1
EXHIBIT 10.6
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PACKAGED ICE, INC.,
PACKAGED ICE SOUTHWESTERN, INC.
SOUTHWESTERN ICE, INC.
AND
THE SHAREHOLDERS OF SOUTHWESTERN ICE, INC.
MARCH 25, 1997
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TABLE OF CONTENTS
Agreement and Plan of Merger
Recitals
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Applicable Contract . . . . . . . . . . . . . . . . . . . . . . . . 1
"Articles of Merger" . . . . . . . . . . . . . . . . . . . . . . . . 1
"Acquisition Price" . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Best Efforts" . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
"Breach" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Cap" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Cash Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Closing Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Consent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Contemplated Transactions" . . . . . . . . . . . . . . . . . . . . . 2
"Contract" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Current Differential" . . . . . . . . . . . . . . . . . . . . . . . 2
"Damages" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . . 2
"Encumbrance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
"Environmental, Health, and Safety Liabilities" . . . . . . . . . . . 3
"Environmental Law" . . . . . . . . . . . . . . . . . . . . . . . . . 3
"ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Escrow Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Escrow Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Escrow Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Excluded Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Facilities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
"Governmental Authorization" . . . . . . . . . . . . . . . . . . . . 5
"Governmental Body" . . . . . . . . . . . . . . . . . . . . . . . . . 5
"Hazardous Activity" . . . . . . . . . . . . . . . . . . . . . . . . 5
"Hazardous Materials" . . . . . . . . . . . . . . . . . . . . . . . . 5
"Intellectual Property" . . . . . . . . . . . . . . . . . . . . . . . 5
"IRC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
"IRS" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Knowledge" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Legal Requirement" . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Noncompetition Agreement" . . . . . . . . . . . . . . . . . . . . . 6
3
"Occupational Safety and Health Law" . . . . . . . . . . . . . . . . 6
"Oral Notice or Communication" . . . . . . . . . . . . . . . . . . . 6
"Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
"Ordinary Course of Business" . . . . . . . . . . . . . . . . . . . . 6
"Organizational Documents" . . . . . . . . . . . . . . . . . . . . . 7
"Parent's Closing Documents" . . . . . . . . . . . . . . . . . . . . 7
"Parent's Disclosure Letter" . . . . . . . . . . . . . . . . . . . . 7
"Parent Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Pre-Closing Tax Period" . . . . . . . . . . . . . . . . . . . . . . 7
"Proceeding" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Registration Rights Agreement" . . . . . . . . . . . . . . . . . . . 7
"Related Person" . . . . . . . . . . . . . . . . . . . . . . . . . . 7
"Release" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Representative" . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Share Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
"Shareholders' Closing Documents" . . . . . . . . . . . . . . . . . . 8
"Shareholders' Disclosure Letter" . . . . . . . . . . . . . . . . . . 9
"Shareholders' Release" . . . . . . . . . . . . . . . . . . . . . . . 9
"Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Stock Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . . . 9
"Tax" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Tax Return" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Threat of Release" . . . . . . . . . . . . . . . . . . . . . . . . . 9
"Threatened" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2. MERGER; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2. Continuing of Corporate Existence . . . . . . . . . . . . . . 10
2.3. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4. Corporate Government . . . . . . . . . . . . . . . . . . . . . 10
2.5. Conversion of Shares . . . . . . . . . . . . . . . . . . . . . 10
2.6 Rights and Liabilities of the Surviving Corporation . . . . . 12
2.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.8 Closing Obligations . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDERS . . 14
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . 14
3.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . 15
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 16
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3.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . 16
3.5 Books and Records . . . . . . . . . . . . . . . . . . . . . . 17
3.6 Title to Properties; Encumbrances . . . . . . . . . . . . . . 17
3.7 Condition and Sufficiency of Assets . . . . . . . . . . . . . 18
3.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 18
3.9 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 19
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12 No Material Adverse Change . . . . . . . . . . . . . . . . . . 21
3.13 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . 21
"Company Other Benefit Obligation" . . . . . . . . . . . . . . . . . 21
"Company Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
"Company VEBA" . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"ERISA Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Multi-Employer Plan" . . . . . . . . . . . . . . . . . . . . . . . . 22
"Other Benefit Obligations" . . . . . . . . . . . . . . . . . . . . . 22
"PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Pension Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Plan Sponsor" . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Qualified Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Title IV Plans" . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"VEBA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
"Welfare Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.14 Compliance with Legal Requirements; Governmental
Authorizations . . . . . . . . . . . . . . . . . . . . . . . . 26
3.15 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . 28
3.16 Absence of Certain Changes and Events . . . . . . . . . . . . 29
3.17 Contracts; No Defaults . . . . . . . . . . . . . . . . . . . . 30
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . 35
3.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.21 Labor Relations; Compliance . . . . . . . . . . . . . . . . . 37
3.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . 38
3.23 Certain Payments . . . . . . . . . . . . . . . . . . . . . . . 38
3.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.25 Relationships with Related Persons . . . . . . . . . . . . . . 39
3.26 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO . . . . . . . . 39
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . 39
4.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . . 39
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 40
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . 41
4.5 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . 41
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4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.7 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . 42
