporation prior to
the Closing Date); and
(iii) investment letter executed by Shareholders
receiving Packaged Ice, Inc. common stock in the form attached
hereto as Exhibit 5.9, (the "Investment Letter").
(iv) the Escrow Agreement as set forth in Exhibit
5.10.
<PAGE> 26
(v) an opinion of counsel as referred to in
Section 8.1(f);
(vi) letters of resignation of the officers and
directors of the Company;
(vii) executed counterparts of all other documents
and certificates required to be delivered to Parent and the
Surviving Corporation pursuant to this Agreement including,
but not limited to the Undertaking Agreement, the Shareholder
Documents, the Noncompetition Agreement, satisfactory evidence
that all third party creditors of the Company have been
satisfied and the title insurance policy in the amount of
$250,000.
(b) Parent and the Surviving Corporation will:
(i) deliver certificates evidencing the Stock
Amount, issued to Shareholders;
(ii) pay the Cash Amount (less adjustments, and
less the Escrow Amount) by bank, cashier's or certified check
payable to the order of Shareholders or wire transfer in
immediately available funds to an account designated by
Shareholders, as may be selected by Shareholders;
(iii) deliver a certificate executed by Parent and
the Surviving Corporation to the effect that, except as
otherwise stated in such certificate, each of Parent and the
Surviving Corporation's representations and warranties in this
Agreement is accurate in all respect as of the Closing Date as
if made on the Closing Date ("Parent and the Surviving
Corporation's Certificate"); and
(c) The Surviving Corporation and the Company will
execute articles of merger and file the same with the Secretary of State of the
State of Texas and the Secretary of State of the State of Alabama.
(d) Parent will deliver the Escrow Amount to the Escrow
Agent to be held pursuant to the Escrow Agreement.
7.3 COMPLIANCE WITH SECURITIES LAWS. As of the date hereof and
prior to the Closing Date, the Company and Shareholders hereby acknowledge and
agree that Parent and Surviving Corporation shall be granted a reasonable
amount of time to comply with all securities laws relating to the issuing of
Parent Stock as part of this transaction.
VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF PARENT AND THE SURVIVING
CORPORATION. The obligations of Parent and the Surviving Corporation to
complete the transactions
<PAGE> 27
contemplated at the Closing shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of
Shareholders or the Company to be performed or complied with on or before the
Closing Date shall have been duly performed or complied with in all respects
and Shareholders shall deliver to Parent and the Surviving Corporation a
certificate signed by Shareholders and an officer of the Company to such
effect.
(b) Representations and Warranties True; No Adverse
Change. The representations and warranties of Shareholders and the Company
contained herein shall be true and correct, in all respects, on the Closing
Date with the same force and effect as though such representations and
warranties had been made on the Closing Date, and since the date hereof there
shall have occurred no adverse change in the Business, and Shareholders shall
deliver to Parent and the Surviving Corporation a certificate signed by
Shareholders and an officer of the Company to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Parent and the Surviving
Corporation from consummating the transactions contemplated hereby.
(d) Third Party Creditors. All third party creditors of
the Business (other than trade payables) will be paid in full, and all
Encumbrances against the Stock, Assets and the Business will be paid or
discharged.
(e) Capital Leases. All Capital Leases shall be paid in
full and the personal property subject thereto shall be conveyed to the
Company free and clear of Encumbrances.
(f) Opinion of Counsel for Shareholders and the Company.
Shareholders shall have received the opinion of Spain & Gillon, L.L.C. dated as
of the Closing Date, in form and substance satisfactory to the Surviving
Corporation's and Parent's counsel, subject to reasonable qualifications and
exceptions, as set forth on Exhibit 8.1(f).
(g) Due Diligence. Parent's and Surviving Corporation's
obligation to consummate this Agreement is expressly conditioned on Parent's
and Surviving Corporation's satisfaction of its due diligence investigation of
the Company and Shareholders.
(h) Ancillary Agreements. Shareholders have executed the
Noncompetition Agreement, the Employment Agreement, the Shareholder Documents,
the Escrow Agreement and all other ancillary documents required hereunder.
<PAGE> 28
(i) Stock Purchase of Southern Bottled Water Company,
Inc. The contemplated merger agreement whereby Packaged Ice Southeast, Inc.
will purchase all of the outstanding capital stock of Southern Bottled Water
Company, Inc. will have occurred contemporaneously with the execution of this
Agreement.
8.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND SHAREHOLDERS.
The obligation of the Company and Shareholders to complete the transactions
contemplated at the Closing shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of Parent
and the Surviving Corporation to be performed or complied with on or before the
Closing Date shall have been duly performed or complied with in all material
respects and Parent and the Surviving Corporation shall deliver to Shareholders
a certificate signed by an officer of Parent and the Surviving Corporation to
such effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Parent and the Surviving
Corporation contained herein shall be true and correct on the Closing Date with
the same force and effect as though such representations and covenants had been
made on the Closing Date, and Parent and the Surviving Corporation shall
deliver to Shareholders a certificate signed by an officer of Parent and the
Surviving Corporation to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining the Company from consummating
the transactions contemplated hereby.
IX. IDEMNIFICATION
9.1 INDEMNIFICATION OF PARENT AND THE SURVIVING CORPORATION BY THE
COMPANY AND SHAREHOLDERS. The Company and Shareholders agree, jointly and
severally, to indemnify, defend and hold harmless Parent and the Surviving
Corporation and Parent's and the Surviving Corporation's employees, agents,
heirs, legal representatives, and assigns from and against any and all claims,
suits, losses, expenses (legal, accounting, investigation and otherwise),
damages and liabilities, including, without limitation, tax liabilities
(hereinafter, collectively "Damages"), arising out of or relating to (i) any
liability or obligation of the Company assumed by Shareholders at the Closing
Date hereunder pursuant to the Undertaking Agreement, (ii) any claim or cause
of action arising with respect to the conduct of, or conditions existing with
respect to, the Company prior to the Closing, whether or not disclosed to
Parent, (iii) any inaccuracy of any representation or warranty set forth in
this Agreement or the breach of any covenant made by Shareholders in or
pursuant to this Agreement, or (iv) the improper or illegal use, storage or
disposal of any Hazardous Materials by the Company or its predecessors prior to
the Closing Date, or any Environmental Action pending, threatened or accrued as
of the Closing Date (whether known or unknown, disclosed or undisclosed.) The
obligation of the Shareholders to
<PAGE> 29
indemnify Parent shall continue notwithstanding Parent's knowledge of the
inaccuracy of any representation or warranty of the Shareholders set forth in
this Agreement or in any document or certificate furnished or required to be
furnished pursuant to this Agreement.
9.2 INDEMNIFICATION OF THE COMPANY AND SHAREHOLDERS BY PARENT AND
THE SURVIVING CORPORATION. Parent and the Surviving Corporation agree to
indemnify, defend and hold harmless the Company and Shareholders from and
against (i) any and all Damages arising out of or relating to any material
inaccuracy or any material misrepresentation, (ii) the material breach of any
warranty set forth in this Agreement, (iii) the breach of any covenant made by
Parent or the Surviving Corporation in or pursuant to this Agreement or (iv)
any claim arising relating to the Company, the Assets or the Business arising
after the Closing Date.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party. In addition to all other
remedies provided hereunder or by law, Parent and the Surviving Corporation
shall have the right to make a claim against the Escrow Amount for any of
Parent's or the Surviving Corporation's Damages.
9.4 RIGHT TO DEFEND. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within forty-five (45) days after receipt of the Notice of
Claim that the Indemnifying Party intends to assume the defense of such claim
and acknowledges its liability to indemnify the Indemnified Party for any
losses resulting from such claim; provided, however, that if the Indemnifying
Party does not elect to assume the defense of any claim, then (a) the
Indemnifying Party shall have the right to participate in the defense of such
claim or demand at its expense through counsel of its own choosing, provided
the Indemnified Party shall control the defense of such claim, (b) the
Indemnified Party may settle any such claim
<PAGE> 30
without the consent of the Indemnifying Party, however, the Indemnifying Party
may not settle any such claim without the prior written consent of the
Indemnified Party; and (c) Section 9.5 hereof shall be inapplicable. Whether
or not the Indemnifying Party does choose to so defend such claim, the parties
hereto shall cooperate in the defense thereof and shall furnish such records,
information and testimony and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be requested in connection therewith. To
the extent Parent or the Surviving Corporation is the Indemnified Party for any
actual or threatened claim or demand by any third party, Parent and the
Surviving Corporation shall have the right to control the prosecution of any
counterclaim or right related to such a claim or demand, provided that Parent
and the Surviving Corporation agree to reasonably cooperate with the Company or
Shareholders with respect to the prosecution of such counterclaim or right.
9.5 SETTLEMENT. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.6 EFFECT OF TERMINATION. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
X. TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of the
Shareholders, Company, Parent and the Surviving Corporation;
(b) Misrepresentation or Breach. By the Company or
Shareholders if there has been a material misrepresentation or a material
breach of a warranty or covenant herein or in any agreement required to be
delivered pursuant hereto on the part of the Surviving Corporation or Parent;
(c) Misrepresentation or Breach. By Parent or the
Surviving Corporation, if there has been a misrepresentation or a breach of a
warranty or covenant herein or in any agreement required to be delivered
pursuant hereto on the part of the Company or Shareholders;
<PAGE> 31
(d) Failure of Condition to Parent's and the Surviving
Corporation's Obligations. By Parent and the Surviving Corporation, if all of
the conditions set forth in Section 8.1 have not been satisfied;
(e) Failure of Condition to the Company's and
Shareholders' Obligations. By the Company or Shareholders, if all of the
conditions set forth in Section 8.2 have not been satisfied;
(f) Court Order. By the Company and Shareholders or
Parent and the Surviving Corporation, if consummation of the transactions
contemplated hereby shall violate any non-appealable final order, decree or
judgment of any court or governmental body having competent jurisdiction; or
(g) Adverse Change. By Parent and the Surviving
Corporation if any event has occurred after the date hereof which is, or will
result in an adverse change in the prospects, business or condition of the
Company.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of the Company,
Shareholders and Parent and the Surviving Corporation under this Agreement
shall terminate without further liability of the Company, Shareholders, Parent
or the Surviving Corporation. If the Company or Shareholders fail to
consummate the transactions contemplated on their part to occur on the
scheduled Closing Date, in circumstances whereby all conditions of the Closing
set forth in Section 8.2 have been satisfied in all material respects or
waived, Parent's and the Surviving Corporation's sole remedy shall be to (i) to
require Shareholders to consummate and specifically perform the transactions
contemplated hereby, 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
reimbursement of its out-of-pocket expenses incurred directly in connection
with the negotiation, preparation and performance of this Agreement. If Parent
and the Surviving Corporation 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 8.1 have been satisfied in all
respects or waived, the Company's and Shareholders' sole remedy shall be to (i)
to require Parent and the Surviving Corporation to consummate and specifically
perform the transactions contemplated hereby, in accordance with the terms of
this Agreement, and to obtain from Parent and the Surviving Corporation 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.
10.3 RIGHT TO PROCEED. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or Section 8.2 has
not been satisfied, the Company, Shareholders or Parent and the Surviving
Corporation, in addition to any other rights which may be available to it,
shall have the right to waive any such condition that is for its benefit and to
require the other party hereto to proceed with the Closing.
<PAGE> 32
XI. TAX MATTERS.
11.1 Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the
Code.
"Final Determination" shall mean (i) with respect to Federal
Taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by the
Company or Shareholders, whichever are responsible for payment of such Tax
under applicable law, with respect to any item disallowed or adjusted by a
Taxing Authority, provided that such responsible party determines that no
action should be taken to recoup such payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion
thereof) beginning after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax,
gross income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign).
"Tax Indemnification Period", means with respect to any Tax,
any Pre-Closing Tax Period of the Company.
<PAGE> 33
11.2 Covenants.
(a) Without the prior written consent of Parent and the
Surviving Corporation, Shareholders shall not cause the Company to
make or change any tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any amended
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 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 Parent or the Surviving Corporation.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) 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 real property transfer
Tax and any similar Tax) shall be accrued by the Shareholders and be
paid by the Shareholders when due (including any applicable
extensions), and the Shareholders will, at the Shareholders' sole
expense, file all necessary Tax returns and other documentation with
respect to all such Taxes and fees. . This subparagraph shall not
apply to any vehicle or other re-titling fees to take place after the
Closing Date. All such vehicle or other re-titling shall be borne by
the Surviving Corporation.
11.3 Cooperation on Tax Matters.
(a) Parent, the Surviving Corporation and Shareholders
shall cooperate fully, 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 6043 of the Code and all Treasury Regulations
promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention
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. Parent and the Surviving Corporation
and Shareholders shall cause the Company to: (i) to retain 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 requirements of any Taxing Authority or any record retention
agreements entered into with any Taxing Authority, and (ii) to give
Shareholders reasonable written notice prior to destroying or
discarding any such books and records and, if Shareholders so
requests, Parent and the Surviving Corporation shall allow
Shareholders to take possession of such books and records.
<PAGE> 34
(b) Parent and the Surviving Corporation and Shareholders
further 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 (including, but not limited to, with
respect to the transactions contemplated hereby).
11.4 Tax Indemnification. The Company and Shareholders hereby
jointly and severally indemnify Parent and the Surviving Corporation against,
and agree to hold Parent and the Surviving Corporation harmless from, any loss,
liability or expense attributable to (i) any Tax with respect to income
(including, to the extent based on income, state franchise Taxes), transfer
Tax, employment or withholding Tax related to employee tips income (actual and
allocated) and related reporting requirements, and gross receipts or royalty
Tax in respect of any franchise operation and any other Tax of the Company
related to the Tax Indemnification Period, (ii) any Tax resulting from a breach
of the provisions of Sections 3.9 and 11.2, and (iii) any liabilities, costs,
expenses (including, without limitation, reasonable expenses of investigation
and attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee or successor (the
sum of (i), (ii), and (iii) being referred to herein as a "Loss"). Parent and
the Surviving Corporation shall give Shareholders ten days notice of any claim
of Loss, and Shareholders shall have the opportunity to defend Parent and the
Surviving Corporation in accordance with Section 9.4 hereof.
11.5 Acquisition Price Adjustment. Any amount paid by the Company,
Parent, the Surviving Corporation or Shareholders under Section 11.4 will be
treated as an adjustment to the relevant purchase price for all Tax purposes
unless a Final Determination causes any such amount not to constitute an
adjustment to the relevant purchase price. In the event of such a Final
Determination, Parent and the Surviving Corporation or Shareholders, as the
case may be, shall pay an amount that reflects the hypothetical Tax
consequences of the receipt or accrual of such payment, using the maximum
statutory rate (or rates, in the case of an item that affects more than one
Tax) applicable to the recipient of such payment for the relevant year,
reflecting for example, the effect of deductions available for interest paid or
accrued and for Taxes such as state and local income Taxes. Any payment
required to be made by Parent and the Surviving Corporation or Shareholders
under Section 11.4 that is not made when due shall bear interest at the rate
per annum determined, from time to time, under the provision of Section
6621(a)(2) of the Code for each day until paid.
11.6 Survival. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
The provisions of this Article XI shall survive the Closing for the
<PAGE> 35
applicable period of limitations notwithstanding any knowledge that Parent or
the Surviving Corporation may have acquired to the contrary thereof.
XII. MISCELLANEOUS
12.1 EXPENSES. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing notwithstanding any knowledge that Parent
or the Surviving Corporation may have acquired to the contrary thereof.
12.3 INUREMENT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
12.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules
and Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
12.5 SEVERABILITY. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the remaining provisions
hereof and without affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
12.6 INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 CAPTIONS AND HEADINGS; USE OF TERM "PERSON". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection
cross-references are to articles, sections and subsections within this
Agreement. As used herein, the term "person" shall mean any corporation,
limited liability company, partnership, venture, proprietorship, trust,
governmental entity, benefit plan or other entity or enterprise.
12.8 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA.
<PAGE> 36
12.9 NOTICES. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to the Company: Anniston Ice & Coal Company, Inc.
c/o William A. Julian
1130 Quintard Avenue, Suite 201
Anniston, Alabama 36202
to the Shareholders: (at the address above)
with a copy to: Glenn E. Estess, Jr.
Spain & Gillon, L.L.C.
2117 2nd Avenue N.
Birmingham, Alabama 35203
to Parent and the
Surviving Corporation: Packaged Ice, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: A.J. Lewis, III, President
with a copy to: Alan Schoenbaum
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St., Suite 1500
San Antonio, Texas 78205
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
12.10 AGENTS OR BROKERS. The Company and Shareholders and Parent
and the Surviving Corporation mutually represent and agree with each other that
no agents or brokers have been utilized in the solicitation or negotiation of
the sale of the Business and no fees, commissions or expenses of any type shall
be due or payable out of the proceeds of the Acquisition Price by either party
to this Agreement.
12.11 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities laws, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in Birmingham, Alabama, and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof, and shall not be appealable. Judicial proceedings may be commenced
<PAGE> 37
only to enforce this arbitration agreement or to enforce the results of
arbitration; provided that such prohibition shall not apply in the event that a
court ordered injunction is an appropriate remedy for a breach of this
Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
[ANNISTON ICE & COAL AGREEMENT AND PLAN OF MERGER
SIGNATURE PAGE FOLLOWS]
<PAGE> 38
[ANNISTON ICE & COAL AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE, INC.
By: /s/ A. J. LEWIS, III
----------------------------------
Print Name: A. J. Lewis, III
-----------------------
Print Title: President
----------------------
PACKAGED ICE SOUTHEAST, INC.
By: /s/ A. J. LEWIS, III
----------------------------------
Print Name: A. J. Lewis, III
-----------------------
Print Title: President
----------------------
ANNISTON ICE & COAL COMPANY, INC.
