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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"), Xxxxxxx'x Party Ice, Inc., a Louisiana
corporation (the "Company") and Xxxx Xxxxxxx Xxxxxxx and Xxxxxxxx Xxxxxxx 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.
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"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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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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(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, Xxxx Xxxxxxx Xxxxxxx and Xxxxxxxx
Xxxxxxx 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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(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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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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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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(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, Xxxx Xxxxxxx
Xxxxxxx and Xxxxxxxx Xxxxxxx will enter into the Noncompetition Agreement
attached hereto as Exhibit 5.12.
5.13 Employment Agreement. At the Closing, Xxxx Xxxxxxx Xxxxxxx
and Xxxxxxxx Xxxxxxx 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 Xxxx Xxxxxxxx, 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 Xxxx Xxxxxxx and Xxxxxxxx Xxxxxxx 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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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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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
Xxxxxxxx, Xxxxxxxxx 00000
to the Shareholders: Xxxx Xxxxxxx Xxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxx, XX. 00000
Xxxxxxxx Xxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxx, XX. 00000
with a copy to: Xxxx X. Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxx 00000
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to Parent and the
Surviving Corporation: Packaged Ice, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: X.X. Xxxxx, III, President
with a copy to: Xxxx Xxxxxxxxxx, P.C.
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xx., Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
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.
[XXXXXXX'X AGREEMENT AND PLAN OF MERGER
SIGNATURE PAGE FOLLOWS]
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[XXXXXXX'X 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:
-------------------------
XXXXXXX'X PARTY ICE, INC.
By:
-------------------------------------
Print Name:
--------------------------
Print Title:
-------------------------
SHAREHOLDERS:
----------------------------------------
XXXX XXXXXXX XXXXXXX
----------------------------------------
XXXXXXXX XXXXXXX
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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 Employment Agreement
Exhibit 5.14 Shareholder Documents
Exhibit 8.1(f) Opinion of Counsel
Shareholders' Disclosure Memorandum
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