4.8 Litigation; Order . . . . . . . . . . . . . . . . . . . . . . 42
4.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 42
4.10 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5. COVENANTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 43
5.1 Access and Investigation . . . . . . . . . . . . . . . . . . . 43
5.2 Operation of the Business of the Company . . . . . . . . . . . 43
5.3 Negative Covenant . . . . . . . . . . . . . . . . . . . . . . 43
5.4 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . 43
5.5 Required Approvals . . . . . . . . . . . . . . . . . . . . . . 43
5.6 Notification . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.7 Payment of Indebtedness by Related Persons . . . . . . . . . . 44
5.8 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . 44
5.9 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10 Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . 44
5.11 Other Tax Matters . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6. COVENANTS OF PARENT . . . . . . . . . . . . . . . . . . . . . . . 45
6.1 Approvals of Governmental Bodies . . . . . . . . . . . . . . . 46
6.2 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.3 Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . 46
6.4 Notification . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.5 Release of Personal Guarantee . . . . . . . . . . . . . . . . 46
SECTION 7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE . . . . . . . 47
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . 48
7.2 Shareholders' Performance . . . . . . . . . . . . . . . . . . 48
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . 48
7.5 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 48
7.6 No Claim Regarding Stock Ownership or Sale Proceeds . . . . . 49
7.7 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . 49
7.8 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.9 Tax Certification . . . . . . . . . . . . . . . . . . . . . . 49
7.10 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATION TO CLOSE . . . . 49
8.1 Accuracy of Representations . . . . . . . . . . . . . . . . . 49
8.2 Parent's Performance . . . . . . . . . . . . . . . . . . . . . 49
8.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.4 Additional Documents . . . . . . . . . . . . . . . . . . . . . 50
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8.5 No Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 50
8.6 Release of Personal Guarantees . . . . . . . . . . . . . . . . 50
8.7 Offer of Employment. . . . . . . . . . . . . . . . . . . . . . 51
8.8 No Prohibition . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . 51
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 51
SECTION 10. INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . 52
10.1 Survival; Right to Indemnification; Knowledge . . . . . . . . 52
10.2 Indemnification and Payment of Damages by Shareholders . . . . 52
10.3 Indemnification and Payment of Damages by Parent . . . . . . . 53
10.4 Time Limitations . . . . . . . . . . . . . . . . . . . . . . . 53
10.5 Limitations on Amount -- Shareholders . . . . . . . . . . . . 54
10.6 Contribution by Parent. With respect to any damages assessed
against Shareholders stemming directly from any Environmental
Claim, Shareholders' will be entitled to contribution from
Parent, Newco and the Surviving Corporation to the extent such
damages are attributable to events occurring after the Closing. 55
10.7 Sole Remedy . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.8 Procedure for Indemnification -- Third Party Claims . . . . . 55
10.09 Procedure for Indemnification -- Other Claims . . . . . . . . 56
10.10 Payment in Cash or Parent Stock . . . . . . . . . . . . . . . 56
11.1 Representative . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 59
12.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . 59
12.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 59
12.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.5 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 61
12.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.8 Entire Agreement and Modification . . . . . . . . . . . . . . 62
12.9 Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . 62
12.10 Assignments, Successors, and No Third-Party Rights . . . . . . 62
12.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.12 Section Headings, Construction . . . . . . . . . . . . . . . . 62
12.13 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . 63
12.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 63
12.15 Enforcement; Venue; Service of Process . . . . . . . . . . . . 63
12.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 63
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of March 25,
1997, by and among Packaged Ice, Inc., a Texas corporation ("Parent"), Packaged
Ice Southwestern, Inc., a Texas corporation ("Newco") and a direct wholly-owned
subsidiary of Parent, Southwestern Ice, Inc., an Arizona corporation (the
"Company"), and Xxxxxx X. Xxxxxx, Xxxx X. Xxxxxxx and Xxxx Xxxxxxxxx
(collectively, the "Shareholders"). The persons listed on the signature page
for Minority Shareholders (hereinafter the "Minority Shareholders") are
entering into this Agreement solely for the certain purposes expressly set
forth herein.
R E C I T A L S :
WHEREAS, the respective Boards of Directors of Parent, Newco and the
Company each desires to effect a merger of the Company with and into Newco
(the "Merger"), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, In consideration of the mutual covenants and agreements
contained herein the parties hereto covenant and agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUISITION PRICE" has the meaning set forth in Section 2.5(d).
"APPLICABLE CONTRACT" means any Contract to which the Company is a party or
bound (a) under which the Company has or may acquire any rights, (b) under
which the Company has or may become subject to any obligation or liability, or
(c) by which the Company or any of the assets owned or used by it is or may
become bound.
"ARTICLES OF MERGER" has the meaning set forth in Section 2.3.
"BASKET" has the meaning set forth in Section 10.6.
"BEST EFFORTS" means the efforts that a reasonably prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as reasonably practicable; provided,
however, that an obligation to use Best Efforts under this Agreement does not
require the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions.
8
"BREACH" means that a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in such representation or warranty as qualified by the
Disclosure Letter or breach of, or any failure to perform or comply with any
covenant, obligation, or other provision contained herein.
"CAP" has the meaning set forth in Section 10.6.
"CASH AMOUNT" has the meaning set forth in Section 2.5(e).
"CLOSING" has the meaning set forth in Section 2.7.
"CLOSING DATE" means the date and time as of which the Closing actually takes
place.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by this
Agreement, including:
(a) the Merger;
(b) the execution, delivery, and performance of the Noncompetition
Agreement, the Registration Rights Agreement, the Shareholders' Release, and
the Escrow Agreement;
(c) the performance by the parties of their respective covenants and
obligations under this Agreement; and
(d) Newco's acquisition of the Company through the Merger.