By: /s/ WILKES L. SCARBROUGH
----------------------------------
Print Name: Wilkes L. Scarbrough
-----------------------
Print Title: V.P. - Sec.
----------------------
SHAREHOLDERS:
/s/ WILKE L. SCARBROUGH
- -------------------------------------
/s/ JANET M. SCARBROUGH
- -------------------------------------
/s/ ELAINE M. SCARBROUGH
- -------------------------------------
<PAGE> 39
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets of the Company
Exhibit B Assets subject to Capital Leases
Exhibit 2.11 Undertaking Agreement
Exhibit 5.9 Investment Letter
Exhibit 5.10 Escrow Agreement
Exhibit 5.12 Noncompetition Agreement
Exhibit 5.13 Employment Agreement
Exhibit 5.14 Shareholder Agreements
Exhibit 8.1(f) Opinion of Counsel
Shareholders' Disclosure Memorandum
<PAGE> 1
EXHIBIT 10.11
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
March 24, 1998, by and among Packaged Ice Southeast, Inc., a Texas corporation
("Buyer"), and Wilkes Scarbrough and Elaine Scarbrough (individually
"Shareholder" and collectively "Shareholders").
PRELIMINARY STATEMENTS
Shareholders own all of the outstanding shares of capital stock of
Southern Bottled Water Company, Inc., an Alabama corporation (hereinafter, the
"Company"), such shares hereinafter referred to as the "Stock".
The Company is engaged in the manufacture and sale of bottled water
products (such business being herein referred to as the "Business").
Shareholders are desirous of selling to Buyer, and Buyer is desirous
of purchasing from Shareholders, all of the Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties hereafter set forth, the
parties hereby agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible. The Assets shall include, but shall not be
limited to, those items specifically described in Exhibit A attached hereto.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business which are used in the direct manufacturing,
distribution and sale of bottled water products which equipment will be
conveyed to Buyer at the Closing, free and clear of the Capital Leases, liens,
claims and any other Encumbrances whatsoever. The property comprising the
Capital Leases is described in Exhibit B attached hereto.
"Closing" shall mean the consummation of this Agreement.
"Closing Date" shall mean the date on which this Agreement is
consummated.
"Company Plans" shall have the meaning set forth in Section 3.17 of
this Agreement.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
<PAGE> 2
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage, lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, adverse claim, deed of
trust, or restriction on transfer of any nature whatsoever other than those
held by Buyer or granted by the Company at Buyer's request.
"Environmental Action" shall have the meaning set forth in Section
3.10 of this Agreement.
"Escrow Agreement" shall have the meaning set forth in Section 2.2(b)
of this Agreement.
"Escrow Agent" shall mean Regions Bank, Anniston, Alabama.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"Excluded Assets" shall mean those assets of the Company that will be
distributed to the Shareholders prior to Closing and shall not belong to the
Company on the Closing Date. The Excluded Assets will be described in Schedule
3.13(a) attached hereto.
"Financial Statements" shall have the meaning set forth in Section
3.3 of this Agreement.
"Hazardous Materials" shall have the meaning set forth in Section 3.10
of this Agreement.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
of this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Leases" shall have the meaning set forth in Section 3.12 of this
Agreement.
"Liabilities" shall have the meaning set forth in Section 2.2(c) of
this Agreement.
"Noncompetition Agreement" shall have the meaning set forth in Section
5.9 of this Agreement.
"Owned Real Property" shall have the meaning set forth in Section 5.10
of this Agreement.
"Personal Property" shall have the meaning set forth in Section 3.13
of this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.2 of
this Agreement.
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<PAGE> 3
"Real Property" shall have the meaning as set forth in Section 3.12
of this Agreement.
"Shareholders' Disclosure Memorandum" shall mean that schedule
delivered to Buyer no later than two business days prior to the execution of
this Agreement and which is attached hereto and incorporated herein by
reference that lists and describes all disclosures by Shareholders concerning
the Assets and the Business which are the subject of this Agreement.
"Stock" shall mean all of the capital stock of the Company outstanding
on the Closing Date.
"Taxes" shall have the meaning as set forth in Section 11.1 hereof.
"Title Insurance Policy" shall have the meaning set forth in Section
5.10 of this Agreement.
"Trade Accounts Payable" shall mean those accounts payable accrued by
the Company that relate directly to the manufacture, storage, distribution and
sale of bottled water products.
"UCC Reports" shall have the meaning as set forth in Section 5.10 of
this Agreement.
"Undertaking Agreement" shall have the meaning set forth in Section
2.2(d) of this Agreement.
II. PURCHASE AND SALE
2.1. STOCK PURCHASE. At the Closing, subject to the terms, covenants
and conditions contained herein, Shareholders shall sell to Buyer, and Buyer
shall purchase from Shareholders, all of the Stock.
2.2 PURCHASE PRICE.
(a) The purchase price for the Stock shall be $8,365,091
(the "Purchase Price"), plus or minus the adjustments set forth hereinbelow,
and payable as follows:
(b) The Purchase Price, less the Escrow Amount
(hereinafter defined) less liabilities, and plus or minus the adjustments set
forth herein, shall be paid to Shareholders in cash, by wire transfer. $337,800
of the Purchase Price shall be placed in escrow (the "Escrow Amount") with the
Escrow Agent pursuant to the escrow agreement in the form attached hereto as
Exhibit 2.2(b) (the "Escrow Agreement").
(c) The Purchase Price shall be reduced by all of the
Company's debts, obligations and other liabilities including, without
limitation, all current liabilities (save and except the Trade Accounts Payable
and accrued expenses), all long term liabilities, all interest bearing debt,
Encumbrances, and Capital Leases (collectively, the "Liabilities") as of the
Closing Date. Prior to the Closing the parties will estimate the amount of
Liabilities and the cash payable to the Shareholders at the Closing will be
reduced by the amount of estimated Liabilities as of the Closing
3
<PAGE> 4
Date, and such amount will be paid directly the Company's creditors to
discharge Encumbrances and Capital Leases.
(d) The cash portion of the Purchase Price remaining
after the estimated Liabilities have been paid and discharged shall be paid
directly to the Shareholders on a pro rata basis based on their ownership of
the Stock in exchange for all of the Stock owned by the Shareholders. The
intent and effect of this Section 2.2(d) is to convey all of the outstanding
Stock of the Company to Buyer with there being no Liabilities (except Trade
Accounts Payables and accrued expenses) or other Encumbrances immediately after
Closing. Shareholders hereby agree that all Liabilities (except Trade Accounts
Payable and accrued expenses) which are not discharged at Closing shall be
assumed by the Shareholders through an Undertaking Agreement in the form
attached hereto as Exhibit 2.2(d).
21 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall also
be subject to the following adjustments:
(a) If, as of the Closing Date, the Company's current
assets, including cash, accounts receivable and inventory, are less than the
sum of its Trade Accounts Payable and accrued expenses, the Purchase Price
shall be reduced by an amount equal to the sum of its Trade Accounts Payable
and accrued expense minus current assets; if the Company's current assets
exceed the sum of its Trade Accounts Payable and accrued expenses, the Purchase
Price shall be increased by the amount equal to the current assets minus Trade
Accounts Payable and accrued expenses.
(b) On or before 30 days after the Closing Date,
Shareholders shall deliver to Buyer the balance sheet of the Company as of the
Closing Date compiled by a Certified Public Accountant (the "Closing Date
Balance Sheet) certified by Shareholders to be true and correct. The Closing
Date Balance Sheet shall (i) fairly present the financial position of the
Company as of the close of business on the Closing Date compiled in a
consistently applied manner, and (ii) include a detailed schedule of
Liabilities. The Closing Date Balance Sheet shall be used to calculate any
post closing adjustments to the Purchase Price as of the Closing Date and the
amount of any Liabilities to be paid by Shareholders, all in accordance with
the terms and conditions set forth in this Agreement.
(c) To the extent the Shareholders received at Closing an
amount of cash in excess of what they are entitled to hereunder, Shareholders
shall pay to Buyer such amount within five (5) days after such determination.
To the extent Shareholders are entitled to a greater amount of cash than they
received at Closing, then Buyer shall pay such amount within five (5) days
after such determination.
III. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders, jointly and severally, represent and warrant to Buyer as
follows:
3.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Alabama
and has all requisite power and
4
<PAGE> 5
authority to own, lease and operate the Business as presently conducted and to
enter into this Agreement and to perform its obligations hereunder and is duly
qualified to do business in any foreign jurisdiction in which it is currently
conducting business operations. All shares of issued and outstanding capital
stock of the Company are owned by Shareholders and are validly issued, fully
paid and nonassessable. Other than this Agreement, there is no subscription,
option, warrant, call, right, agreement or commitment relating to the issuance,
sale, delivery, repurchase or transfer by Shareholders or the Company
(including any right of conversion or exchange under any outstanding security
or other instrument) of any of its capital stock or other securities, and there
are no other outstanding shares of the Company's capital stock other than the
Stock. Shareholders own and have good and marketable title to the Stock, free
and clear of all Encumbrances. Upon the sale of the Stock to Buyer at Closing,
Shareholders will transfer to Buyer the entire legal and beneficial interest in
the Stock, free and clear of any Encumbrances. There are no voting trusts,
proxies or any other agreements or understandings with respect to the voting of
the Stock. All Shareholders are the valid legal owners of the shares of stock
in the Company that he or she purports to own, and no such shares are subject
to any external or ancillary agreement with any third party.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. This
Agreement has been duly executed and delivered by Shareholders and constitutes
the valid and binding obligation of Shareholders, enforceable against them in
accordance with its terms. The execution, delivery and performance of this
Agreement by Shareholders and the consummation of the transactions contemplated
hereby will not require the consent, approval or authorization of any third
party or governmental authority, and will not, with or without the giving of
notice, the passage of time, or both, violate, conflict with, result in a
default, breach or loss of rights under, or result in the creation of any lien,
claim or encumbrance pursuant to, any lien, encumbrance, instrument, agreement,
or understanding, or any law, regulation, rule, order, judgment or decree, to
which Shareholders are a party or by which they are bound or affected.
3.3 FINANCIAL STATEMENTS. Shareholders have previously caused to
be furnished to Buyer the Company's unaudited balance sheet as of December 31,
1997, and the related statements of income and statements of cash flow for the
fiscal year then ended, and the unaudited balance sheet of the Company as of
February 28, 1998 and the related unaudited statement of income and statement
of cash flow for the 2-month period ending February 28, 1998 (such balance
sheets and related statements are collectively referred to herein as the
"Financial Statements"). The Financial Statements taken as a whole present
fairly the financial position of the Company and the Business as of December
31, 1997 and February 28, 1998, respectively, and the results of operations for
such periods, compiled in a consistently applied manner.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by Shareholders in Section 3.3 of
Shareholders' Disclosure Memorandum and except for trade accounts payable
arising in the ordinary course of business and consistent with past practice
since the date of the Company's February 28, 1998 Balance Sheet, Shareholders
have operated the Company in the ordinary course and the Company has incurred
no liabilities which would be required by GAAP to be reflected on a balance
sheet of the Company as of the date hereof or disclosed in the notes thereto.
Since December 31, 1997 there has not been any adverse
5
<PAGE> 6
change in the Business, operations, properties, prospects, Assets or condition
of the Company, and no event has occurred or circumstance exists that may
result in such an adverse change.
3.4 SHAREHOLDER DEBT. There are no Encumbrances held by
Shareholders against the Company, the Assets, or the Business.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. All items
comprising the Assets have been continuously used by the Company in connection
with the Business and are now in serviceable condition, unless expressly
disclosed to the contrary by Shareholders in Section 3.5 of Shareholders'
Disclosure Memorandum.
3.6 GOOD TITLE. Except as set forth in Section 3.6 of
Shareholders' Disclosure Memorandum, the Company has good, legal and marketable
title to all of the Assets, free and clear of Encumbrances. Except as set
forth in Section 3.6 of Shareholders' Disclosure Memorandum, all items of
Personal Property or Real Property used in the Business are owned by the
Company.
3.7 LITIGATION. Except as set forth on Section 3.7 of
Shareholders' Disclosure Memorandum, there is no claim, action, suit,
proceeding or investigation (judicial, governmental or otherwise), nor any
order, decree or judgment in effect against or relating to Shareholders, the
Company or the Assets, or the transactions contemplated by this Agreement, and
to Shareholders' knowledge, none is threatened. Neither the Company nor any of
the Shareholders is aware of any event or circumstance that will, or is
reasonably likely to, give rise to or serve as a basis for the commencement of
any claim, action, suit or proceeding against the Company or the Assets.
3.8 COMPLIANCE WITH LAWS. Except as set forth in Section 3.8 of
Shareholders' Disclosure Memorandum, to the Shareholders' knowledge,
Shareholders and the Company have complied with all laws, rules, regulations,
ordinances, orders, judgments and decrees relating to the Company, the Stock
and the Assets. To the Shareholders' knowledge, the ownership and use of the
Assets and the conduct of the Business as it specifically relates to the Assets
does not conflict with the rights of any other person.
3.9 TAXES. Except as set forth in Section 3.9 of Shareholders'
Disclosure Memorandum, the Company has, within the time and manner prescribed
by law, filed all material returns, declarations, reports and statements
required to be filed by it (together, "Returns") in respect of any Taxes and
each such Return has been prepared in compliance in all material respects with
all applicable laws and regulations and is true and correct in all material
respects, and the Company has, within the time and in the manner prescribed by
applicable law, paid all Taxes that are shown to be due and payable with
respect to the periods covered thereby. The Company is an "S-corporation"
under the Code, has had in effect since its corporate inception, or such other
date as set forth in Section 3.9 of Shareholders' Disclosure Memorandum, a
valid, binding, timely filed election to be taxed pursuant to Subchapter S of
the Code, and is not liable for any federal income taxes as a "C-corporation"
under the Code.
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<PAGE> 7
Except as set forth in Section 3.9 of Shareholders' Disclosure
Memorandum (i) the Company has not requested or been granted an extension of
the time for filing any Return which has not yet been filed; (ii) the Company
has not consented to extend to a date later than the date hereof the time in
which any Tax may be assessed or collected by any taxing authority; (iii) no
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Tax has been proposed, asserted or assessed by any
taxing authority against the Company; (iv) there is no action, suit, taxing
authority proceeding, or audit now in progress, pending or, to Shareholders'
knowledge, threatened against or with respect to the Company; (v) no claim has
been made by a taxing authority in a jurisdiction where the Company does not
file Tax Returns that the Company is subject to Taxes assessed by such
jurisdiction; (vi) there are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the Assets; (vii) the Company will not be
required to include any amount in taxable income or exclude any item of
deduction or loss from taxable income for any taxable period (or a portion
thereof) ending after the Closing Date as a result of any of the following: (A)
a change in method of accounting for a taxable period ending on or prior to the
Closing Date, (B) any "closing agreement," as described in Code Section 7121
(or any corresponding provision of state, local or foreign income Tax law)
entered into on or prior to the Closing Date, (C) any sale reported on the
installment method where such sale occurred on or prior to the Closing Date,
and (D) any prepaid amount received on or prior to the Closing Date; and (viii)
Company has no obligation or liability for the payment of Taxes of any other
person as a result from any expressed obligation to indemnify another person,
or as a result of such Company assuming or succeeding to the Tax liability of
any other person as successor, transferee or otherwise.
3.10 ENVIRONMENTAL. To the Shareholders' knowledge, the Company
has complied in all 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 concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to occupational safety and health, good
manufacturing practices for food products, wetlands, emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes (collectively, "Hazardous
Materials") 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 Hazardous Materials,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice ("Environmental Action") has been filed or commenced
against any of them alleging any failure so to comply, nor is the Company or
any Shareholder aware of any circumstance or conditions which may cause any
such Environmental Action to be filed or commenced against the Company.
Without limiting the generality of the preceding sentence, and to the
Shareholders' knowledge, the Company has obtained and been in compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under any applicable law or regulation, and
has complied, in all respects, with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in such laws.
7
<PAGE> 8
3.11 INSURANCE. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Company's and have been sufficient to protect the Company, the Assets and
the Business in all respects. The Company has not been refused any insurance
with respect to its Assets or operations, and its coverage has not been
limited, terminated or canceled by any insurance carrier to which it has
applied for any such insurance or with which it has carried insurance, during
the last three (3) years. Section 3.11 of Shareholders' Disclosure Memorandum
lists all claims, which (including related claims which in the aggregate)
exceed $5,000 which have been made by the Company in the last three years under
any workers' compensation, general liability, property or other insurance
policy applicable to Shareholders, the Business or any of the Assets. Except
as set forth on Section 3.11 of Shareholders' Disclosure Memorandum, there are
no pending or threatened claims under any insurance policy. Such claim
information includes the following information with respect to each accident,
loss, or other event: (a) the identity of the claimant; (b) the nature of the
claim; (c) the date of the occurrence; (d) the status as of the report date and
(e) the amounts paid or expected to be paid or recovered.
3.12 REAL PROPERTY.
(a) Section 3.12 of Shareholders' Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel of real
property owned by, leased to or used by the Company (the "Real Property") and
(ii) a complete and accurate list of all current leases, lease amendments,
subleases, assignments, licenses and other agreements to which the Real
Property is subject (collectively, the "Leases"), together with the name and
address of each tenant, the commencement and expiration date of each lease, the
monthly rent and additional rent payable under each lease and the date to which
such rent has been paid, the amount of any deposits, security or otherwise made
under such lease and whether the consent of any party to the lease (or their
mortgage) is required to consummate the transactions contemplated hereby. The
Company has delivered to Buyer true and complete copies of the Leases.