"CONTRACT" means any agreement, contract, obligation, promise, or undertaking
(whether written or oral, and whether express or implied) that is legally
binding provided that any oral contract shall be limited to those oral
contracts entered into by an executive officer of the Company on behalf of the
Company.
"DAMAGES" has the meaning set forth in Section 10.2.
"EFFECTIVE DATE" has the meaning set forth in Section 2.3.
"ENCUMBRANCE" means any charge, claim, condition, equitable interest including
any equitable servitude, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
2
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"ENVIRONMENT" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwater, drinking water supply, stream sediments, ambient air,
plant and animal life, and any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" means any law, regulation, ordinance, order, injunction,
decree, consent decree, judgment or administrative directive relating to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to lawful levels the release of pollutants
or hazardous substances or materials into the Environment;
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(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to lawful levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting self-
appointed representatives of the public interest to recover for injuries done
to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGREEMENT" has the meaning set forth in Section 2.8(d)(i) .
"ESCROW AGENT" means Texas Commerce Bank.
"ESCROW AMOUNT" has the meaning set forth in Section 2.5(e).
"EXCLUDED ASSETS" means (i) the Corpus Christi, Texas real property, the
building thereon, the lease thereof and all personal property in such
building; (ii) the real and personal property in Xxxxxx, Arizona, and (iii)
the real and personal property in Crystal City, Texas, except for whichever of
the following Parent chooses to removed from the Crystal City property: the
compressor, ice machines, receivers, accumulator, condenser, rake bin,
electrical components, vault refrigeration, valves and fittings.
"FACILITIES" means any real property, leaseholds, or other interests currently
or formerly owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Company.
"GAAP" means generally accepted accounting principles as employed in the United
States of America. Wherever in this Agreement reference is made to a
calculation to be made in accordance with GAAP, such reference shall be deemed
to be to the GAAP from time to time applicable as at the date on which such
calculation is made or required to be made in accordance with GAAP.
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"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or other
legally recognized jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other legally
recognized government;
(c) governmental or legally recognized quasi-governmental authority
of any nature (including any governmental agency, branch, department, official,
or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body legally exercising, or legally entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release,
storage, transfer, transportation, treatment, or use (including any withdrawal
or other use of groundwater) of Hazardous Materials in, on, under, about, or
from the Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that poses an unreasonable risk of harm to
persons or property on or off the Facilities or that may affect the value of
the Facilities or the Company.
"HAZARDOUS MATERIALS" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof
having hazardous characteristics, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-
containing materials.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade names, copyrights,
technology, trade secrets, know-how, formulas and processes which are owned or
used by the Company.
"IRC" means the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" means the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
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"KNOWLEDGE" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a reasonably prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonable investigation concerning the existence of such fact or other
matter.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as a
director, executive officer, partner, executor, or trustee of such Person (or
in any similar capacity) has Knowledge of such fact or other matter; provided,
however, the Company will be deemed to have Knowledge of a particular fact or
other matter if Shareholders have such Knowledge.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, existing principle of common law, regulation, statute, or treaty.
"MASTER LEASE AGREEMENT" has the meaning set forth in Section 12.8.
"MERGER" has the meaning set forth in Section 2.1.
"NONCOMPETITION AGREEMENT" has the meaning set forth in Section 2.8(a)(iii).
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement (other than
common law principles) designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards, and any
governmental program designed to provide safe and healthful working conditions.
"OPTION AGREEMENT" shall mean set forth in Section 12.8.
"ORAL NOTICE OR COMMUNICATION" means any notice or communication delivered or
transmitted orally to an executive officer of the Company.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" An action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
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(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority).
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any
amendment to any of the foregoing.
"PARENT'S CLOSING DOCUMENTS" has the meaning set forth in Section 4.2.
"PARENT'S DISCLOSURE LETTER" means the disclosure letter delivered by Parent to
Shareholders concurrently with the execution and delivery of this Agreement
which are incorporated herein by reference.
"PARENT STOCK" has the meaning set forth in Section 2.5(e).
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" has the meaning set forth in Section 3.13.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof) ending on or
before the close of business on the Closing Date.
"PROCEEDING" means any action, arbitration, audit, hearing, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section
2.8(a)(iv).
"RELATED PERSON" means, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
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(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
Related Person also means, with respect to a specified Person other than
an individual:
(e) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(f) any Person that holds a Material Interest in such specified
Person;
(g) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(h) any Person in which such specified Person holds a Material
Interest;
(i) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(j) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of voting securities or other voting interests representing at
least 10% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 10% of the outstanding equity
securities or equity interests in a Person.
"RELEASE" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" means the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
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"SERVICES AGREEMENT" has the meaning set forth in Section 12.8.
"SHARE PRICE" has the meaning set forth in Section 2.5(c).
"SHAREHOLDERS' CLOSING DOCUMENTS" has the meaning set forth in Section 3.2.
"SHAREHOLDERS' DISCLOSURE LETTER" means the disclosure schedule delivered by
the Company and the Shareholders to Parent concurrently with the execution and
delivery of this Agreement which is attached hereto and incorporated herein by
reference and any and all supplements to the Disclosure Letter.
"SHAREHOLDERS' RELEASE" has the meaning set forth in Section 2.8(a)(ii).
"SHARES" means all of the shares of the no par value common stock of the
Company owned by the Shareholders.
"STOCK AMOUNT" has the meaning set forth in Section 2.5(d).
"SUBSIDIARY" means, with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to
elect a majority of that corporation's or other Person's board of directors or
similar governing body, or otherwise having the power to direct the business
and policies of that corporation or other Person (other than securities or
other interests having such power only upon the happening of a contingency that
has not occurred) are held, directly or indirectly by the Owner; when used
without reference to a particular Person, "Subsidiary" means a Subsidiary of
the Company.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.1.
"TAX" means any tax (including without limitation any tax on gross income, net
income, franchise, gross receipts, royalty, capital gains, value added, sales,
property, ad valorem, transfer, license, use, profits, windfall profits,
withholding on amounts paid to or by the Company, payroll, employment, excise,
severance, stamp, occupation, premium, gift, or estate), levy, assessment,
tariff, duty (including customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed, assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency, or fee.
"TAX RETURN" means any material return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
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"THREAT OF RELEASE" means a substantial likelihood of a Release that would
require action in order to prevent or mitigate damage to the Environment
resulting from such Release.
"THREATENED" means a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
(to the extent of Shareholders' Knowledge) if any other event has occurred or
any other circumstances exist, with respect to which the Shareholders would
reasonably conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
SECTION 2. MERGER; CLOSING
2.1 Merger. In accordance with the provisions of the business
corporation laws of the States of Texas, at the Effective Date, the Company
shall be merged (the "Merger") into Newco and Newco shall be the surviving
corporation (the "Surviving Corporation,") and as such shall continue to be
governed by the laws of the State of Texas. For federal income tax purposes, it
is intended that the Merger shall qualify as a plan of reorganization pursuant
to Sections 368(a)(1)(A) and 368(a)(2)(D) of the IRC.
2.2. Continuing of Corporate Existence. Except as may otherwise be
set forth herein the corporate existence and identity of Newco, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of the Company, with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and into that
of Newco, and the Surviving Corporation shall be vested fully therewith and the
separate corporate existence and identity of the Company shall thereafter cease
except to the extent continued by statute.
2.3. Effective Date. The Merger shall become effective upon the
occurrence of the issuance of the certificate of merger (the "Effective Date")
by the Secretary of State of the State of Texas pursuant to Article 5.04 of the
Texas Business Corporation Act. The signatures of the Minority Shareholders
are not required for the Agreement to become effective with respect to the
Shareholders.
2.4. Corporate Government.
(a) The Articles of Incorporation of Newco as in effect on the
Effective Date, shall continue in full force and effect and shall be the
Articles of Incorporation of the Surviving Corporation.
(b) The Bylaws of Newco, as in effect as of the Effective
Date, shall continue in full force and effect and shall be the Bylaws of
the Surviving Corporation.
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(c) The members of the Board of Directors and the officers of
the Surviving Corporation shall be the persons holding such offices as
of the Effective Date.
2.5. Conversion of Shares. The manner and basis of converting the
Shares shall be as follows:
(a) Each Share which is issued and outstanding immediately
prior to the Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the
right to receive the Share Price which shall be payable, without
interest thereon, upon the surrender of the certificate formerly
representing such Share, in accordance with sub-paragraph (f).
(b) Each Share shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and retired and
cease to exist.
(c) As used herein, the term "Share Price" shall mean an
amount equal to the Acquisition Price (as defined below) divided by the
total number of outstanding Shares.
(d) As used herein, the term "Acquisition Price" shall mean
$9,500,000, of which an $3,500,000 (the "Cash Amount") will be paid to
the Shareholders and Minority Shareholders, while an additional
$6,000,000 will be paid to the Shareholders in the form of newly issued
shares of Parent's $.01 par value common stock ("Parent Stock") valued
at $10 per share (the "Stock Amount").
(e) At the Closing, Parent will pay the Stock Amount to the
Shareholders, $2,960,811 of the Cash Amount (the "Shareholders' Cash
Amount") to the Shareholders, and the $539,189 (the "Minority
Shareholders' Cash Amount") of the Cash Amount to the Minority
Shareholders. Parent will deliver 10% of the Acquisition Price, in the
form of 60,000 shares of Parent Stock and $350,000 in cash (the "Escrow
Amount") to the Escrow Agent to be held pursuant to the Escrow
Agreement. The Escrow Amount will reflect contributions from the
Shareholders of $350,000 in cash from the Shareholders (the
"Shareholders' Cash Contribution") and 60,000 shares of Parent Stock
(the "Shareholders' Stock Contribution").
(f) Each share of common stock, par value $.01 per share, of
Newco ("Newco Stock") which shall be outstanding immediately prior to
the Effective Date shall, at the Effective Date, by virtue of the Merger
and without any action on the part of the holder thereof, be converted
into one share of common stock of the Surviving Corporation.
(g) The stock transfer books of the Company shall be closed as
of the close of business on the Effective Date, and no transfer of
record of any, of the Shares shall take place thereafter.
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(h) No fractional shares of Parent Stock and no certificates
or scrip therefor shall be issued.
(i) All of the Parent Stock, when delivered pursuant to the
provisions of this Agreement, shall be validly issued, fully paid and
nonassessable.
(j) At the Closing, the holders of certificates representing
Shares shall thereupon cease to have any rights with respect to such
Shares and shall surrender certificates representing the Shares to
Parent whereupon such holders shall receive a certificate or
certificates for the number of shares of Parent Stock to which such
holder is entitled hereunder.