(b) Except as disclosed in Section 3.12 of Shareholders'
Disclosure Memorandum, and to the Shareholders' knowledge, (i) each of the
Leases is in full force and effect and has not been amended or modified; (ii)
neither the Company, nor any other party thereto, is in default thereunder, nor
is there any event which with notice or lapse of time, or both, would
constitute a default thereunder; (iii) the Company has received no notice that
any party to any Lease intends to cancel, terminate or refuse to renew the same
or to exercise or decline to exercise any option or other right thereunder; and
(iv) no rental under the Leases has been paid more than one month in advance.
(c) To the Shareholders' knowledge, there are no pending
or threatened condemnation or similar proceedings or assessments affecting the
Real Property, lawsuits by adjoining landowners or others, nor is there any
belief by the Company or Shareholders that any such lawsuit is contemplated by
any person, nor is any condemnation or assessment contemplated by any
governmental entity. The Real Property does not encroach on any other
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parcels of real property. The improvements to the Real Property do not violate
any zoning, easement, setback or other restrictive covenants applicable to the
Real Property. Except as set forth in the title commitments provided to the
Real Property, since November 18, 1996, there have been no materially adverse
actions that have or will affect the title to the Real Property or the use of
the Real Property as contemplated by Buyer hereunder. The title commitments to
the Real Property that were provided to Buyer prior to the Closing are
materially true and correct as of the Closing Date.
(d) At the time of Closing the Real Property will not in
whole or in part be subject to any lease, other than the Leases described
above.
(e) The Company has not entered, and will not enter, into
any written contracts, agreements, or listings, or be a party to any oral
understandings or agreements affecting the Real Property or the Leases.
(f) To the Shareholders' knowledge, the Company has
complied with all applicable laws, ordinances, regulations, statutes and rules
relating to the Real Property or any part thereof.
(g) Except as disclosed in Section 3.12 of the
Shareholders' Disclosure Memorandum, and to the Shareholders' knowledge, there
has been no storage, production, transportation, disposal, treatment or release
of any Hazardous Materials on or about the Real Property, and the Company has
complied with all applicable local, state or federal environmental laws and
regulations. There are no wells, underground storage tanks, cesspools, covered
surface impoundments or other sources of environmental pollutants or
contaminants on the Real Property.
Prior to the Company's acquisition of the Real Property, to
the Shareholders' knowledge, there was no storage, production, transportation,
disposal, treatment or release of any Hazardous Materials on or about the Real
Property. To the Shareholders' knowledge, there have been no Hazardous
Materials on or in the neighboring properties which, through soil or
groundwater migration, could have moved to the Real Property.
(h) The Company shall not and the Shareholders shall
cause the Company to not change or make alterations to the Real Property
between the date of this Agreement and the Closing. Such prohibited changes
shall include, but shall not be limited to, removal or relocation of site
improvements, buildings and landscaping.
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(i) The zoning of each parcel of the Real Property
permits the improvements located thereon and the continuation of business
presently being conducted thereon. The Real Property is served by utilities
and services necessary for the normal and continued operation of the business
presently conducted thereon. None of the real property constituting the Real
Property is subject to any zoning or historical preservation rulings or
ordinances that will prohibit the Company from continuing its intended use as a
manufacturing and/or distribution facility for bottled water products.
(j) The Real Property and the real property owned by the
Anniston Ice & Coal Company, Inc., includes all of the real property utilized
by the Company in the Business. At the Closing, the Real Property shall be
free and clear of all liens of other Encumbrances and will enable Buyer to
continue conducting the same Business on the Real Property as was conducted
prior to the Closing Date.
3.13 PERSONAL PROPERTY.
(a) To the Shareholders' knowledge, Section 3.13 of
Shareholders' Disclosure Memorandum is a complete and accurate schedule as of
February 28, 1998 describing, and specifying the location of, all inventory,
motor vehicles, machinery, fixtures, equipment, furniture, supplies, tools,
intangible assets and all other tangible or intangible personal property owned
by, in the possession of, or used by the Company (hereinafter the "Personal
Property"). The Personal Property shall not include any of the Excluded Assets
which are more fully described in Schedule 3.13(a) which is attached hereto and
incorporated herein by reference.
(b) Each lease, license, rental agreement, contract of
sale or other agreement applicable to any Personal Property is listed in
Section 3.13 of Shareholders' Disclosure Memorandum and is in full force and
effect; neither Shareholders nor any other party thereto is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. The Company has received no notice that
any party to any such lease, license, rental agreement, contract of sale or
other agreement intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. No
Personal Property is subject to any lease, license, contract of sale or other
agreement that is adverse to the Business, properties or financial condition of
the Company.
(c) The inventory of the Company as reflected by the
Financial Statements and as described in Section 3.13 of Shareholders'
Disclosure Memorandum consisted and consists of items substantially all of
which were and will be of the usual quality and quantity necessary for the
normal conduct of the Company and reasonably expected to be usable or salable
within a reasonable period of time in the ordinary course of business of the
Company, except items of inventory which have been written down to realizable
market value or written off completely, and damaged or broken items in an
amount which does not affect the value of the inventory as reflected on the
Financial Statements. With respect to inventory in the hands of suppliers for
which the Company is committed as of the date hereof, such inventory is
reasonably expected to be usable in the ordinary course of business of the
Shareholders as presently being conducted.
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3.14 CONTRACTS. Section 3.14 of Shareholders' Disclosure
Memorandum contains a complete and accurate list of all presently effective
contracts, leases and other agreements ("Contracts") to which the Company is a
party and which affect or are applicable to the Assets or the Company, true and
complete copies (or summaries in the case of oral contracts) of each of which
have been delivered to Buyer by Shareholders, including, without limitation,
any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any such
obligation for the borrowing of money;
(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either within or
outside the United States relating to sharing of present or future commissions,
fees or other income or profits;
(d) service agreement, lease, license, rental agreement,
contract of sale or other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract;
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts and/or
rebates);
(j) collective bargaining, employment or consulting
agreement;
(k) supply agreement or requirements contract; and
(l) construction contract, contract to purchase capital
equipment, or otherwise make capital expenditures.
Except as disclosed in Section 3.14 of Shareholders' Disclosure
Memorandum, each of the Contracts is in full force and effect and has not been
amended or modified and neither the Company, nor any other party thereto, is in
default thereunder, nor is there any event which with notice or lapse of time,
or both, would constitute a default thereunder. The Company has received no
notice that any party intends to cancel, terminate or refuse to renew any such
Contract or to exercise or decline to exercise any option or other right
thereunder. There are no
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contracts to which the Company is a party that cannot be terminated by the
Company without a penalty being assessed against the Company.
3.15 LABOR MATTERS. To the Shareholders' knowledge, there are no
controversies pending or threatened between the Company and any employees of
the Company. The Company has complied with all laws relating to the employment
of labor, including any provisions thereof relating to wages, hours, collective
bargaining, immigration, safety and the payment of withholding and social
security and similar taxes, and the Company has no liability for any arrears of
wages or taxes or penalties for failure to comply with any of the foregoing.
None of the Company's employees is a member of a labor union, and neither the
Company nor any of the Shareholders is aware of any effort (past or current) by
any labor union to organize the Company's employees.
3.16 ABSENCE OF SENSITIVE PAYMENTS. The Company has not made or
maintained (i) any contributions, payments or gifts of its funds or property to
any official, employee or agent of any vendor, customer or supplier, or of any
governmental entity, where either the payment or the purpose of such
contribution, payment or gift was or is illegal under the laws of the United
States or any state thereof, or any other jurisdiction (foreign or domestic);
or (ii) any contribution, or reimbursement of any political gift or
contribution made by any other person, to candidates for public office, whether
federal, state, local or foreign, where such contributions by the Company or
Shareholders were or would be a violation of applicable law.
3.17 EMPLOYEE BENEFITS. To the knowledge of Shareholders' all
employee benefit plans including, but not limited to health benefit plans,
(whether or not covered by ERISA), deferred compensation or executive
compensation plans for employees, directors or independent contractors, and all
other employee or independent contractor arrangements or programs that are
maintained or contributed to by the Company (collectively, the "Company Plans")
have been administered and operated in all material respects in compliance with
their terms, ERISA, if applicable, the Code and other applicable law. All
Company Plans that are intended to be qualified under Section 401(a) of the
Code are so qualified and a current favorable IRS determination letter exists
for each such plan and covers the amendments required by the Tax Reform Act of
1986. All funded Company Plans are fully funded according to their terms and
applicable law. No prohibited transaction or breach of fiduciary duty under
ERISA has been committed by any fiduciary, disqualified person or party in
interest of any Company Plan. To the knowledge of Shareholders' the Company
has no liability, contingent or otherwise, under Title IV of ERISA or any other
applicable law. All Company Plans are set forth in Section 3.17 of
Shareholders Disclosure Memorandum which is attached hereto and incorporated
herein by reference. All Company Plans will be terminated as of the Closing
Date and the liability of all such Company Plans, including, but not limited to
any obligations to fund such plans, is and will remain the sole liability of
the Shareholders.
3.18 CAPITAL IMPROVEMENTS. Section 3.18 of Shareholders'
Disclosure Memorandum describes all of the capital improvements or purchases or
other capital expenditures (as determined in accordance with GAAP) which the
Company has committed to or contracted for
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which have not been completed prior to the date hereof and the cost and expense
reasonably estimated to complete such work and purchases.
3.19 NO UNDISCLOSED LIABILITIES. To the knowledge of Shareholders,
except for the obligations and liabilities arising under the contracts
disclosed in Section 3.14 of the Shareholders' Disclosure Memorandum, 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 Financial
Statements and current liabilities incurred in the ordinary course of business
since the respective dates thereof.
3.20 ACCOUNTS RECEIVABLE. Except as otherwise indicated in
Section 3.20 of the Shareholder's Disclosure Memorandum, all accounts
receivable of the Company have arisen out of bona fide transactions in the
ordinary course of business, and each such account receivable constitutes a
valid and binding obligation of the obligor, maker, co-maker, guarantor,
endorser or debtor thereof or thereunder and is collectible in full within 60
days.
3.21 COMPLETE AND ACCURATE DISCLOSURE. No representation or
warranty made to Buyer in this Agreement or in connection with this transaction
contains or will contain an untrue statement of a fact, or omits or will omit
to state a fact necessary to make such representation or warranty not
misleading or necessary to enable Buyer to make a fully informed decision with
respect to its purchase of the Stock. All documents and information which have
been or will be delivered to Buyer or its representatives by or on behalf of
the Company are and will be true, correct and complete copies of the documents
they purport to represent.
3.22 LOANS FROM ANNISTON ICE & COAL COMPANY, INC. Shareholders
warrant and represent that the funds loaned to the Company from Anniston Ice &
Coal Company, Inc. were originally borrowed from Regions Bank by Anniston Ice &
Coal Company, Inc. and subsequently loaned by Anniston Ice & Coal Company, Inc.
to the Company for the benefit of the Company. Since Anniston Ice & Coal
Company, Inc. is being merged into Buyer contemporaneously with the closing of
this Agreement, Buyer will pay all amounts owed to Anniston Ice & Coal Company
directly to Regions Bank instead of paying said amounts to Anniston Ice & Coal
Company.
3.23 INTERCOMPANY AND AFFILIATE DEBT. As of the Closing, there is
no intercompany or affiliate debt as it relates to the Company and any other
entity that is affiliated with the Company, or owned or controlled by any of
the same individuals comprising the Shareholders hereunder.
3.24 BOTTLING LABELS. To the knowledge of Shareholders, the labels
used by the Company in its water bottling operations are accurately labeled in
all material respects, do not contain in misrepresentations or other misleading
information, and do not violate any laws or violate or infringe on the rights
of any third party.
3.25 WATER CONTRACT. The contract by and among Wilkes L.
Scarbrough and the Water Works & Sewer Board of Anniston is in full force and
effect, is fully assignable by Wilkes
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L. Scarbrough to either the Company or Buyer or Buyer's parent company, and
such assignment will enable Buyer or Buyer's parent company to continue water
bottling operations to the same extent as enjoyed by the Company and Wilkes L.
Scarbrough on the date hereof.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Buyer is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas.
4.2 POWER AND AUTHORITY. Buyer has the requisite corporate power
and authority, and has been duly authorized, to enter into this Agreement and
to perform all of its obligations hereunder. Buyer represents and warrants to
Shareholders that this Agreement has been duly executed and delivered by Buyer,
and constitutes a valid and binding obligation in accordance with its terms.
4.3 EFFECT OF THIS AGREEMENT. The execution, delivery and
performance by Buyer of this Agreement, and each Ancillary Document to which
Buyer is or will be a party, the consummation by Buyer of the transactions
contemplated hereby and thereby, and the compliance by Buyer with the
provisions hereof or thereof, will not, with or without the giving of notice or
the passage of time, (a) violate any law, ordinance, rule or regulation
applicable to Buyer, (b) violate any judgment, writ, injunction, order or
decree of any court, arbitrator or governmental authority applicable to Buyer,
or (c) result in the breach of or conflict with any term, covenant, condition
or provision of the articles of incorporation or by-laws of Buyer.
4.4 APPROVALS, CONSENTS, ETC.. No consent, authorization or
approval of, or waiver or exemption by, or filing or registration with, any
governmental agency or any other person is required to be obtained or made in
connection with the execution, delivery or performance by Buyer of this
Agreement or any Ancillary Document, or the consummation by Buyer of the
transactions contemplated hereby or thereby.
V. COVENANTS OF SHAREHOLDERS
Shareholders hereby, jointly and severally, covenant and agree as
follows:
5.1 CONDUCT OF BUSINESS. From the date hereof through the Closing
Date, Shareholders shall, and shall cause the Company to, use all reasonable
efforts to (i) preserve substantially the relationships with the Company's
employees, suppliers, customers and others doing business with it, (ii) perform
its obligations under all contracts, leases and permits in all material
respects, (iii) comply with all applicable laws, (iv) confer with Buyer
regarding operational matters of a material nature, (v) report periodically to
Buyer regarding the status of the business and the results of operations of the
Company, and (vi) conduct Company's business in the ordinary course and
consistent with past practices. Without limiting the foregoing, except as
otherwise required or permitted by this Agreement or listed in Section 5.1 of
Shareholder's Disclosure Memorandum from the date hereof through the Closing
Date, the Shareholders shall not, without Buyer's prior written consent, permit
the Company to:
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(a) amend its articles of incorporation or bylaws;
(b) (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the Company's
capital stock, (ii) redeem, purchase or otherwise acquire directly or
indirectly any shares of the capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities; (iii) authorize for issuance, issue, sell, pledge,
deliver or agree to commit to issue, sell, pledge or deliver (whether through
the issuance or granting of any options, warrants, calls, subscriptions, stock
appreciation rights or other rights or other agreements) or otherwise encumber
any shares of capital stock of any class of the Company or any securities
convertible into or exchangeable for shares of capital stock of any class of
the Company; or (iv) split, combine or reclassify the outstanding capital stock
of the Company or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of the capital stock of the Company;
(c) acquire or agree to acquire (including, without
limitation, by merger, consolidation or acquisition of stock or assets) any
business, corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof;
(d) sell, lease, license, transfer, mortgage or subject
to any Encumbrance or otherwise dispose of any assets of the Company other than
sales of inventory in the ordinary course of business and consistent with past
practice;
(e) except as disclosed in Section 5.1(e) of
Shareholder's Disclosure Memorandum, make or agree to make any new capital
expenditure or expenditures;
(f) except as required to comply with applicable law or
with contracts existing on the date hereof, (i) adopt, enter into, terminate or
amend in any material respect any employment contract, collective bargaining
agreement or employee benefit plan, (ii) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any director, officer
or employee, (iii) pay any benefit not provided for under any employee benefit
plan, (iv) increase in any manner the severance or termination pay of any
officer or employee, (v) grant any awards under any employee benefit plan
(including the grant of stock options, stock appreciation rights, stock-based
or stock-related awards, performance units or restricted stock or the removal
of existing restrictions in any employee benefit plans or agreements or awards
made thereunder), or (vi) take any action to fund or in any other way secure
the payment of compensation or benefits under any employee, contract or
employee benefit plan;
(g) amend, terminate or enter into any material contract;
(h) (i) incur or assume any debt, other than trade and
accounts payable incurred in the ordinary course of business in amounts
consistent with past practice, (ii) issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company; (iii)
enter into any arrangement to maintain any financial condition of another
person;
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(iv) guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person;
or (v) make any loans, advances or capital contributions to, or investments in,
any other person;
(i) make any material change in accounting methods,
principles or practices unless required by GAAP;
(j) compromise or settle any material claim or action;
(k) take, or agree to commit to take, any action that
would or is reasonably likely to result in any of the conditions set forth in
Article VIII not being satisfied, or would make any representation or warranty
of Shareholders contained herein inaccurate in any respect at, or as of any
time prior to, the Closing, or that would impair the ability of Shareholders to
consummate the transactions contemplated hereby in accordance with the terms
hereof or delay such consummation;
(l) make or rescind any Tax election or settle or
compromise any Tax liability or refund or change in any material respect any of
the methods of reporting income or deductions for federal income tax purposes;
(m) permit any material insurance policy naming the
Company as a beneficiary or a loss payable payee to be canceled or terminated,
except in the ordinary course of business and consistent with past practice;
(n) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company;
(o) enter into any related party contract; or
(p) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or authorize, recommend, propose or
announce an intention to do any of the foregoing.
5.2 INVESTIGATION BY BUYER. Prior to the Closing Date,
Shareholders shall (i) give Buyer and its authorized representatives and
advisors access, at reasonable times and on reasonable notice, to all items of
Personal Property, books and records, personnel, offices, and other facilities
of the Company, (ii) permit Buyer to make such inspections thereof as Buyer may
reasonably require, and (iii) cause its employees, and its advisors to furnish
to Buyer and its authorized representatives and advisors such financial and
operating data and other information with respect to the Business prepared in
the ordinary course of the Business as Buyer or its agent shall from time to
time reasonably request.