2.6 Rights and Liabilities of the Surviving Corporation. As of the
Effective Date, the Surviving Corporation shall have the following rights and
obligations:
(a) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the duties
and liabilities of a corporation organized under the laws of the State
of Texas.
(b) The Surviving Corporation shall possess all of the rights,
privileges, immunities and franchises, of either a public or private
nature, of Newco, and the Company. All rights, title and interests to
all real estate and other property owned by Newco and the Company shall
be allocated to and vested in the Surviving Corporation without
reversion or impairment, without further act or deed, and without any
transfer or assignment having occurred, (but subject to any existing
liens or other encumbrances) thereon.
(c) At the Effective Date, the Surviving Corporation shall
thenceforth be responsible and liable for all liabilities and
obligations of the Company and Newco, and any Proceeding pending by or
against the Company or Newco may be prosecuted as if the Merger had not
occurred, or the Surviving Corporation may be substituted in its place.
Neither the rights of creditors nor any liens upon the property of Newco
or the Company shall be impaired by the Merger.
2.7 Closing. Consummation of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Parent's counsel at
0000 XxxxxxxXxxx Xxxxx, Xxx Xxxxxxx, Xxxxx 00000, at 10:00 a.m. (local time) on
the first business day following ten (10) days after the conditions set forth
in Section 7 and Section 8 have been met or waived, or at such other time and
place as the parties may agree. Subject to the provisions of Section 9,
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 2.7 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement. The Closing shall be deemed to have
taken place on the Effective Date.
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2.8 Closing Obligations. At the Closing:
(a) Shareholders will deliver to Parent:
(i) certificates representing the Shares, to be
surrendered to Newco and Parent;
(ii) releases in the form of Exhibit 2.8(a)(ii) executed
by Shareholders and the Minority Shareholders ("Shareholders'
Release");
(iii) Noncompetition Agreements in the form of Exhibit
2.8(a)(iii), executed by Shareholders and the Minority
Shareholders (the "Noncompetition Agreement"); and
(iv) the Registration Rights Agreement (defined in Section
6.9) executed by the Shareholders;
(v) a certificate executed by Shareholders representing
and warranting to Parent and Newco that Shareholders'
representations and warranties in this Agreement are accurate in
all respects as of the Closing Date as if made on the Closing
Date;
(vi) investment letters executed by Shareholders and the
Minority Shareholders in the form attached hereto as Exhibit
2.8(a)(vi);
(vii) Amended and Restated Voting Agreement dated
September 20, 1995 as amended by Amendment No. 1 to Amended and
Restated Voting Agreement dated January 17, 1997, executed by
Shareholders;
(viii) Amended and Restated Shareholders Agreement dated
September 20, 1995 as amended by Amendment No. 1 to Amended and
Restated Shareholders Agreement dated January 17, 1997, executed
by Shareholders;
(b) Parent will deliver:
(i) to the Shareholders the Shareholders' Cash Amount
less the Shareholders' Cash Contribution as follows:
(A) $1,246,806 by bank cashier's or certified
check payable to the order of Xxxxxx X. Xxxxxx,
(B) $690,730 by bank cashier's or certified
check payable to the order of Xxxx X. Xxxxxxxxx,
00
00
(C) $673,275 by bank cashier's or certified
check payable to the order of Xxxx X. Xxxxxxx; and
(ii) to the Minority Shareholders the Minority
Shareholders' Cash Amount as follows:
(A) $539,189 by bank cashier's or certified
check payable to the order of the Minority Shareholders
per written instructions given by them to Parent on or
before the Closing date; and
(iii) to the Shareholders the Shareholders' Stock Amount
less the Shareholders' Stock Contribution as follows:
(A) 257,880 shares of Parent Stock to Xxxxxx X.
Xxxxxx,
(B) 142,865 shares of Parent Stock to Xxxx X.
Xxxxxxxxx, and
(C) 139,255 shares of Parent Stock to Xxxx X.
Xxxxxxx.
(c) Parent will deliver to Shareholders:
(i) the Registration Rights Agreement executed by
Parent;
(ii) the Noncompetition Agreements executed by Parent;
(iii) a certificate executed by Parent representing and
warranting to Shareholders that Parent and Newco's
representations and warranties in this Agreement are accurate in
all respects as of the Closing Date as if made on the Closing
Date;
(iv) the voting agreement whereby certain shareholders
of Parent agree on a voting arrangement for the designee of
Xxxxxx X Xxxxxx, Xxxx X. Xxxxxxx and Xxxx Xxxxxxxxx (the "SWI
Voting Agreement").
(d) Parent and Shareholders will enter into:
(i) the escrow agreement substantially in the form of
Exhibit 2.8(d)(i) (the "Escrow Agreement") with Texas Commerce
Bank;
(ii) the Articles of Merger, which will be filed by
Newco; and
(iii) the lease agreement for the Crystal City Texas
property in the form attached hereto as Exhibit 2.8(d)(iii).
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(e) Parent will deliver the Escrow Amount to the Escrow Agent
to be held pursuant to the Escrow Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, SHAREHOLDERS AND MINORITY SHAREHOLDERS
Except as set forth in Shareholders' Disclosure Letter, which shall
indicate the Section to which such exception relates, the Company and
Shareholders jointly and severally represent and warrant to Parent and Newco in
Sections 3.1 through Sections 3.26, and the Company and Minority Shareholders
severally warrant and represent in Section 3.27 as follows:
Section 3.1 Organization and Good Standing.