5.3 CLOSING CONDITIONS. Shareholders will, to the extent within
their control, use their best efforts to cause the conditions set forth in
Section 8.1 to be satisfied by the Closing Date.
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5.4 CONFIDENTIALITY. From and after the date hereof, Shareholders
will, and will cause the Company and their officers, employees,
representatives, consultants and advisors to, hold in confidence all
confidential information in the possession of Shareholders or the Company, its
affiliates or its financial advisor concerning the Company. Shareholders will
not release or disclose any such information to any person other than Buyer and
its authorized representatives. Notwithstanding the foregoing, the
confidentiality obligations of this Section shall not apply to information:
(a) which Shareholders or the Company are compelled to
disclose by judicial or administrative process, or, in the reasonable opinion
of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to
Shareholders or the Company by a third party who obtained such information
other than as a result of a breach of a confidential relationship.
5.5 PUBLIC ANNOUNCEMENT. Shareholders and Buyer will cooperate in
the public announcement of the transactions contemplated by this Agreement,
and, other than as may be required by applicable law, no such announcement will
be made by either party without the consent of the other party, which consent
shall not be unreasonably withheld.
5.6 NO SHOPPING. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither Shareholders nor the Company shall (and Shareholders and the Company
shall cause their respective affiliates, officers, directors, employees,
representatives and agents not to) directly or indirectly, solicit, initiate or
participate in discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group (other than Buyer
or an affiliate or an associate of Buyer) concerning, or enter into any
agreement providing for, any merger, sale of material assets, sale of stock or
similar transactions involving the Company, the Stock or the Assets.
5.7 FURTHER ASSURANCES. Shareholders will use their best efforts
to implement the provisions of this Agreement, and for such purpose
Shareholders, at the request of Buyer, at or after the Closing Date, will,
without further consideration, promptly execute and deliver, or cause to be
executed and delivered, to Buyer such deeds, assignments, bills of sale,
consents, documents evidencing title and other instruments in addition to those
required by this Agreement, in form and substance satisfactory to Buyer, as
Buyer may reasonably deem necessary or desirable to implement any provision of
this Agreement and to place Buyer in actual possession and operating control of
the Company, the Business and the Assets.
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5.8 INSURANCE. Shareholders shall cause and the Company shall
continue to maintain insurance through the Closing Date with financially sound
and reputable insurers unaffiliated with Shareholders in such amounts and
against such risks as are adequate to fully protect the Assets and the
Business.
5.9 NONCOMPETITION AGREEMENT. At the Closing, Shareholders will
enter into a noncompetition agreement in the form attached hereto as Exhibit
5.9 (the "Noncompetition Agreement").
5.10 TITLE REPORTS. Within ten (10) days after the date hereof,
Shareholders, at Shareholders' sole cost and expense, shall provide a title
report(s) and survey for all real property owned by the Company ("Owned Real
Property") and current reports of searches made of the Uniform Commercial Code
Records of the County and State where each parcel of Owned Real Property is
located (the "UCC Reports") setting forth the state of liens affecting the
title to the personal property and real property to be conveyed hereunder.
Such title report(s) shall serve as the basis for the issuance of a title
insurance policy or policies (the "Title Insurance Policy") in favor of Buyer,
at Shareholders' sole expense, insuring that that the Owned Real Property will
be, at Closing, owned by the Company free from all liens, charges,
encumbrances, exceptions, or reservations of any kind or character other than
those specifically approved by Buyer in writing. The Title Insurance Policy
shall be in the amount of $250,000.
5.11 EMPLOYMENT AGREEMENT. At the Closing, Elaine Scarbrough will
enter into the Employment Agreement attached hereto as Exhibit 5.11.
5.12 TERMINATION OF PROFIT SHARING AND PENSION PLANS. Prior to the
Closing, the Company Plans will be terminated by resolution of the board of
directors of the Company and amended as appropriate to effect such termination.
It is understood and agreed that the Company Plans will be terminated and wound
up in accordance with their respective terms and applicable law.
In the event that as of the Closing Date there are additional sums
that have accrued to the Company Plans but such amounts have not been paid,
then Shareholders shall remain jointly and severally liable for such amounts
and shall reimburse the Company for any amounts that the Company is required to
make in this regard.
Shareholders hereby covenant that they will take all necessary actions
to file the appropriate requests with the Internal Revenue Service to obtain a
favorable determination letters with respect to the termination of the Company
Plans and will bear all costs associated with such favorable determination.
VI. COVENANTS OF BUYER
6.1 CLOSING CONDITIONS. Buyer will, to the extent within its
control, use its best efforts to cause the conditions set forth in Section 8.2
to be satisfied by the Closing Date.
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6.2 ANCILLARY AGREEMENTS. At the Closing, Buyer will enter into
the Noncompetition Agreement, the Escrow Agreement and all other ancillary
documents required hereunder.
6.3 BUYER'S FINANCIALS. Buyer hereby covenants that its financial
information provided to Shareholders pursuant to this Agreement are true and
correct.
VII. CLOSING
7.1 TIME AND PLACE. The consummation of the sale and purchase of
the Stock and the execution of the Noncompetition Agreement, the Escrow
Agreement and all other ancillary documents required hereunder (the "Closing")
shall take place at a mutually agreeable time and place on or before March 24,
1998. The date of the Closing shall herein be referred to as the "Closing
Date."
7.2 SHAREHOLDERS' OBLIGATIONS AT CLOSING. At the Closing,
Shareholders shall execute, acknowledge (where appropriate) and deliver, or
cause to be delivered, to Buyer in form reasonably satisfactory to Buyer:
(a) Stock certificates representing the Stock, duly
endorsed for transfer or accompanied by stock powers duly executed in blank,
and any other documents that are necessary to transfer to Buyer good and
marketable title to the Stock;
(b) All written approvals, consents and certificates
required to be executed by the Shareholders in order to effectively transfer
the Stock to Buyer.
(c) The opinion of counsel referred to in Section 8.1(f).
(d) Letters of resignation of the officers and directors
of the Company.
(e) All other documents and certificates required to be
delivered to Buyer pursuant to this Agreement, including without limitation,
the Noncompetition Agreement and the Escrow Agreement and the Undertaking
Agreement.
(f) Deliver to Buyer the Title insurance Policy to the
Owned Real Property.
7.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer will:
(a) pay the cash portion of the Purchase Price in
accordance with Section 2.2;
(b) deliver $337,800 to the Escrow Agent;
(c) deliver to Shareholders executed counterparts of the
Noncompetition Agreement and the Escrow Agreement and all other ancillary
documents required hereunder.
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VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to complete the transactions contemplated at the Closing shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of
Shareholders to be performed or complied with on or before the Closing Date
shall have been duly performed or complied with in all respects and
Shareholders shall deliver to Buyer a certificate signed by an officer of
Shareholders to such effect.
(b) Representations and Warranties True; No Adverse
Change. The representations and warranties of Shareholders contained herein
shall be true and correct on the Closing Date with the same force and effect as
though such representations and warranties had been made on the Closing Date,
and since the date hereof there shall have occurred no adverse change in the
Business, and Shareholders shall deliver to Buyer a certificate signed by an
officer of Shareholders to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Buyer from consummating the
transactions contemplated hereby.
(d) Third Party Creditors. All third party creditors of
the Business will be paid in full, and all Encumbrances against the Stock and
Assets, including all Owned Real Property, will be paid or discharged.
(e) Capital Leases. All Capital Leases shall be paid in
full and the personal property subject thereto shall be conveyed to the
Company free and clear of Encumbrances.
(a) Opinion of Counsel for Shareholders Buyer shall have
received the opinion of Spain & Gillon, L.L.C. dated as of the Closing Date, in
form and substance satisfactory to Buyer and Buyer's counsel, subject to
reasonable qualifications and exceptions, as set forth on Exhibit 8.1(f).
(a) Due Diligence Inspection. Buyer's obligation to
consummate this Agreement is expressly conditioned on Buyer's satisfaction of
its due diligence investigation of the Company and Shareholders.
(h) Ancillary Agreements. Shareholders have executed the
Noncompetition Agreement, the Employment Agreement, the Escrow Agreement and
all other ancillary documents required hereunder.
(i) Merger of Anniston Ice & Coal Company, Inc. The
contemplated merger of Anniston Ice & Coal Company, Inc. whereby Anniston Ice &
Coal Company, Inc. will merge into Buyer and Buyer will remain as the surviving
entity will have occurred contemporaneously with the execution of this
Agreement.
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(j) Water Works and Sewer Board Contract. The
Shareholders shall have delivered a contract by and among the Company and the
Anniston Water Works and Sewer Board permitting the Company to continue to
purchase water from the Water Works and Sewer Board in a form that is
acceptable to Buyer.
8.2 CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS. The obligation of
Shareholders to complete the transactions contemplated at the Closing shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Performance. Each agreement and obligation of Buyer
to be performed or complied with on or before the Closing Date shall have been
duly performed or complied with in all material respects and Buyer shall
deliver to Shareholders a certificate signed by an officer of Buyer to such
effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Buyer contained herein
shall be true and correct on the Closing Date with the same force and effect as
though such representations and covenants had been made on the Closing Date,
and Buyer shall deliver to Shareholders a certificate signed by an officer of
Buyer to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Shareholders from
consummating the transactions contemplated hereby.
IX. INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER BY SHAREHOLDERS. Shareholders agree
to indemnify, defend and hold harmless Buyer and Buyer's employees, agents,
heirs, legal representatives, and assigns from and against any and all claims,
suits, losses, expenses (legal, accounting, investigation and otherwise),
damages and liabilities, including, without limitation, tax liabilities
(hereinafter, collectively "Damages"), arising out of or relating to (i) any
liability or obligation of the Company assumed by Shareholders at the Closing
Date hereunder pursuant to the Undertaking Agreement, (ii) any claim or cause
of action arising with respect to the conduct of, or conditions existing with
respect to, the Company prior to the Closing, whether or not disclosed to
Buyer, (iii) any inaccuracy of any representation or warranty set forth in this
Agreement or the breach of any covenant made by Shareholders in or pursuant to
this Agreement, or (iv) the improper or illegal use, storage or disposal of any
Hazardous Materials by the Company prior to the Closing Date, or any
Environmental Action pending, threatened or accrued as of the Closing Date
(whether known or unknown, disclosed or undisclosed.) The obligation of the
Shareholders to indemnify Buyer shall continue for a period of seven years
after the date hereof notwithstanding Buyer's knowledge of the inaccuracy of
any representation or warranty of the Shareholders set forth in this Agreement
or in any document or certificate furnished or required to be furnished
pursuant to this Agreement.
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9.2 INDEMNIFICATION OF THE COMPANY AND SHAREHOLDERS BY BUYER.
Buyer agrees to indemnify, defend and hold harmless the Shareholders from and
against (i) any and all Damages arising out of or relating to any material
inaccuracy or any material misrepresentation made herein by Buyer, (ii) the
material breach of any warranty of Buyer set forth in this Agreement, (iii) the
breach of any covenant made by Buyer in or pursuant to this Agreement or (iv)
any claim arising relating to the Company, the Assets or the Business arising
after the Closing Date.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party. In addition to all other
remedies provided hereunder or by law, Buyer shall specifically have the right
to make a claim against the Escrow Amount for any of Buyer's Damages.
9.4 RIGHT TO DEFEND. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within forty-five (45) days after receipt of the Notice of
Claim that the Indemnifying Party intends to assume the defense of such claim
and acknowledges its liability to indemnify the Indemnified Party for any
losses resulting from such claim; provided, however, that if the Indemnifying
Party does not elect to assume the defense of any claim, then (a) the
Indemnifying Party shall have the right to participate in the defense of such
claim or demand at its expense through counsel of its own choosing, provided
the Indemnified Party shall control the defense of such claim, (b) the
Indemnified Party may settle any such claim without the consent of the
Indemnifying Party, however, the Indemnifying Party may not settle any such
claim without the prior written consent of the Indemnified Party; and (c)
Section 9.5 hereof shall be inapplicable. Whether or not the Indemnifying
Party does choose to so defend such claim, the parties hereto shall cooperate
in the defense thereof and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be requested in connection therewith. To the extent
Shareholders are the Indemnified Parties for any actual or threatened claim or
demand by any third party, Shareholders shall have the right to control the
prosecution of any counterclaim or right related to such a claim or demand,
provided that Shareholders agree to reasonably cooperate with Buyer with
respect to the prosecution of such counterclaim or right.
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9.5 SETTLEMENT. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.6 EFFECT OF TERMINATION. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
X. TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of
Shareholders and Buyer;
(b) Misrepresentation or Breach. By Shareholders if
there has been a material misrepresentation or a material breach of a warranty
or covenant herein or in any agreement required to be delivered pursuant hereto
on the part of Buyer hereto;
(c) Misrepresentation or Breach. By Buyer if there has
been a misrepresentation or a breach of a warranty or covenant herein or in
any agreement required to be delivered pursuant hereto on the part of
Shareholders hereto;
(d) Failure of Condition to Buyer's Obligations. By
Buyer, if all of the conditions set forth in Section 8.1 have not been
satisfied;
(e) Failure of Condition to Shareholders' Obligations.
By Shareholders, if all of the conditions set forth in Section 8.2 have not
been satisfied;
(f) Court Order. By Shareholders or Buyer if
consummation of the transactions contemplated hereby shall violate any
nonappealable final order, decree or judgment of any court or governmental body
having competent jurisdiction; or
(g) Adverse Change. By Buyer if any event has occurred
after the date hereof which is, or will result in an adverse change in the
prospects, business or condition of the Company.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of Shareholders and Buyer
under this Agreement shall terminate without further liability of Shareholders
or Buyer. If Shareholders fail to consummate the
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transactions contemplated on its part to occur on the scheduled Closing Date,
in circumstances whereby all conditions of the Closing set forth in Section 8.2
have been satisfied in all material respects or waived, Buyer's sole remedy
shall be to (i) to require Shareholders to consummate and specifically perform
the transactions contemplated hereby, 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. If Buyer fails 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 8.1 have been satisfied in all respects or
waived, Shareholders' sole remedy shall be to (i) to require Buyer to
consummate and specifically perform the transactions contemplated hereby, in
accordance with the terms of this Agreement, and to obtain from Buyer 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.
10.3 RIGHT TO PROCEED. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or Section 8.2 has
not been satisfied, Shareholders or Buyer, in addition to any other rights
which may be available to it, shall have the right to waive any such condition
that is for its benefit and to require the other party hereto to proceed with
the Closing.
XI.TAX MATTERS.
11.1. TAX DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Final Determination" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by the
Company or Shareholders, whichever are responsible for payment of such Tax
under applicable law, with respect to any item disallowed or adjusted by a
Taxing Authority, provided that such responsible party determines that no
action should be taken to recoup such payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion thereof)
beginning after the close of business on the Closing Date.
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"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax, gross
income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign).
"Tax Indemnification Period", means with respect to any Tax, any
Pre-Closing Tax Period of the Company.
11.2 SECTION 338(H)(10) ELECTION. Shareholders and the Company
will join with Buyer in making an election under Section 338(h)(10) of the Code
and Section 1.338(h)(10)-1 of the Treasury Regulations promulgated under the
Code, and any corresponding election under state, local and foreign tax laws,
with respect to the purchase and sale of the Stock hereunder (a "Section
338(h)(10) Election"). Shareholders will include any income, gain, loss,
education or other tax item resulting from the Section 338(h)(10) Election on
their respective Tax returns to the extent permitted by applicable laws.
Shareholders will also pay any Tax imposed on the Company attributable to the
making of the Section 338(h)(10) Election, including, but not limited to, (i)
any Tax imposed under Code Section 1374, or (ii) any tax imposed under Reg.
Section 1.338(h)(10)-1(e)(5) and Shareholders will indemnify Buyer and the
Company against any liabilities, costs, expenses (including, without
limitation, reasonable expenses of investigation and attorneys fees and
expenses), losses, damages, settlements, assessments or judgments arising out
of any failure to pay any such Taxes. The Company and Shareholders have not
revoked the Company's election to be taxed as an S corporation within the
meaning of Code Section 1361 and 1362. The Company and Shareholders have not
taken or allowed any action that would result in the termination of the
Company's status as a validly electing S corporation within the meaning of Code
Sections 1361 and 1362.
11.3 ALLOCATION OF PURCHASE PRICE. Buyer and Shareholders agree
that the purchase price paid to Shareholders hereunder and the liabilities of
the Company (plus other relevant items) will be allocated to the assets of the
Company for all purposes (including Tax and financial accounting purposes) as
mutually determined by Buyer and Shareholders in accordance with applicable
income tax laws and regulations, which allocation shall be set forth on
Schedule 11.3 to be attached to this Agreement following the final
determination of any adjustment to the purchase price pursuant to this
Agreement. Buyer and Shareholders will file, and will cause the Company to
file, all Tax Returns and information reports in a manner consistent with such
allocations.
11.4 FILING OF SHORT PERIOD RETURNS. Buyer and Shareholders shall
treat and cause the Company to treat the Closing Date as the last day of the
taxable period in which the Company is an
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S corporation, as defined under the Code. All Tax returns 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 Code, the books of the Company shall be closed effective the Closing
Date. Shareholders will cause its accounting firm to prepare, at Shareholders'
expense, the S Short Year Returns.
11.5. COVENANTS.
(a) Without the prior written consent of Buyer,
Shareholders shall not cause the Company to make or change any tax election,
change any annual tax accounting period, adopt or change any method of tax
accounting, file any amended 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 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 Buyer.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) 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 real property transfer Tax and any similar
Tax) shall be accrued by the Company on the Effective Date Balance Sheet and be
paid by the Shareholders when due (including any applicable extensions), and
the Company will, at Shareholders' expense, file all necessary Tax returns and
other documentation with respect to all such Taxes and fees. This subparagraph
shall not apply to any vehicle or other re- titling fees to take place after
the Closing Date. All such vehicle or other re-titling shall be borne by the
Buyer.