(a) Part 3.1 of the Shareholders' Disclosure Letter contains a
complete and accurate list for the Company of its name, its jurisdiction
of incorporation, other jurisdictions in which it is authorized to do
business. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its
business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. The Company is duly qualified to
do business as a foreign corporation and is in good standing under the
laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification. The Company
has no Affiliates or Subsidiaries.
(b) Shareholders have delivered to Parent copies of the
Organizational Documents of the Company, as currently in effect.
(c) The Company has no Subsidiaries.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Company and the Shareholders, enforceable against the
Company and the Shareholders in accordance with its terms.
(b) Upon the execution and delivery by Shareholders of the
Escrow Agreement, the Registration Rights Agreement, the Shareholders'
Release, and the Noncompetition Agreement (collectively, the
"Shareholders' Closing Documents"), the Shareholders' Closing Documents
will constitute the legal, valid, and binding obligations of
Shareholders, enforceable against Shareholders in accordance with their
respective terms. The Company and the Shareholders have the absolute and
unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the Shareholders' Closing Documents and to
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perform their respective obligations under this Agreement and the
Shareholders' Closing Documents.
(c) Prior to the Closing, the Shareholders have held a
shareholders meeting (or have executed a consent) and have duly adopted
all resolutions required by law to approve the Merger.
(d) Except as set forth in Part 3.2 of the Shareholder'
Disclosure Letter, neither the execution and delivery of this Agreement
by Shareholders and the Company nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with
or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the Company,
or (B) any resolution adopted by the board of directors or the
shareholders of the Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person a valid basis
to challenge any of the Contemplated Transactions or to exercise
any remedy or obtain any relief under, any Legal Requirement or
any Order to which the Company or Shareholders, or any of the
assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation
of any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate,
or modify, any Governmental Authorization that is held by the
Company or that otherwise relates to the business of, or any of
the assets owned or used by, the Company;
(iv) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Company.
Except as set forth in Part 3.2 of the Shareholders' Disclosure Letter,
neither Shareholders nor Company is required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
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3.3 Capitalization.
(a) The authorized equity securities of the Company consist of
1,000,000 shares of common stock, no par value, of which 1,110 shares are
issued and outstanding and constitute the Shares.
(b) Shareholders are the record and beneficial owner and holder of
the Shares, free and clear of all Encumbrances, except as set forth on Part 3.3
of the Shareholders' Disclosure Letter.
(c) No legend or other reference to any purported Encumbrance appears
upon any certificate representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
between the Company and any other Person relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company. None of
the outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any other Legal Requirement. The Company
does not own and has no Contract to acquire, any equity securities or other
securities of any Person (other than the Company) or any direct or indirect
equity or ownership interest in any other business.
3.4 Financial Statements. Shareholders have delivered to Parent:
(a) the audited balance sheet of the Company as at December 31, 1994, and the
related statements of income, changes in shareholders' equity, and cash flow
for the fiscal year then ended, (b) the audited balance sheet of the Company as
at December 31, 1995 (including the notes thereto, if any), and the related
statements of income, changes in shareholders' equity, and cash flow for the
fiscal year then ended, (c) an audited balance sheet of the Company as at
December 31, 1996 (the "1996 Balance Sheet"), and the related statements of
income, changes in shareholders' equity, and cash flow for the fiscal year then
ended, and (d) an unaudited balance sheet of the Company as at January 31,
1997 (the "Interim Balance Sheet") and the related unaudited statements of
income, changes in shareholders' equity, and cash flow for the one month then
ended, including in each case the notes thereto, if any. Such financial
statements and notes (collectively, the "Financial Statements") fairly present
the financial condition and the results of operations, changes in shareholders'
equity, and cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP
(except as set forth in Part 3.4 of the Shareholders' Disclosure Letter),
subject, in the case of unaudited financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse), the absence of notes and such other
differences as are described in Part 3.4 of Shareholders' Disclosure Letter.
The Financial Statements reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements.
3.5 Books and Records. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Parent, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the Boards of Directors, and committees of
the Boards of Directors of
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the Company, and, to the Knowledge of Shareholders, no meeting of any such
shareholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. All of those
books and records are in the possession of the Company.