11.6. COOPERATION ON TAX MATTERS.
(a) Buyer and Shareholders shall cooperate fully, 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 6043 of the Code and all Treasury
Regulations promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention 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. Buyer
and Stockholders shall cause the Company to: (i) to retain 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 requirements of
any Taxing Authority or any record retention agreements entered into with any
Taxing Authority, and (ii) to give Shareholders reasonable written notice prior
to destroying or discarding any such books and records and, if Shareholders so
request, Buyer shall allow Shareholders to take possession of such books and
records.
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(b) Buyer and Shareholders further 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 (including, but not limited
to, with respect to the transactions contemplated hereby).
11.7. TAX INDEMNIFICATION. Shareholders hereby jointly and
severally indemnify Buyer against and agree to hold Buyer harmless from any
loss, liability or expense attributable to (i) any Tax with respect to income
(including, to the extent based on income, state franchise Taxes), transfer
Tax, employment or withholding Tax related to employee tips income (actual and
allocated) and related reporting requirements, and gross receipts or royalty
Tax in respect of any franchise operation and any other Tax of the Company
related to the Tax Indemnification Period, (ii) any Tax resulting from a breach
of the provisions of Section 11.5, and (iii) any liabilities, costs, expenses
(including, without limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee or successor (the
sum of (i), (ii), and (iii) being referred to herein as a "Loss").
11.8 PURCHASE PRICE ADJUSTMENT. Any amount paid by Shareholders,
Buyer or the Company under Section 11.7 will be treated as an adjustment to the
relevant purchase price for all Tax purposes unless a Final Determination
causes any such amount not to constitute an adjustment to the relevant purchase
price. In the event of such a Final Determination, Buyer, the Company or
Shareholders, as the case may be, shall pay an amount that reflects the
hypothetical Tax consequences of the receipt or accrual of such payment, using
the maximum statutory rate (or rates, in the case of an item that affects more
than one Tax) applicable to the recipient of such payment for the relevant
year, reflecting for example, the effect of deductions available for interest
paid or accrued and for Taxes such as state and local income Taxes. Any
payment required to be made by Buyer or Shareholders under this Article XI that
is not made when due shall bear interest at the rate per annum determined, from
time to time, under the provision of Section 6621(a)(2) of the Code for each
day until paid.
11.9. SURVIVAL. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
XII. MISCELLANEOUS
12.1 EXPENSES. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing for a period of seven years.
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12.3 INUREMENT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
12.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules
and Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
12.5 SEVERABILITY. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the remaining provisions
hereof and without affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
12.6 INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 CAPTIONS AND HEADINGS; USE OF TERM "PERSON". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection
cross-references are to articles, sections and subsections within this
Agreement. As used herein, the term "person" shall mean any corporation,
limited liability company, partnership, venture, proprietorship, trust,
governmental entity, benefit plan or other entity or enterprise.
12.8 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA.
12.9 NOTICES. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission (with facsimile generated
confirmation), or by United States Mail, postage prepaid, by registered or
certified mail (return receipt requested), to the addressed indicated below and
shall be deemed given when received by the addressee thereof:
to Shareholders: Wilkes Scarbrough
c/o William A. Julian
1130 Quintard Avenue, Suite 201
Anniston, Alabama 36202
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Elaine Scarbrough
c/o William A. Julian
1130 Quintard Avenue, Suite 201
Anniston, Alabama 36202
with a copy to: Glenn E. Estess, Jr.
Spain & Gillon, L.L.C.
2117 2nd Avenue N.
Birmingham, Alabama 35203
to Buyer: Packaged Ice Southeast, Inc.
8572 Katy Freeway, Suite 101
Houston, Texas 77024
Attn: James F. Stuart, Chief Executive Officer
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
300 Convent St., Suite 1500
San Antonio, Texas 78205
Attn: Alan Schoenbaum
or such other address or addresses as may be expressly designated by
either party by notice given in accordance with the foregoing provision.
12.10 AGENTS OR BROKERS. Shareholders and Buyer mutually represent
and agree with each other that no agents or brokers have been utilized in the
solicitation or negotiation of the sale of the Business and no fees,
commissions or expenses of any type shall be due or payable out of the proceeds
of the purchase price by either party to this Agreement.
12.11 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities laws, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in Birmingham, Alabama and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof, and shall not be appealable. Judicial proceedings may be commenced
only to enforce this arbitration agreement or to enforce the results of
arbitration; provided that such prohibition shall not apply in the event that a
court ordered injunction is an appropriate remedy for a breach of this
Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
[SBWC STOCK PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS]
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[SBWC STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE SOUTHEAST, INC.
By: /s/ A. J. LEWIS, JR.
----------------------------------------
Print Name: A. J. LEWIS, JR.
-----------------------------
Print Title: President
----------------------------
SHAREHOLDERS:
/s/ WILKES SCARBROUGH
-------------------------------------------
WILKES SCARBROUGH
/s/ ELAINE SCARBROUGH
-------------------------------------------
ELAINE SCARBROUGH
<PAGE> 31
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets of Southern Bottled Water Company, Inc.
Exhibit B Property Subject to Capital Leases
Exhibit 2.2(b) Escrow Agreement
Exhibit 2.2(d) Undertaking Agreement
Schedule 3.13(a) Excluded Assets
Exhibit 5.9 Noncompetition Agreement
Exhibit 5.11 Employment Agreement
Exhibit 8.1(f) Opinion of Counsel
Schedule 11.3 Allocation of Purchase Price
Shareholders' Disclosure Memorandum
<PAGE> 1
EXHIBIT 10.12
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
March 26, 1998, by and among Packaged Ice Southeast, Inc., a Texas corporation
(the "Buyer"), Cumberland Gas and Ice, Inc., a Georgia corporation (the
"Seller"), S. Keith Dixon, an individual residing in the State of Georgia, and
Annie Mae Dixon, an individual residing in the State of Georgia, who together
own all of the outstanding shares of Seller (together, the "Shareholders").
PRELIMINARY STATEMENTS
Seller is engaged in the production, distribution and sale of packaged
ice products (such business being referred to herein as the "Seller's Business"
or the "Business"); and
Seller is desirous of selling to Buyer, and Buyer is desirous of
purchasing, certain assets of Seller's Business, upon the terms and conditions
hereafter set forth; and
The Seller and Shareholders are desirous of entering into a
noncompetition agreement and other ancillary agreements.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties hereafter set forth, the
parties hereby agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"Assets" shall mean the First Closing Assets and the Brunswick
Property. The Assets shall not include the Excluded Assets (defined
hereinbelow).
"Assigned Leases" shall have the meaning set forth in Section 3.7 of
this Agreement.
"Bill of Sale" shall refer to the Bill of Sale conveying title to the
Assets from Seller to Buyer attached to this Agreement as Exhibit A.
"Brunswick Property" shall have the meaning set forth in Section 2.2
of the Agreement.
"Encumbrances" shall have the meaning set forth in Section 3.4 of
this Agreement.
"Excluded Assets" shall have the meaning set forth in Section 2.3 and
Schedule 2.3 of this Agreement.
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"First Closing " shall have the meaning set forth in Section 7.1 of
this Agreement.
"First Closing Assets" shall have the meaning set forth in Section 2.1
of this Agreement.
"First Closing Date" shall have the meaning set forth in Section 7.1
of this Agreement.
"First Closing Real Property" shall mean the real property to be
conveyed to Buyer on the First Closing Date, and the legal description of which
is in Schedule 2.1 and is attached to this Agreement and is incorporated
herein.
"Financial Statements" shall have the meaning set forth in Section 3.3
of this Agreement.
"Governmental Authority" shall mean any federal, state, local, foreign
or other governmental agency, department, commission, board, bureau,
instrumentality or body.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets of, and only of, the
Business (together with all pending applications, continuations-in-part and
extensions for any of the above).
"Leased Real Property" shall have the meaning set forth in Section 2.1
of this Agreement.
"Letter of Credit" shall have the meaning set forth in Section 2.10 of
this Agreement.
"Macon Lease" shall mean the lease entered into by and between
Mini-Food Stores, Inc. and Cumberland Gas and Ice, Inc. on June 10, 1992 for
real property located in Macon, Georgia.
"Real Property" shall mean the First Closing Real Property and the
Brunswick Property.
"Seller's Disclosure Memorandum" shall mean a memorandum prepared by
the Seller and Shareholders and delivered to Buyer that lists all disclosures
by the Seller and Shareholders concerning the Assets and the Business which are
the subject of this Agreement.
"Second Closing" shall have the meaning set forth in Section 7.1 of
this Agreement.
"Second Closing Date" shall have the meaning set forth in Section 7.1
of this Agreement.
"Taxes" shall mean all excise, added value, sales, use, real and
personal property, occupancy, business and occupation, mercantile, real estate,
or other tax (including interest and penalties thereon and including estimated
taxes thereof).
"Tifton Lease" shall mean that certain Lease entered into on August
21, 1995 by and between Cumberland Gas and Ice, Inc. and Georgia Cold Storage
Co. for real property located in Tifton, Georgia.
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II. PURCHASE AND SALE
2.1 PURCHASE AND SALE OF ASSETS AT FIRST CLOSING. Subject to the
terms and conditions of this Agreement, and in reliance upon the
representations and warranties of Seller contained herein, Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer agrees to purchase, at
the First Closing, the personal property, Intangible Assets, contracts and
rights of Seller related to the Seller's Business, including but not limited to
those items which are described on Schedule 2.1 attached hereto and
incorporated herein by reference, all of the goodwill of Seller's Business
associated therewith, all of the First Closing Real Property together with a
title insurance policy or policies (with premiums paid by Seller in an amount
equal to the value allocated to each parcel or leasehold interest provided in
Schedule 2.8 attached hereto, and otherwise in form and substance satisfactory
to Buyer) (collectively, the "First Closing Assets"), free and clear of
Encumbrances.
2.2 PURCHASE AND SALE OF ASSETS AT SECOND CLOSING. Subject to
the terms and conditions of this Agreement, and in reliance upon the
representations and warranties of Seller contained herein, Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer agrees to purchase, at
the Second Closing, the real property known as the Brunswick Property as more
particularly described in the legal description described in Schedule 2.2
attached hereto, as restored in accordance with the plans and specifications
set forth in Schedule 2.2 attached hereto, together with a title insurance
policy (with premium paid by Seller in an amount equal to, and otherwise in
form and substance satisfactory to Buyer), (the "Brunswick Property"), free and
clear of Encumbrances. Certain improvements constructed on the Brunswick
Property have been destroyed by an insured casualty event. Ranger Insurance
("Insurer") has agreed to pay the replacement costs of the destroyed equipment
and improvements which it estimates at $450,000 ("Insurance Funds") and such
funds will be used exclusively for the repair and restoration of improvements
at the Brunswick Property. In connection with such repair and restoration,
Seller represents and warrants that it has commenced construction to rebuild
the ice manufacturing plant at the Brunswick Property in accordance with the
plans and specifications set forth in Schedule 2.2 attached hereto. Seller
agrees to take such action as is necessary to complete such construction by
April 15, 1998, and to consult with Buyer as frequently as Buyer desires with
respect to the Contractor's work. In addition, Seller agrees to submit any and
all change orders requested by Buyer, and the cost of such change orders shall
be added to the Second Closing Purchase Price. Seller represents and warrants
that the Insurance Funds are sufficient to cover all costs necessary to rebuild
the ice manufacturing plant at the Brunswick Property in accordance with the
plans and specifications set forth in Schedule 2.2 attached hereto, and to
Buyer's satisfaction. If the construction on the Brunswick Property is not
complete by April 15, 1998, the Second Closing Purchase Price shall be reduced
by an amount of $2,500 per day, through April 30, 1998, then shall be reduced
by an amount of $5,000 per day thereafter, such sum being agreed upon as
liquidated damages for the failure of Seller to perform the duties, liabilities
and obligations imposed upon it by the terms and provisions of this Section 2.2
and because of the difficulty, inconvenience and uncertainty of ascertaining
actual damages. The Second Closing shall take place within ten (10) days after
completion of the construction on the Brunswick Property, to Buyer's reasonable
satisfaction.
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2.3 EXCLUDED ASSETS. The Assets shall not include, and Buyer
shall not acquire, the assets and properties described in Schedule 2.3 attached
hereto (the "Excluded Assets").
2.4 PURCHASE PRICE.
(a) First Closing Assets. The purchase price for the
First Closing Assets shall be THREE MILLION THREE HUNDRED THOUSAND
DOLLARS ($3,300,000.00).
(b) Brunswick Property. The purchase price for the
Brunswick Property shall be ONE MILLION DOLLARS ($1,000,000).
The Purchase Price shall be payable in accordance with Section 2.6 of
this Agreement.
2.5 ASSUMPTION OF LIABILITIES. It is hereby agreed and
understood that Buyer is assuming no liabilities whatsoever of Seller, and the
Assets will be conveyed free and clear of all Encumbrances arising out of
Seller's Business or otherwise. Seller shall be responsible for all employment
related expenses which accrue before the First Closing Date, including, without
limitation, salaries, wages, accrued vacation pay, sick pay or leave,
unemployment compensation, ERISA obligations, pension and profit sharing plans,
income tax withholding, and Social Security taxes. Seller will continue to be
responsible for all tort, contractual, statutory and environmental liabilities
(including, without limitation, all cleanup requirements) relating to (a) the
First Closing Assets existing on or prior to the First Closing Date, and (b)
the Brunswick Property existing on or prior to the Second Closing Date, and
shall discharge all accounts payable and other liabilities and obligations
(save and except Seller's obligations for the construction of the Brunswick
Property) promptly after the First Closing, and shall discharge all liabilities
and obligations relating to the construction of the Brunswick Property prior to
the Second Closing. Seller will terminate its employees related to the
Business as of the First Closing Date, and Buyer may thereafter hire any or all
of such employees. The parties agree that Buyer is not assuming any of
Seller's pension or profit sharing plans, and Seller shall remain responsible
therefor.
2.6 PAYMENT OF PURCHASE PRICE.
(a) The purchase price for the First Closing Assets shall
be payable as follows:
(i) the First Closing Date payoff amounts of all
current and long-term interest bearing debt and capital leases
(including any unpaid interest and prepayment penalties) shall
be paid directly to Seller's creditors;
(ii) the remaining cash shall be paid to Seller;
(b) The purchase price for the Brunswick Property (less
any adjustments made for Liquidated Damages) shall be paid to Seller
on the Second Closing Date after the
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conditions set forth in Section 2.2 and the closing conditions set
forth in Section 7.4 have been completed by the Seller.
2.7 PRORATION. The parties shall prorate at the First Closing
and the Second Closing, the current year's ad valorem taxes and vehicle license
fees on the property comprising the assets conveyed at such closing, based on
the latest available statements from taxing authorities, whether for the
current tax year or the preceding tax year. In addition, the parties shall
prorate at Closing the rent and other charges due under the Assigned Leases
("Lease Charges"). The prorated amounts shall be payable in the manner set
forth below. Seller's pro rata share of such taxes, vehicle license fees and
Lease Charges shall be the portion attributable to the period through the day
preceding the closing date which the real property or the personal property is
conveyed to Buyer, prorated by days.
(a) If a prorated amount is payable by Buyer and
determinable on a closing date, it shall be added to the amount
payable by Buyer at the respective closing.
(b) If a prorated amount is payable by Buyer and not
determinable on a closing date, it shall be billed by Seller when
determinable and promptly paid by Buyer to Seller.
(c) If a prorated amount is payable by Seller and
determinable on a closing date, it shall be deducted from the amount
otherwise payable by Buyer on a respective closing date
(d) If a prorated amount is payable by Seller and not
determinable on a closing date, it shall be billed by Buyer when
determinable and promptly paid by Seller to Buyer.
2.8 ALLOCATION. The parties hereto agree and acknowledge that
the Purchase Price shall be allocated as set forth in Schedule 2.8 attached
hereto, and Seller and Buyer agree to file all Tax returns or reports
including, without limitation, IRS Form 8594, for their respective taxable
years in which the First Closing and Second Closing occur, and to reflect the
allocation of the Purchase Price on any such return or report, and agree not to
take any position inconsistent therewith before any Governmental authority
charged with the collection of any Tax or in any administrative proceeding.
2.9 CONSULTING AGREEMENTS. Buyer shall enter into a consulting
agreement in the form of Exhibit C attached hereto, with Keith Dixon for a term
of ten (10) years, with an annual compensation of $61,000. Buyer shall enter
into a consulting agreement in the form of Exhibit D attached hereto, with
Sidney Southwell for a term of five (5) years, with annual compensation of
$18,000 per year (together the two agreements are hereinafter referred to as
the "Consulting Agreements").
2.10 LETTER OF CREDIT. At the First Closing, Seller shall provide
to Buyer an irrevocable letter of credit in a form acceptable to Buyer, from a
nationally recognized financial
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institution reasonably acceptable to Buyer, in the amount of $430,000 (the
"Letter of Credit") to reimburse Buyer for any Damages (hereinafter defined)
incurred by Buyer as set forth in Article IX hereof. The Letter of Credit shall
be effective as of the First Closing Date and be continuously in effect for a
period of one (1) year and forty (40) days after the Second Closing Date, and
permit Buyer to unilaterally withdraw sums for Damages incurred by Buyer and
which are indemnified pursuant to Article IX of this Agreement, by presenting
the original Letter of Credit to the issuing bank accompanied by a letter
signed by a representative of Buyer which states "The undersigned are entitled
to draw upon this letter of credit pursuant to that certain agreement dated
March ____, 1998 by and among Packaged Ice Southeast, Inc., S. Keith Dixon and
Annie Mae Dixon (the "Asset Purchase Agreement")." If the Second Closing has
not occurred by April 15, 1998, Seller agrees to renew or replace the Letter of
Credit for a like term by March 22, 1999, and if Seller has not provided such
renewal or replacement Letter of Credit by March 22, 1999, Buyer is entitled to
draw the entire amount of the Letter of Credit. If any Damages which are
indemnifiable by Seller have not been paid or are not finally determined at May
14, 1999, then Seller shall cause a renewal or replacement Letter of Credit to
be delivered to Buyer ten (10) days prior to the expiration of the then current
Letter of Credit, which will entitle Buyer to draw upon the issuing bank until
ten (10) days after such dispute is finally determined. If such replacement
letter is not provided by the ten (10) day period before the expiration of the
then current Letter of Credit, then Buyer shall be entitled to draw the entire
amount of the Letter of Credit.
III. REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND SHAREHOLDERS
Except as otherwise disclosed in the Seller's Disclosure Memorandum,
each of the Seller and Shareholders represent and warrant, jointly and
severally, to Buyer as follows:
3.1 ORGANIZATION. Seller is a corporation duly incorporated and
organized under the laws of the State of Georgia, and is qualified to do
business in the State of Georgia. The Seller has all requisite power and
authority to own, lease and operate the Business as presently conducted and to
enter into this Agreement and to perform its respective obligations hereunder.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. The
execution, delivery and performance by the Seller and Shareholders of this
Agreement, and the consummation of each of them of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered by the Seller and
Shareholders and constitutes the valid and binding obligations of the Seller
and Shareholders, enforceable against them in accordance with its terms. The
execution, delivery and performance of this Agreement by the Seller and
Shareholders will not, with or without the giving of notice, the passage of
time, or both, violate, conflict with, result in a default, breach or loss of
rights under, or result in the creation of any lien, claim or encumbrance
pursuant to any lien, encumbrance, instrument, agreement or understanding, or
any law, regulation, rule, order, judgment or decree, to which the Seller
and/or the Shareholders are a party or by which they are bound or affected.
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3.3 FINANCIAL STATEMENTS. Seller has previously caused to be
furnished to Buyer the balance sheets of Seller's Business (separate from any
propane gas or other business conducted by Seller) as of December 31, 1996 and
December 31, 1997, the related unaudited statements of income and statements of
cash flow for the period then ended and the balance sheet and statements of
income and cash flow as of January 31, 1998 and February 28, 1998 (such balance
sheets and related statements are collectively referred to herein as the
"Financial Statements"). The Financial Statements taken as a whole present
fairly the financial position of Seller as of December 31, 1996, December 31,
1997, January 31, 1998, and February 28, 1998, respectively, and the results of
operations for such periods, all in accordance with generally accepted
accounting principles ("GAAP") consistently applied.
Except as and to the extent reflected or reserved against in the
Financial Statements, or as disclosed by the Seller and Shareholders in the
Seller's Disclosure Memorandum, and except for liabilities arising in the
ordinary course of business and consistent with past practice since the date of
the December 31, 1997 balance sheet of Seller, Seller has operated the Business
in the ordinary course and has incurred no material liabilities which would be
required to be reflected in accordance with generally accepted accounting
principles on a balance sheet as of the date hereof or disclosed in the notes
thereto. Since December 31, 1997, there has not been any material adverse
change in the business, operations, properties, prospects, assets or condition
of Seller, and no event has occurred or circumstance exists that may result in
such a material adverse change.
3.4 ENCUMBRANCES ON THE ASSETS. Except as set forth on the
Seller's Disclosure Memorandum, there are no debts, liabilities, mortgages,
liens, security interests, charges, pledges, conditional sale agreements, or
adverse claims or restrictions, transfers or any other encumbrances
(hereinafter "Encumbrances") whatsoever against the Assets.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. The Seller and
Shareholders acknowledge that Buyer is purchasing the Assets for the express
purpose of operating a packaged ice manufacturing and distribution business.
All items comprising the Assets have been continuously used by Seller in
Seller's Business and are now in serviceable condition unless expressly
disclosed to the contrary by the Seller in the Seller's Disclosure Memorandum.
3.6 TITLE TO PERSONAL PROPERTY. Except as set forth in the
Seller's Disclosure Memorandum, Seller has good, legal and marketable title to
all of the personal property comprising the Assets; at the First Closing,
Seller shall deliver to Buyer good, legal and marketable title to the First
Closing Assets free from and clear of all Encumbrances; at the Second Closing,
Seller shall deliver to Buyer good, legal and marketable title to the Brunswick
Property free and clear of all Encumbrances.
3.7 REAL PROPERTY.
(a) Section 3.7 of Seller's Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel
of real property owned by, leased to or used by Seller which is to be
transferred to Buyer, and a complete and accurate list of all
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current leases, lease amendments, subleases, assignments, licenses,
and other agreements to which the Real Property is subject (the
"Assigned Leases"). Seller has delivered to Buyer true and complete
copies of the Assigned Leases. The Seller's Disclosure Memorandum
contains the address of each property, together with a summary
description of the buildings and improvements thereon, the name and
address of each landlord where Seller is a tenant, and of each tenant
where Seller is a landlord, the commencement and expiration date of
each lease, the monthly rent and additional rent payable under such
lease, and the date to which such rent has been paid, the amount of
any deposits, security or otherwise, made under such lease, and
whether the consent of any other party to the lease (or their
mortgagee) is required to consummate the transaction contemplated
hereby.
(b) Except as disclosed in Section 3.7 of Seller's
Disclosure Memorandum, (i) each of the Assigned Leases is in full
force and effect and has not been amended or modified; (ii) neither
Seller, nor any other party thereto, is in default thereunder, and
there is not, under any such Assigned Leases, any event which, with
notice and/or lapse of time, would constitute a default by any party
to any such Assigned Leases; (iii) Seller has received no notice that
any parties to any Assigned Leases intend to cancel, terminate, or
refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder.
(c) Seller is the owner of, or is the tenant in good
standing under, valid and effective Assigned Leases, with respect to
all Real Property used by Seller in the operation of Seller's Business
which is to be transferred or assigned to Buyer.
(d) Except as set forth in Section 3.7 of Seller's
Disclosure Memorandum, the Real Property is properly zoned for, and
permits, the improvements located thereon and the continuation of the
business presently being conducted thereon. The Real Property is
served by utilities and services necessary for the normal and
continued operation of the Business. Seller has no knowledge of any
pending or threatened action or proceeding which could result in a
modification or termination of such zoning.
(e) Seller shall grant and convey the Real Property to
Buyer at the First Closing and the Second Closing, as contemplated
herein, free and clear of all Encumbrances or other restrictions which
would materially affect the use for which it is held by Seller.
Seller has not received notice that any of the Real Property is
subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any public authority
with or without payment of compensation therefor, nor has any such
condemnation, expropriation or taking been proposed.
(f) Except as disclosed in Section 3.7 of Seller's
Disclosure Memorandum, (i) there are no tanks on or below the surface
of the Real Property, (ii) there is no hazardous or toxic waste,
substance or material or other contaminant or pollutant (as determined
under federal, state or local law) present on or below the surface of
the Real Property including, without limitation, in the soil, subsoil,
groundwater or surface water, which
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constitutes a violation of any law, ordinance, rule or regulation of
any governmental entity having jurisdiction thereof or subjects or
could subject Buyer to any liability to third parties, and (iii) the
Real Property has never been used by Seller or by any previous owners
or operators to generate, manufacture, refine, produce, store, handle,
transfer, process or transport any hazardous or toxic waste, substance
or material or other contaminant or pollutant.
3.8 LITIGATION. Except as set forth in the Seller's Disclosure
Memorandum, there is no pending claim, action, suit, proceeding or
investigation (judicial, governmental or otherwise), nor any order, decree or
judgment in effect or threatened against or relating to Seller or the Assets,
or the transactions contemplated by this Agreement, and 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 claim, action, suit, proceeding or
investigation.
3.9 COMPLIANCE WITH LAWS. Seller has complied with all laws, rules,
regulations, ordinances, orders, judgments and decrees relating to the Assets.
The ownership and use of the Assets and the conduct of the Business as it
specifically relates to the Assets does not conflict with the rights of any
other person.
3.10 TAXES. All returns, including estimated tax returns, required
to be filed after the First Closing Date by or with respect to Seller with
respect to Taxes, that, if unpaid, might result in a lien upon any of the
Assets, will be duly filed and will be true, correct and complete, and all
Taxes payable pursuant thereto will be paid, except such Taxes, if any, as may
be contested in good faith. No deficiency or adjustment in respect to any Taxes
that have been assessed against or with respect to Seller that if unpaid, might
result in a lien upon any of the Assets, remains unpaid.
All Taxes that relate to the Assets and that are payable or accruable
by Seller, or to which Seller has any liability with respect to events
occurring on or before either the First Closing Date or the Second Closing
Date, have been paid in full except for income, franchise or capital stock
taxes and transfer, sales and other taxes arising in connection with the
transactions contemplated by this Agreement.
3.11 ENVIRONMENTAL. The Seller has complied in all respects with
all laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of any Governmental
Authorities ("Laws") which have jurisdiction over the Seller and its
subsidiaries concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
wetlands, 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 (collectively, an "Environmental Action") has been
filed or commenced against any of them alleging any failure of Seller so to
comply, nor is the Seller and/or the Shareholders aware
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of any circumstances or conditions which may cause any such Environmental
Action to be filed or commenced against Seller.
Without limiting the generality of the preceding sentence, the Seller
has obtained and been in material 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.
Buyer, at Buyer's expense, shall have the right to conduct any and all
environmental investigations and surveys necessary to satisfy Buyer as to the
environmental condition of the Assets or the Leased Real Properties; provided,
however, that Seller shall provide to Buyer evidence that the development of
the Owned Real Property described in Section 3.7 of Seller's Disclosure
Memorandum as the "Kingsland Facility" was made in compliance with all Laws and
that Seller shall, at its expense, fulfill all the conditions laid out in
Schedule 8.1(i) attached hereto and incorporated herein by reference, as
provided in Section 8.1(i) hereof, prior to the First Closing Date.
3.12 EMPLOYEE BENEFITS. All employee benefit plans (whether or not
covered by ERISA), deferred compensation or executive compensation plans for
employees, directors or independent contractors, and all other employee or
independent contractor arrangements or programs that are maintained or
contributed to by the Seller (collectively, the "Company Plans") have been
administered and operated in all material respects in compliance with their
terms, ERISA, if applicable, the Code and other applicable law. All Company
Plans that are intended to be qualified under Section 401(a) of the Code are so
qualified and a current favorable IRS determination letter exists for each such
plan and covers the amendments required by the Tax Reform Act of 1986. All
funded Company Plans are fully funded according to their terms and applicable
law. To the knowledge of the Seller and Shareholders, no prohibited
transaction or breach of fiduciary duty under ERISA has been committed by any
fiduciary, disqualified person or party in interest of any Company Plan. The
Seller has no liability, contingent or otherwise, under Title IV of ERISA.
3.13 CONSENTS. Except as set forth in the Seller's Disclosure
Memorandum, no consent or approval of any public body or authority, and no
consents or waivers from other parties to the Assigned Leases, material
licenses, franchises, permits, agreements or other instruments are required to
be obtained by the Seller as a result of the transfer of the Assets
contemplated by this Agreement to (i) avoid the loss of any Assigned Leases,
material license, franchise, permit or other instrument or the creation of any
lien or other claim on any Asset pursuant to the terms of any law, regulation,
order, agreement or other legal requirement binding upon Seller and/or
Shareholders relating to the Business or to which any such Asset may be
subject, or (ii) to enable Buyer to continue the operation of the Business
substantially as conducted prior to the First Closing.
3.14 CONTRACTS. Seller is not a party to any contracts relating to
the Business or the Assets that are not terminable at will, other than those
contracts of Seller relating to the Business listed and described in the
Seller's Disclosure Memorandum.
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3.15 INSURANCE AND WARRANTIES.
(a) Insurance. Seller has in force all policies of
insurance described in Section 3.15(a) of the Seller's Disclosure
Memorandum insuring it (including descriptions of whether such
policies and binders are "claims made" or "occurrences" policies, and
the respective issuers and expiration dates thereof). Unless otherwise
described on the Seller's Disclosure Memorandum, the Seller and the
Shareholders have not been advised of (i) any risks or any fact or
matter which might render such policies void or voidable, or (ii) any
cancellations of insurance coverage, or material increases in premium,
or other costs related to insurance, to take effect, or that are
proposed, or that may or will occur, following the First Closing
and/or the Second Closing. To the Seller's and Shareholders'
knowledge, all such policies are underwritten by reputable insurers,
and there is no basis to believe the insurers are or are likely to
become financially unsound. Seller has not been refused insurance or
been notified of any cancellation or involuntary reduction or other
limitation of insurance during the past three years. Section 3.15(a)
of the Seller's Disclosure Memorandum lists all claims made or due to
be made by Seller, and all matters for which a claim could reasonably
have been but was not made, against an insurer on account of events
occurring since December 31, 1996.
(b) Warranties. Except as described in Section 3.15(b)
of the Seller's Disclosure Memorandum, (i) Seller has not agreed to
become responsible for consequential damages or made any express
warranties to third parties with respect to any products distributed
or sold by Seller, and (ii) there are no warranties (express or
implied) outstanding with respect to any products other than any such
implied by law. A copy of each standard warranty of Seller with
respect to such product is included in Section 3.15(b) of the Seller's
Disclosure Memorandum.
3.16 INVENTORIES.
(a) All inventories shown on the December 31, 1997
balance sheet of Seller consisted of, and all inventories thereafter
acquired will consist of, items of good and merchantable quality and
quantity usable or salable in the ordinary and regular course of
Seller's business except for obsolete items and items below standard
quality, all of which have been written off, or written down to net
realizable value on the December 31, 1997 balance sheet of Seller.
Each inventory or class was priced at the lower of cost or market on
the first-in, first-out basis and, as to the classes of items
inventoried and methods of counting and pricing, such inventories were
determined in a manner consistent with prior years. Except to the
extent, if any, disclosed in Section 3.16 of the Seller's Disclosure
Memorandum, Seller has neither sold any of its inventory under
agreements with an express right of return, nor consigned any
inventory, and Seller and Shareholders have no knowledge of any
pending returns of inventory in any material quantity.
(b) There have been no material changes in the
inventories reflected in the December 31, 1997 balance sheet of Seller
and there will be no further changes in any such inventories except
those changes resulting from write down or write-offs, purchases
<PAGE> 12
in the ordinary and regular course of business, and sale of
merchandise inventory in the ordinary and regular course of business.
3.17 SUPPLIERS AND CUSTOMERS. Except as set forth in Section 3.17
of the Seller's Disclosure Memorandum and to Seller's and Shareholders' actual
knowledge, no customer of Seller has communicated to Seller or Shareholders, in
any manner, his or its intention to cease to do business with or trade with
Seller, or materially alter, modify or amend the terms with which it has
conducted business with Seller whether as a result of, or in contemplation of,
the consummation of the transactions contemplated by this Agreement.
3.18 COMPLETE AND ACCURATE DISCLOSURE. No representation or
warranty made to Buyer in this Agreement or in connection with this transaction
contains or will contain an untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make such representation or
warranty not misleading or necessary to enable a prospective Buyer of Seller's
Business or the Assets to make a fully informed decision. All documents and
information which have been or will be delivered to Buyer or its
representatives by or on behalf of the Seller and the Shareholders are and will
be true, correct and complete copies of the documents they purport to
represent.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Buyer is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas and is qualified to conduct business in the State of
Georgia. Buyer is a wholly owned subsidiary of Packaged Ice, Inc., a Texas
corporation ("Packaged Ice"). Packaged Ice is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Texas and
is qualified to conduct business in the State of Georgia.
4.2 POWER AND AUTHORITY. Buyer has the requisite corporate power
and authority, and has been duly authorized, to enter into this Agreement and
to perform all of its obligations hereunder. Buyer represents and warrants to
the Seller and Shareholders that this Agreement has been duly executed and
delivered by Buyer and constitutes a valid and binding obligation in accordance
with its terms. The execution, delivery and performance of this Agreement by
the Buyer will not, with or without the giving of notice, the passage of time,
or both, violate, conflict with, result in a default, breach or loss of rights
under, or result in the creation of any lien, claim or encumbrance pursuant to,
any lien, encumbrance. instrument, agreement, or understanding, or any law,
regulation, rule, order, judgment or decree, to which the Buyer is a party or
by which it is bound or affected. Buyer has received the necessary approval
from Packaged Ice to complete the transactions contemplated herein.
V. COVENANTS OF THE SELLER AND SHAREHOLDERS
The Seller and Shareholders hereby covenant and agree as follows:
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5.1 CONDUCT OF BUSINESS. Seller shall operate the Business in
the ordinary course and continue normal capital expenditures and maintenance in
connection with the First Closing Assets during the period from the date hereof
until to the First Closing Date, and in connection with the Brunswick Property
during the period from the date hereof until the Second Closing Date except (i)
as may be permitted by this Agreement or (ii) as may be necessary to consummate
the transactions contemplated hereby. However, Seller's activities involving
the Brunswick Property be limited to the reconstruction of the Brunswick
Property as provided in Section 2.2 hereof from the period beginning with the
First Closing Date through the Second Closing Date.
5.2 INVESTIGATION BY BUYER.
(a) Between the date hereof and the Second Closing Date,
the Seller and Shareholders shall (i) give Buyer and its authorized
representatives and advisors access, at reasonable times and on
reasonable notice, to all items of personal property and real property
or leasehold interest comprising the Assets, books and records,
personnel, offices, and other facilities of the Assets, (ii) permit
Buyer to make such inspections thereof as Buyer may reasonably
require, and (iii) cause their employees, and their advisors to
furnish to Buyer and its authorized representatives and advisors such
financial and operating data and other information with respect to the
Business prepared in the ordinary course of the Business as Buyer or
its agent shall from time to time reasonably request.