3.6 Title to Properties; Encumbrances. Part 3.6 of the Shareholders'
Disclosure Letter contains a complete and accurate list of all real property,
leaseholds, or other interests therein owned by the Company. Shareholders have
delivered or made available to Parent copies of the deeds and other instruments
(as recorded) by which the Company acquired or disposed of such real property
and interests, and copies of all title insurance policies, opinions, abstracts,
and surveys in the possession of Shareholders or the Company and relating to
such property or interests. Except with respect to the Excluded Assets, the
Company owns (with good and marketable title in the case of real property,
subject only to the matters permitted by the following sentence) all the
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) reflected as owned in the books and records of the Company,
including all of the properties and assets reflected in the Interim Balance
Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Shareholders' Disclosure Letter and
personal property sold since the date of the Interim Balance Sheet in the
Ordinary Course of Business or otherwise as permitted herein), and all of the
properties and assets purchased or otherwise acquired by the Company since the
date of the Interim Balance Sheet (except for personal property acquired and
sold since the date of the Interim Balance Sheet in the Ordinary Course of
Business and consistent with past practice or otherwise as permitted herein),
which subsequently purchased or acquired properties and assets (other than
accounts receivable, inventory and short-term investments) are listed in Part
3.6 of the Shareholders' Disclosure Letter. Except with respect to the Excluded
Assets, all material properties and assets reflected in the Interim Balance
Sheet are free and clear of all Encumbrances and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) mortgages or security interests shown on
the Interim Balance Sheet as securing specified liabilities or obligations,
with respect to which no default (or event that, with notice or lapse of time
or both, would constitute a default) exists, (b) mortgages or security
interests incurred in connection with the purchase of property or assets after
the date of the Interim Balance Sheet (such mortgages and security interests
being limited to the property or assets so acquired), with respect to which no
default (or event that, with notice or lapse of time or both, would constitute
a default) exists, (c) liens for current taxes not yet due, and (d) statutory
and nonstatutory landlord liens, and (e) liens on property which do not
materially affect the operation of the business of the Company.
3.7 Condition and Sufficiency of Assets. Except as set forth in Part
3.7 of the Shareholders' Disclosure Letter, the property and assets of the
Company are in good operating condition and repair (ordinary wear and tear
excepted) and are adequate for the uses to which they are being put, and none
of such property and assets is in need of repairs except for ordinary, routine
repairs that are due to ordinary wear and tear, or are not material in nature
or cost. The property and assets of the Company are sufficient for the
continued conduct of the Company's business after the Closing in substantially
the same manner as conducted prior to the Closing.
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3.8 Accounts Receivable. All accounts receivable of the Company that
are reflected on the Interim Balance Sheet or the 1996 Balance Sheet
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Unless paid prior to the Closing Date, the
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the 1996 Balance Sheet or
the Interim Balance Sheet or on the accounting records of the Company as of the
Closing Date (which reserves are adequate and calculated consistent with past
practice and, in the case of the reserve as of the Closing Date, will not
represent a greater percentage of the Accounts Receivable as of the Closing
Date than the reserve reflected in the Interim Balance Sheet represented of the
Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been or
will be collected in full, without any set-off, within one hundred eighty (180)
days after the day on which it first becomes due and payable. There is no
contest, claim, or right of set-off, other than returns in the Ordinary Course
of Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Part 3.8(a) of
the Shareholders' Disclosure Letter contains a complete and accurate list of
all Accounts Receivable as of the date of the Interim Balance Sheet, which list
sets forth the aging of such Accounts Receivable.
3.9 Inventory. The inventory of the Company, whether or not
reflected in the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, all of which have been written off
or written down to net realizable value in the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or net
realizable value on a first in, first out basis. The quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company.
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10 of
the Shareholders' Disclosure Letter and obligations and liabilities arising
under the Applicable Contracts, the Company has no liabilities or obligations
of the type required to be reflected as liabilities on a balance sheet prepared
in accordance with GAAP except for liabilities or obligations reflected or
reserved against in the Interim Balance Sheet, the 1996 Balance Sheet and
current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.11 Taxes.
(a) The Company has filed or caused to be filed (on a timely
basis since inception) all Tax Returns that are or were required to be
filed by or with respect to any of them, either separately or as a
member of a group of corporations, pursuant to applicable Legal
Requirements. Shareholders have delivered or made available to Parent
copies of all such Tax Returns relating to income or franchise taxes
filed since inception. The Company
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has paid, or made provision for the payment of, all Taxes that have or
may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Shareholders or the Company,
except such Taxes, if any, as are listed in Part 3.11 of the
Shareholders' Disclosure Letter and are being contested in good faith
and as to which adequate reserves have been provided in the Interim
Balance Sheet.
(b) The United States federal income and state franchise Tax
Returns of the Company subject to such Taxes have been audited by the
IRS or relevant state tax authorities or are closed by the applicable
statute of limitations for all taxable years through December 31, 1991.
Part 3.11 of the Shareholders' Disclosure Letter contains a complete and
accurate list of all audits of all such Tax Returns, including a
reasonably detailed description of the nature and outcome of each audit.
All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Part 3.11 of the
Shareholders' Disclosure Letter, are being contested in good faith by
appropriate proceedings. Part 3.11 of the Shareholders' Disclosure
Letter describes all adjustments to the United States federal income Tax
Returns filed by the Company or any group of corporations including the
Company for all taxable years since December 31, 1991, and the resulting
deficiencies proposed by the IRS. Except as described in Part 3.11 of
the Shareholders' Disclosure Letter, neither the Shareholders nor the
Company has given or been requested to give waivers or extensions (or is
or would be subject to a waiver or extension given by any other Person)
of any statute of limitations relating to the payment of Taxes of the
Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate and are at least
equal to that Company's liability for Taxes. To the Shareholders'
Knowledge, there exists no proposed tax assessment against the Company
except as disclosed in the Interim Balance Sheet or in Part 3.11 of the
Shareholders' Disclosure Letter. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to any property
or assets held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other
Person. The Shareholders are not subject to withholding under Section
1445 of the IRC with respect to any transaction contemplated hereby.
The Company has not been a member of any affiliated group (as defined in
IRC Section 1504(a) or consolidated, combined or unitary group for
purposes of any other Taxes. None of the material property used by the
Company is subject to a lease, other than a "true" lease for federal
income tax purposes.