(b) The Seller and Shareholders agree that, subsequent to
the Second Closing Date, Buyer and its agents and accountants will be
permitted reasonable access, during normal business hours, and as
often as Buyer may reasonably request, consistent with reasonable
requirements of the Seller and Shareholders, to the books and records
of Seller and its affiliates, insofar as such books and records
contain information or data pertaining to the Assets prior to the
Second Closing Date to the extent such information is not otherwise
available at the offices or other facilities of the Buyer, and Buyer
shall have the right to make copies thereof and excerpts therefrom.
5.3 CLOSING CONDITIONS. The Seller and Shareholders will, to the
extent within their control, use their best efforts to cause the conditions set
forth in Article VII to be satisfied by the First Closing Date.
5.4 CONFIDENTIALITY. From and after the date hereof, the Seller
and Shareholders will, and will cause their respective officers, employees,
representatives, consultants and advisors to, hold in confidence all
confidential information in the possession of the Seller and Shareholders,
their affiliates or their financial advisors concerning the Assets and the
Leased Properties. The Seller and Shareholders will not release or disclose
any such information to any person other than Buyer and its authorized
representatives. Notwithstanding the foregoing, the confidentiality obligations
of this Section shall not apply to information:
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(a) which the Seller and/or Shareholders are compelled to
disclose by judicial or administrative process, or, in the reasonable
opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to the
Seller and/or Shareholders by a third party who obtained such
information other than as a result of a breach of a confidential
relationship.
5.5 PUBLIC ANNOUNCEMENT. The Seller, Shareholders and Buyer will
cooperate in the public announcement of the transactions contemplated by this
Agreement, and, other than as may be required by applicable law, no such
announcement will be made by either party without the consent of the other
party, which consent shall not be unreasonably withheld.
5.6 NO SHOPPING. The Seller and the Shareholders shall not
solicit, initiate or participate, directly or indirectly, or cause any other
person to solicit, initiate or participate, directly or indirectly, in
discussions or negotiations with, or provide any information to, any other
person (other than the Buyer) concerning, or enter into any agreement providing
for (other than in the ordinary course of business) the acquisition of the
Assets or part thereof (whether by merger, purchase of stock or assets or other
similar transaction), other than the acquisition contemplated by this
Agreement. The restrictions of this paragraph shall terminate if the First
Closing has not taken place by the date referred to in Section 7.1.
5.7 FURTHER ASSURANCES. The Seller and the Shareholders will use
their best efforts to implement the provisions of this Agreement, and for such
purpose the Seller and Shareholders, at the request of Buyer, at or after the
First Closing Date, will, without further consideration, promptly execute and
deliver, or cause to be executed and delivered, to Buyer such deeds,
assignments, bills of sale, consents, documents evidencing title and other
instruments in addition to those required by this Agreement, in form and
substance satisfactory to Buyer, as Buyer may reasonably deem necessary or
desirable to implement any provision of this Agreement.
5.8 INSURANCE. Seller shall maintain insurance through the First
Closing Date with respect to the First Closing Assets and through to the Second
Closing Date with respect to the Brunswick Property with financially sound and
reputable insurers unaffiliated with the Seller and/or Shareholders in such
amounts and against such risks as are adequate to protect the Assets and the
Business.
5.9 NONCOMPETITION AGREEMENT. At the First Closing, the Seller,
the Shareholders, and Sidney Southwell will each enter into a noncompetition
agreement in the form attached hereto as Exhibit E (the "Noncompetition
Agreement").
5.10 CESSATION OF BUSINESS/CHANGE OF NAME. At and after the First
Closing, the Seller will cease to conduct any business constituting the
manufacturing, packaging, distribution and/or
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storage of packaged ice products. In addition, Seller will promptly, after the
First Closing (but in no event more than 30 days after the First Closing Date)
effectuate the change of the names of the business from Cumberland Gas and Ice,
Inc. by filing all necessary documents with the Georgia Secretary of State's
office or such other proper state and local governmental authority as is
necessary to effectuate such name change, and will terminate all of its assumed
name filings. Seller and Shareholders further agree that they will execute any
and all other documents requested by Buyer to facilitate Buyer's use of the
name "Cumberland Ice" or any variant thereof.
5.11 OPINION OF LEGAL COUNSEL. At the First Closing and the
Second Closing, the Seller and Shareholders shall deliver to Buyer a Legal
Opinion of Sellers counsel in the form attached hereto as Exhibit F (the
"Seller's Opinion of Counsel").
5.12 DISCHARGE OF SELLER'S DEBTS. Seller hereby agrees and
acknowledges that Buyer is not assuming any of Seller's debts, and that Seller
remains responsible for and will discharge all debts that relate to the
Business and/or the Assets and were incurred by Seller at or prior to the First
Closing.
5.13 TITLE COMMITMENT. Seller, at Seller's sole cost and expense,
shall cause a nationally recognized title company acceptable to Buyer (the
"Title Company") to issue and deliver to Buyer (i) current title commitments
(the "Title Commitments") accompanied by two copies of all recorded documents
affecting the Real Property, and which will constitute encumbrances against the
Real Property at the First Closing for the First Closing Real Property to be
conveyed as part of the First Closing Assets and at the Second Closing Date for
the Brunswick Property, and (ii) current reports of searches made of the
Uniform Commercial Code Records of the County and State where each parcel of
Real Property is located (the "UCC Reports") setting forth the state of title
to the personal property to be conveyed hereunder. Seller, at Seller's sole
cost and expense, shall also obtain and deliver to Buyer current surveys (the
"Surveys") of the Real Property prepared by a duly licensed land surveyor
acceptable to Buyer. The Surveys shall:
(a) set forth an accurate metes and bounds description of
the Real Property which shall contain the gross square footage and the
net square footage of the Real Property;
(b) locate all existing easements and rights-of-way
(setting forth the book and page number of all recorded instruments
creating the same), alleys, streets, and roads;
(c) show any encroachments upon the Real Property;
(d) show all existing improvements;
(e) show all dedicated public streets providing access to
the Real Property and whether such access is paved to the property
line of the Real Property; and
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(f) contain the Surveyor's certification in the form and
substance satisfactory to Buyer's counsel.
Buyer shall give Seller written notice on or before the expiration of
fifteen (15) days after the receipt of the Title Commitments, UCC Reports and
the Surveys, whichever is received last, whether the condition of the title as
set forth in such Title Commitments, UCC Reports and Surveys is or is not
satisfactory, and in the event Buyer states that the condition of title is not
satisfactory, Seller shall, at its sole cost and expense, promptly undertake to
eliminate or modify to the reasonable satisfaction of Buyer those title matters
which Buyer states to be unsatisfactory. Seller agrees to use Seller's best
efforts to satisfy promptly Buyer's timely objections to title, and in the
event Seller does not satisfy said objections within ten (10) days after said
notice, Buyer may, at its option, either (i) accept title subject to the
objections raised by Buyer, without an adjustment in the Purchase Price, in
which event said objections shall be deemed waived for all purposes, or (ii)
terminate this Agreement and receive back any deposits or escrowed funds
delivered by Buyer, and this Agreement shall be of no further force and effect.
The Real Property shall be conveyed to Buyer subject to no Encumbrances or
reservations of any kind or character other than those specifically approved by
Buyer in writing (the "Permitted Exceptions").
5.14 COMPUTER/ACCOUNTING SERVICES.
Following the First Closing, Seller shall ensure that, for a period
not longer than ninety (90) days, the current procedures for collecting,
recording and processing information carried on by the Seller and which are
related to the Business (including but not limited to financial and customer
relations) shall be carried on in their ordinary and usual manner, and Seller
shall provide access and unrestricted use of office, telephone (excluding the
cost of long distance charges), personnel, computer and other systems and
common areas used by the Business. Such use by Buyer shall not cause an
unreasonable disruption of Seller's gas business. Seller further agrees that
the costs of such continuation of collection, recording and processing of such
information during the aforementioned period shall be solely borne by Seller.
Seller further agrees that the period between the First Closing Date and the
Second Closing Date, Buyer shall be entitled to use the Brunswick Property for
any purposes Buyer sees fit including but not limited to the production of ice,
the servicing of clients and general office work. Buyer will be responsible
for the utility costs of the Brunswick Property which are related to Buyer's
use of such facility beginning with the date on which Buyer first incurs such
expenses, and in no case beginning earlier than the First Closing Date.
5.15 ACCOUNTS PAYABLE. Seller shall provide Buyer with an
affidavit of accounts payable indicating the amount owed by Seller to each
creditor individually as of the First Closing Date and includes the address to
which each creditor payments are to be made, and the date the last payment was
made. Seller covenants that the creditors of Seller as of the First Closing
Date and the Second Closing Date shall be paid in full when due and that no
liability for any amounts due by Seller on either the First Closing Date or the
Second Closing Date shall attach to Buyer.
5.16 UPDATED FINANCIAL STATEMENTS. Within thirty (30) days of the
First Closing Date, Seller shall provide Buyer with the compiled financial
statements (prepared by an
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independent certified public accountant) of the Seller's Business through the
First Closing Date, such statements shall be related solely to the ice business
activities of Seller and shall not include information related to Seller's
propane or other business.
5.17 SEPARATION OF BUSINESS. As of the First Closing Date with
respect to the First Closing Real Property, and as of the Second Closing Date
with respect to the Brunswick Property, Seller shall have removed all equipment
related to Seller's propane business from the Real Property and shall cease to
conduct any operations related to the propane business on any of the Real
Property.
5.18 POST FIRST CLOSING INVENTORY SCHEDULE. Seller shall provide,
at the First Closing, a schedule of packaging materials, supplies and ice
inventory separated by category and location, as of the First Closing Date (the
"Closing Date Inventory Schedule"). Seller shall also include all supporting
documentation for the inventory schedule including invoices and other sales
records. The purchase price for the First Closing Assets shall be reduced by
the amount of the difference in inventory paid for, or received on the account
of Buyer or its parent corporation, and the amount of the same such inventory
on hand as of the First Closing Date. The intent of this provision is to
reimburse the Buyer (and/or its parent corporation) for amounts or credits
extended for merchandise ordered or received by Seller prior to the First
Closing Date.
VI. COVENANTS OF BUYER
6.1 ANCILLARY AGREEMENTS. At the Closing, Buyer will pay the
purchase price as set forth in Section 2.6 hereof, and enter into the
Noncompetition Agreement, the Escrow Agreement, the Consulting Agreements, and
all other ancillary documents required hereunder.
VII. CLOSING
7.1 TIME AND PLACE. The consummation of the sale and purchase of
the First Closing Assets and the execution of the Noncompetition Agreement as
contemplated hereby (the "First Closing") shall take place at the offices of
Seller's counsel whose address is Whelchel, Brown, Readdick & Bumgartner, 5
Glenn Avenue, Brunswick, GA 31521-0220. The date of the First Closing shall
herein be referred to as the "First Closing Date" and shall take place no later
than March ___, 1998. The consummation of the sale and purchase of the
Brunswick Property (the "Second Closing") shall take place at a location
mutually agreeable to the parties. The date of the Second Closing shall herein
be referred to as the "Second Closing Date."
7.2 THE SELLER'S AND THE SHAREHOLDERS' OBLIGATIONS AT FIRST
CLOSING. At the First Closing, the Seller and the Shareholders shall, where
appropriate, execute, acknowledge and deliver to Buyer in form satisfactory to
Buyer:
(a) a General Warranty Deed covering the First Closing
Real Property in recordable form, subject only to the Permitted
Exceptions insofar as they affect the First Closing Real Property;
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(b) an assignment of the Macon Lease, in recordable form,
subject only to the Permitted Exceptions, insofar as they affect the
Leased Real Property, which, if necessary, has been consented to by
the lessor thereof;
(c) an Estoppel Certificate as referred to in Section
8.1(g) hereof from the lessee of the Macon Lease;
(d) copies of all certificates of occupancy, licenses,
permits, authorizations, and approvals required by law and issued by
all Governmental Authorities having jurisdiction, if any, and the
original of each bill for current real estate and personal property
taxes, together with proof of payment thereof (if any of the same have
been paid);
(e) Non-disturbance Agreements from the lender(s) of the
lessor(s) of the Macon Lease;
(f) an Owner's Policy of Title Insurance in the amount of
the value allocated to each parcel provided in Schedule 2.8 attached
hereto of the First Closing Real Property, subject only to the
Permitted Exceptions, insofar as they affect the First Closing Real
Property;
(g) a memorandum of the lease for the leased premises in
Tifton, Georgia in recordable form;
(h) Bill of Sale, assignments or other suitable transfer
documents transferring to Buyer the First Closing Assets, free and
clear of all liens and encumbrances, in form reasonably satisfactory
to counsel for Buyer which includes the form WCC-3 or other
appropriate form indicating release of liens by any secured party and
that no action of redress or reclamation shall be sought by any
secured party against Buyer or the Assets;
(i) the Noncompetition Agreements executed by Seller,
Shareholders, and Sidney Southwell;
(j) a Certificate of Compliance, in form and substance
satisfactory to Buyer, from the Seller and the Shareholders indicating
that the Seller and the Shareholders have materially complied with
their obligations contained in this Agreement, that all
representations and warranties contained in this Agreement or in any
certificate required to be delivered in connection with this Agreement
shall be accurate at and as of the First Closing with the same force
and effect as though made at the First Closing, and no material
adverse change with respect to the Seller has occurred;
(k) a copy of Seller's Opinion of Counsel to Buyer;
(l) the officer's certificate referred to in Section
8.1(f);
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(m) the documents evidencing the transfers of all motor
vehicles and registrations thereof which are part of the Assets;
(n) an affidavit of creditors indicating the amount owed
to each creditor as of the First Closing Date, the address of the
creditor, and the last payment made to creditor as provided in Section
5.14 hereof;
(o) the Letter of Credit;
(p) a termination statement, acceptable to Buyer, of the
Tifton Lease;
(q) a lease for the property located in Tifton in the
form attached hereto as Exhibit B signed by the lessee of the Tifton
Lease; and
(r) all other previously undelivered documents,
instruments and writings required to be delivered at or prior to the
First Closing pursuant to this Agreement or otherwise in connection
herewith.
7.3 BUYER'S OBLIGATIONS AT FIRST CLOSING. At the First Closing,
Buyer will:
(a) pay the purchase price for the First Closing Assets
in accordance with Section 2.6;
(b) deliver to the Seller and Sidney Southwell and the
Shareholders executed counterparts of the Noncompetition Agreements,
the Consulting Agreements, and all other ancillary documents required
hereunder; and
(c) deliver a Certificate of Compliance, dated as of the
First Closing Date, from an officer of Buyer indicating that Buyer has
materially complied with its obligations, representations and
warranties contained in this Agreement.
7.4 THE SELLER'S AND SHAREHOLDER'S OBLIGATIONS AT THE SECOND
CLOSING. At the Second Closing, the Seller and Shareholders shall, where
appropriate, execute, acknowledge and deliver to Buyer in form satisfactory to
Buyer:
(a) a General Warranty Deed covering the Brunswick
Property (and all improvements), in recordable form, subject only to
the Permitted Exceptions relating to the Brunswick Property;
(b) all transferable warranties related to the Brunswick
Property;
(c) an Owner Policy of Title Insurance in the amount of
the value allocated to the Brunswick Property in Schedule 2.8 attached
hereto, subject only to the Permitted Exceptions, insofar as they
relate to the Brunswick Property;
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(d) Bill of Sale, assignments or other suitable transfer
documents transferring to Buyer the Brunswick Property, free and clear
of all liens and encumbrances, in form reasonably satisfactory to
counsel for Buyer which includes the form WCC-3 or other appropriate
form indicating release of liens by any secured party and that no
action of redress or reclamation shall be sought by any secured party
against Buyer or the Brunswick Property;
(e) a Certificate of Compliance, in form and substance
satisfactory to Buyer, from the Seller and the Shareholders indicating
that the Seller and the Shareholders have materially complied with
their obligations contained in this Agreement, that all
representations and warranties contained in this Agreement or in any
certificate required to be delivered in connection with this Agreement
shall be accurate at and as of the Second Closing with the same force
and effect as though made at the Second Closing, and no material
adverse change with respect to the Seller or the Brunswick Property
has occurred;
(f) a copy of Seller's Opinion of Counsel to Buyer dated
as of the Second Closing Date;
(g) the officer's certificate referred to in Section
8.1(f) dated as of the Second Closing Date; and
(h) all other previously undelivered documents,
instruments and writings required to be delivered at or prior to the
Second Closing pursuant to this Agreement or otherwise in connection
herewith.
7.5 THE BUYER'S OBLIGATIONS AT THE SECOND CLOSING. At the Second
Closing, Buyer will:
(a) pay to Seller the purchase price for the Brunswick
Property, less any Liquidated Damages or other adjustments in
accordance with Section 2.2; and
(b) deliver to Seller any other documents required to be
delivered by Buyer at or prior to the Second Closing pursuant to this
Agreement.
VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to complete the transactions contemplated on the First Closing Date and the
Second Closing Date shall be subject to the satisfaction, on or prior to the
First Closing Date and the Second Closing Date, respectively, of the following
conditions:
(a) Performance. Each agreement and obligation of the
Seller and the Shareholders to be performed on or before the First
Closing Date and the Second Closing
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Date, respectively, (including, but not limited to, covenants set
forth in Article V) shall have been duly performed in all material
respects;
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of the Seller and
Shareholders contained herein, or in any certificate required to be
delivered in connection with this Agreement, shall have been accurate
on the date hereof and shall be accurate at and as of the First
Closing Date and the Second Closing Date respectively, and since the
date hereof there shall have occurred no material adverse change in
the business operations, properties, prospects, Assets or condition of
Seller. Seller shall deliver to Buyer certificates dated as of the
First Closing Date and the Second Closing Date executed by the
President of Seller so stating;
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Buyer from
consummating the transactions contemplated hereby;
(d) Third-Party Creditors. All third-party creditors of
the Business will be paid in full and have released all liens or
claims against the Assets, or Seller shall provide to Buyer
documentation from all third-party creditors indicating that the
third-party creditors have released their liens against the Assets and
consented to Seller's conveyance of the Assets to Buyer free and clear
of all liens or other Encumbrances;
(e) Opinion of Counsel. On the First Closing and the
Second Closing Date, the Seller and the Shareholders shall have
delivered Seller's Opinion of Counsel as described in Section 5.11
herein to Buyer;
(f) Corporate Approval. On the First Closing Date, Buyer
shall have received a certified copy of the resolutions of the
Shareholders and Board of Directors of Seller, certified by its
Secretary or Assistant Secretary, authorizing the execution of this
Agreement and the consummation of the transactions contemplated
hereby;
(g) Estoppel Certificate. Seller shall deliver to Buyer
an estoppel certificate signed by the Landlord of the Assigned Leases
in the form of Exhibit G attached hereto (the "Estoppel Certificate");
(h) Due Diligence. As of the First Closing Date, Buyer
shall have completed and shall be satisfied with its due diligence
investigation;
(i) Environmental Clean Up. As of both the First Closing
Date and the Second Closing Date, Seller shall be in compliance with
all laws as warranted in Section 3.11 and, in addition, shall have, by
the First Closing Date completed all of the environmental tasks
provided in Schedule 8.1(i) attached hereto and incorporated herein by
reference; and
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(j) Brunswick Property. The construction of the
Brunswick Property shall be completed in accordance with the plans and
specifications set forth on Schedule 2.2 attached hereto to the
reasonable satisfaction of Buyer or Buyer shall have waived its
objections in writing before it is required to complete the Second
Closing. Notwithstanding any other provision of this Agreement, Buyer
and Seller agree that the obligation of Buyer to acquire the Brunswick
Property (and Seller's right to any consideration therefrom) shall not
be subject to "material compliance" or any other form of legal or
equitable relief and shall be solely dependent on the satisfaction of
the conditions and obligations set forth in Sections 2.5, 7.4 and 8.1
of this Agreement.
8.2 CONDITIONS TO OBLIGATIONS OF THE SELLER AND THE SHAREHOLDERS.
The obligation of the Seller and the Shareholders to complete the transactions
contemplated at the First Closing and the Second Closing shall be subject to
the satisfaction on or prior to the First Closing Date and Second Closing Date,
respectively, of the following conditions:
(a) Performance. Each agreement of Buyer to be performed
on or before the First Closing Date or the Second Closing Date,
respectively, shall have been duly performed in all material respects;
(b) Representations and Warranties True. The
representations and warranties of Buyer contained herein shall have
been true in all material respects; and
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining the Seller and the
Shareholders from consummating the transactions contemplated hereby.
IX. INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER BY THE SELLER AND THE SHAREHOLDERS.
The Seller and the Shareholders agree to individually and severally indemnify,
defend and hold harmless Buyer and Buyer's employees, agents, heirs, legal
representatives, and assigns from and against any and all claims, suits,
losses, expenses (legal, accounting, investigation and otherwise), damages and
liabilities, including, without limitation, tax liabilities (hereinafter,
collectively "Damages"), arising out of or relating to (i) any liability or
obligation of the Seller and/or the Shareholders not expressly assumed by Buyer
hereunder, (ii) the conduct of, or conditions existing with respect to, the
Business or the Assets prior to the First Closing, and prior to the Second
Closing, with respect to the Brunswick Property, (iii) any inaccuracy of any
representation or warranty set forth in this Agreement or the breach of any
covenant made by the Seller and/or Shareholders in or pursuant to this
Agreement, and (iv) any noncompliance with any bulk sales law by Buyer or
Seller. In the event that any Damages are incurred under this Section 9.1,
Buyer shall be entitled to draw upon the Letter of Credit, as well as being
entitled to any and all remedies provided for herein.
9.2 INDEMNIFICATION OF THE SELLER AND THE SHAREHOLDERS BY BUYER.
Buyer agrees to indemnify, defend and hold harmless the Seller and the
Shareholders from and against only those
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Damages arising out of or relating to any inaccuracy or any representation or
warranty of Buyer set forth in this Agreement or the breach of any covenant
made by Buyer in or pursuant to this Agreement.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party. In addition to all other
remedies provided hereunder or by law, Buyer shall specifically have the right
to, if after thirty (30) days following the notice to the Indemnifying Party
(in this case, the Seller and the Shareholders) as required by this paragraph,
the Indemnifying Party has not remedied the cause of such claim to the
satisfaction of Buyer, draw against the Letter of Credit for any of Buyer's
Damages.
9.4 RIGHT TO DEFEND. If the facts giving rise to any such claim for
indemnification involve any actual or threatened claim or demand by any third
party against the Indemnified Party, the Indemnifying Party shall be entitled
(without prejudice to the right of the Indemnified Party to participate in the
defense of such claim or demand at its expense through counsel of its own
choosing) to assume the defense of such claim or demand in the name of the
Indemnified Party at the Indemnifying Party's expense and through counsel of
its own choosing, which counsel shall be reasonably satisfactory to the
Indemnified Party, if it gives written notice to the Indemnified Party within
forty-five (45) days after receipt of the Notice of Claim, that the
Indemnifying Party intends to assume the defense of such claim and acknowledges
its liability to indemnify the Indemnified Party for any losses resulting from
such claim; provided, however, that if the Indemnifying Party does not elect to
assume the defense of any claim, then (a) the Indemnifying Party shall have the
right to participate in the defense of such claim or demand at its expense
through counsel of its own choosing, provided the Indemnified Party shall
control the defense of such claim, (b) the Indemnified Party may settle any
such claim without the consent of the Indemnifying Party, however, the
Indemnifying Party may not settle any such claim without the prior written
consent of the Indemnified Party; and (c) Section 9.5 hereof shall be
inapplicable. Whether or not the Indemnifying Party does choose to so defend
such claim, the parties hereto shall cooperate in the defense thereof and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be requested in
connection therewith. To the extent the Seller and the Shareholders are the
Indemnified Party for any actual or threatened claim or demand by any third
party, the Seller and the Shareholders shall have the right to control the
prosecution of any counterclaim or right related to such a claim or demand,
provided that the Seller and the Shareholders agree to reasonably cooperate
with Buyer with respect to the prosecution of such counterclaim or right.
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9.5 SETTLEMENT. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.6 EFFECT OF TERMINATION. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
9.7 TIME LIMITATIONS. If the First Closing and/or the Second
Closing occurs, the Seller and the 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
First Closing Date or the Second Closing Date, respectively, or representations
made again as of the First Closing Date or the Second Closing Date,
respectively, other than those in Sections 2.2, 3.4, 3.6, 3.7, 3.10. 3.11 and
3.12, unless on or before two years from the First Closing Date (or the Second
Closing Date if the claim relates to the Brunswick Property), Buyer notifies
Seller of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Buyer. A claim with respect to Sections 2.2,
3.4, 3.6, 3.7. 3. 10, 3.11, or 3.12 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 First Closing occurs, except as
otherwise provided for in this paragraph, Buyer 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 First
Closing Date (or the Second Closing Date if the Second Closing occurs and the
claim relates to the Brunswick Property), unless on or before two years from
the First Closing Date (or the Second Closing Date if the claim refers to the
Brunswick Property), Seller notifies Buyer of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Seller.
9.8 LIMITATIONS ON AMOUNT. The Seller and the Shareholders will
have no liability (for indemnification or otherwise) with respect to the
matters described in Section 9.1 until the total of all Damages with respect to
such matters and the matters described in Section 9.1 exceeds $50,000 in the
aggregate (the "Basket"), and then the Seller and Shareholders shall be
responsible for all Damages based thereon from the first dollar of Damages
without regard to 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 2.2, 3.4, 3.6, 3.7, 3.10. 3.11.
or 3.12 or any provisions herein to the extent of their relation to any of the
Excluded Assets and the Seller's and Shareholders obligation to discharge all
liabilities not assumed by Buyer. The Seller's and the Shareholders' maximum
liability with respect to the matters described in Section 9.1 will be limited
to Two Million Dollars ($2,000,000) in the aggregate (the "Cap"); provided,
however, this Cap will not apply to a claim for indemnification
24
<PAGE> 25
arising out of a breach of any of the Company s representations, warranties or
covenants contained in Sections 2.2, 3.4, 3.6, 3.7, 3.10, 3.11, or 3.12.
Damages resulting from willful or intentional misrepresentations, any
provisions herein to the extent of their relation to any of the Excluded
Assets, and the Seller's and Shareholders obligation to discharge all
liabilities not assumed by Buyer.
X. TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the First Closing Date by any of
the following:
(a) Mutual Consent. By mutual written consent of the
Seller, Shareholders and Buyer;
(b) Misrepresentation or Breach. By the Seller, the
Shareholders or the Buyer, if there has been a material
misrepresentation or a material breach of a warranty or covenant
herein or in any agreement required to be delivered pursuant hereto on
the part of the other party hereto;
(c) Failure of Condition to Buyer's Obligations. By
Buyer, if all of the conditions set forth in Section 8.1 have not been
satisfied by March ____, 1998.
(d) Failure of Condition to Seller's and Shareholders'
Obligations. By the Seller and Shareholders, if all of the conditions
set forth in Section 8.2 have not been satisfied by March ___, 1998;
(e) Court Order. By the Seller and Shareholders or Buyer
if consummation of the transactions contemplated hereby shall violate
any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction; or
(f) Material Adverse Change. By Buyer if any event has
occurred after the date hereof which is, or will result in a material
adverse change in the prospects, business or condition of the Assets.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of the Seller,
Shareholders and Buyer under this Agreement shall terminate without further
liability of the Seller, Shareholders or Buyer.
If the Seller and the Shareholders fail to consummate the transactions
contemplated on their part to occur on or before March __, 1998, in
circumstances whereby all conditions of a closing set forth in Section 8.2 have
been satisfied in all material respects or waived, Buyer's sole remedy shall be
to (i) to require the Seller and the Shareholders to consummate and
specifically perform the transactions contemplated hereby, in accordance with
the terms of this Agreement, and to obtain from the Seller and the Shareholders
any attorney fees incurred in connection with procuring such specific
performance or (ii) terminate this Agreement and obtain
25
<PAGE> 26
reimbursement of its out-of-pocket expenses incurred directly in connection
with the negotiation, preparation and performance of this Agreement.
If Buyer fails to consummate the transactions contemplated on its part
to occur on a closing date, in circumstances whereby all conditions of a
closing set forth in Section 8.1 have been satisfied in all material respects
or waived in writing by Buyer, the Seller's and Shareholders' sole remedy shall
be to (i) require Buyer to consummate and specifically perform the transactions
contemplated hereby, in accordance with the terms of this Agreement, and to
obtain from Buyer any attorney fees incurred in connection with procuring such
specific performance or (ii) terminate this Agreement and obtain reimbursement
of their out-of-pocket expenses incurred directly in connection with the
negotiation, preparation and performance of this Agreement.
10.3 RIGHT TO PROCEED. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or 8.2 has not been
satisfied, the Seller, Shareholders and Buyer, in addition to any other rights
which may be available to them, shall have the right to waive any such
condition that is for their benefit and to require the other party hereto to
proceed with the First Closing and/or the Second Closing.
XI. MISCELLANEOUS
11.1 EXPENSES. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses. Sales or use tax imposed on the Seller or Buyer as a
result of this transaction, if any, shall be paid by Seller.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made in connection with this
Agreement shall survive the First Closing and the Second Closing.
11.3 INUREMENT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
11.4 NUMBER AND GENDER OF WORDS. When the context so requires in
this Agreement, words of gender shall include either or both genders and the
singular number shall include the plural.
11.5 SEVERABILITY. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the remaining provisions
hereof and without affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
26
<PAGE> 27
11.6 INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
11.7 CAPTIONS AND HEADINGS; USE OF TERM "PERSON". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless the
context otherwise requires, all article, section or subsection cross-references
are to articles, sections and subsections within this Agreement. As used
herein, the term "person" shall mean any corporation, partnership, venture,
proprietorship, trust, benefit plan or other entity or enterprise.
11.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.
11.9 NOTICE. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission, or by United States Mail, postage
prepaid, by registered or certified mail (return receipt requested), to the
addressed indicated below and shall be deemed given when received by the
addressee thereof:
to Seller: Cumberland Gas and Ice, Inc.
Attn.: Keith Dixon, President
P.O. Box 466
Kingsland, Georgia 31548
to Shareholders: Attn.: Keith Dixon
P.O. Box 466
Kingsland, Georgia 31548
to Buyer: Packaged Ice Southeast, Inc.
Attn.: A.J. Lewis III, President
8572 Katy Freeway, Suite 101
Houston, Texas 77024
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Attn.: Alan Schoenbaum
300 Convent St., Suite 1500
San Antonio, Texas 78205
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
11.10 AGENTS OR BROKERS. Buyer represents that it has not retained
or used the services of any broker or finder which would result in the
imposition of a fee upon the Seller,
27
<PAGE> 28
Shareholders or Buyer. The Seller has, however, retained the services of The
Inman Company and shall be unilaterally responsible for any fees, charges,
commissions or any other type of consideration requested by, or to be found due
to, The Inman Company for its participation in the transactions contemplated by
this Agreement. Buyer expressly denies any obligation to compensate The Inman
Company in any way for its participation in this transaction.
11.11 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement, and all time limitations shall be strictly construed and rigidly
enforced. The failure or delay in the enforcement of any rights or interests
granted herein shall not constitute a waiver of any such right or interest or
be considered as a basis for estoppel.
11.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
11.13 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 Rules of the American Arbitration
Association by a single arbitrator to be located in Atlanta, DeKalb County,
Georgia, and judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof, and shall not be appealable.
11.14 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules and
Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
[ASSET PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS]
28
<PAGE> 29
[ASSET PURCHASE AGREEMENT SIGNATURE PAGE]
Executed on the date first written above.
BUYER:
PACKAGED ICE SOUTHEAST, INC.
By:
--------------------------------------
Print Name: A.J. Lewis, III
Print Title: President
SELLER:
CUMBERLAND GAS AND ICE, INC.
By:
--------------------------------------
Print Name: S. Keith Dixon
Print Title: President
SHAREHOLDERS:
------------------------------------------
S. Keith Dixon, An Individual
------------------------------------------
Annie Mae Dixon, An Individual
29
<PAGE> 30
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Bill of Sale
Exhibit B Lease of Tifton Property
Exhibit C Consulting Agreement - Dixon
Exhibit D Consulting Agreement - Southwell
Exhibit E Noncompetition Agreement
Exhibit F Seller's Opinion of Counsel
Exhibit G Estoppel Certificate
Schedule 2.1 First Closing Real Property and First Closing Assets
Schedule 2.2 Brunswick Plans
Schedule 2.3 Excluded Assets
Schedule 2.8 Allocation of Purchase Price
Schedule 8.1(i) Environmental Clean lip
Seller's Disclosure Memorandum
30
<PAGE> 1
EXHIBIT 11.1
PACKAGED ICE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNING PER COMMON SHARE
AND COMMON EQUIVALENTS SHARE
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1998 1997
------------ ------------
<S> <C> <C>
Net loss $(24,178,017) $ (592,179)
Add interest expense on convertible demand notes 505 --
Less dividends on preferred stock:
Series C (616,439) --
------------ ------------
Loss applicable to common stock $(24,794,456) $ (591,674)
============ ============
Weighted average common shares outstanding 4,395,175 2,827,571
Incremental shares attributable to conversion of demand notes -- 5,814
Incremental shares attributable to outstanding stock options and warrants 1,290,042 272,822
------------ ------------
As adjusted for fully diluted calculation 5,685,217 3,103,207
============ ============
Loss per common and common equivalent share:
Primary $ (5.64) $ (0.21)
Fully-Diluted (1) $ (4.25) $ (0.19)
</TABLE>
(1) This calculation is presented in accordance with Regulation S-K; although it
is contrary to paragraphs 13 and 27 of the Statement of Financial Accounting
Standards 128 "Earnings Per Share."
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT OF INCOME FOUND ON PAGES
4 AND 5 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1998 MAR-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 16,655,963 0 0 0
<SECURITIES> 4,913,170 0 0 0
<RECEIVABLES> 5,269,164 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 2,591,994 0 0 0
<CURRENT-ASSETS> 30,178,832 0 0 0
<PP&E> 71,356,765 0 0 0
<DEPRECIATION> 7,097,572 0 0 0
<TOTAL-ASSETS> 186,421,480 0 0 0
<CURRENT-LIABILITIES> 8,815,730 0 0 0
<BONDS> 145,000,000 0 0 0
25,812,404 0 0 0
3,222,753 0 0 0
<COMMON> 49,225 0 0 0
<OTHER-SE> 1,549,517 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 186,421,480 0 0 0
<SALES> 8,401,157 0 0 0
<TOTAL-REVENUES> 8,401,157 0 0 0
<CGS> 6,394,028 0 0 0
<TOTAL-COSTS> 6,394,028 0 0 0
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 2,873,971 0 0 0
<INCOME-PRETAX> (6,791,126) 0 0 0
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (6,791,126) 0 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> (17,386,893) 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (24,178,017) 0 0 0
<EPS-PRIMARY> (5.64) (0.21) (0.35) (0.26)
<EPS-DILUTED> (5.64) (0.21) (0.35) (0.26)
</TABLE>