(d) All Tax Returns filed by the Company are true, correct,
and complete. There is no tax sharing agreement that will require any
payment by the Company after the date of this Agreement. The Company
has had a valid election to be taxed as an "S Corporation" since its
inception and through the date of the Merger.
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(e) There is no plan or intention by any of the Shareholders
or the Minority Shareholders, and to the Knowledge of the Company, there
is no plan or intention on the part of any of the Shareholders or the
Minority Shareholders to sell, exchange, or otherwise dispose of a
number of shares of Parent Stock to be received by them hereunder that
would reduce the Shareholders' ownership of Parent Stock to a number of
shares having a value, as of the Effective Date, of less than fifty
percent (50%) of the value of all of the formerly outstanding Shares as
of the Effective Date. For the purposes of this representation, the
Shares exchanged for cash or other property, surrendered by dissenters
or exchanged for cash in lieu of fractional shares of Parent Stock will
be treated as outstanding Shares on the Effective Date. Moreover, the
Shares and shares of Parent Stock held by Shareholders and otherwise
sold, redeemed, or disposed of prior or subsequent to the Effective Date
will be considered in making this representation.
(f) Newco will acquire at least ninety percent (90%) of the
fair market value of the net assets and at least seventy percent (70%)
of the fair market value of the gross assets held by the Company
immediately prior to the Merger. For the purposes of this
representation, amounts paid by the Company to dissenters, amounts paid
by the Company to Shareholders who receive cash or other property, the
Company's assets used to pay its reorganization expenses, and all
redemptions and distributions (except for regular normal dividends) made
by the Company immediately preceding the transfer, will be included as
assets of the Company held immediately prior to the Merger.
(g) The liabilities of the Company assumed by Newco and the
liabilities to which the transferred assets of the Company are subject
were incurred by the Company in the ordinary course of its business.
(h) There is no intercompany indebtedness existing between
Parent and the Company or between Newco and the Company that was issued,
acquired, or will be settled at a discount.
(i) The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of
the IRC.
(j) The fair market value of the assets of the Company
transferred to Newco will equal or exceed the sum of the liabilities
assumed by Newco pursuant to this Agreement, plus the amount of
liabilities, if any, to which the transferred assets are subject.
(k) The Company is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the IRC.
3.12 No Material Adverse Change. Since the date of the 1996 Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or
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condition of the Company, and to the Shareholders' Knowledge no event has
occurred or circumstance exists that will or is reasonably likely to result in
such a material adverse change.
3.13 Employee Benefits.
(a) As used in this Section 3.13, the following terms have the
meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit
Obligation owed, adopted, or followed by the Company or an ERISA Affiliate of
the Company.
"COMPANY PLAN" means all Plans of which the Company or an ERISA
Affiliate of the Company is or was a Plan Sponsor, or to which the Company or
an ERISA Affiliate of the Company otherwise contributes or has contributed, or
in which the Company or an ERISA Affiliate of the Company otherwise
participates or has participated. All references to Plans are to Company Plans
unless the context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of
the Company or any ERISA Affiliate of an Company.
"ERISA AFFILIATE" means, with respect to the Company, any other
person that, together with the Company, would be treated as a single employer
under IRC Section 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA Section
3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements,
or customary practices, whether or not legally enforceable, to provide
benefits, other than salary, as compensation for services rendered, to present
or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon
the amount of service rendered, sabbatical policies, severance payment
policies, and fringe benefits within the meaning of IRC Section 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" has the meaning given in ERISA Section 3(2)(A).
"PLAN" has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Section 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet
the requirements of IRC Section 401(a).
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"TITLE IV PLANS" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer
Plans.
"VEBA" means a voluntary employees' beneficiary association under
IRC Section 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA Section 3(1).
(b) (i) Part 3.13(i) of the Shareholders' Disclosure Letter
contains a complete and accurate list of all Company Plans, and
identifies as such all Company Plans that are Qualified Plan. Neither
the Company nor any ERISA Affiliate of the Company has ever established,
maintained or contributed to or otherwise participated in, or had an
obligation to maintain, contribute to, or otherwise participate in, any
Company Other Benefit Obligations, Company VEBAs, defined benefit
Pension Plans, Title IV Plans, or Multi-Employer Plans.
(ii) Part 3.13(ii) of the Shareholders' Disclosure
Letter contains a complete and accurate list of (A) all ERISA
Affiliates of the Company , and (B) all Plans of which any such
ERISA Affiliate is or was a Plan Sponsor, in which any such ERISA
Affiliate participates or has participated, or to which any such
ERISA Affiliate contributes or has contributed.
(iii) Part 3.13(iii) of the Shareholders' Disclosure
Letter sets forth a calculation of the liability of the Company
for post-retirement benefits other than pensions, made in
accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether the
Company is required by this Statement to disclose such
information.
(iv) Part 3.13(v) of the Shareholders' Disclosure Letter
sets forth the financial cost of all obligations owed under the
Company Plans that is not subject to the disclosure and reporting
requirements of ERISA.
(c) Shareholders have delivered to Parent, or will deliver to
Parent within ten days of the date of this Agreement:
(i) all documents that set forth the terms of the
Company Plans, and of any related trust, including (A) all plan
descriptions and summary plan descriptions of Company Plans for
which Shareholders or the Company are required to prepare, file,
and distribute plan descriptions and summary plan descriptions,
and (B) all summaries and descriptions furnished to participants
and beneficiaries regarding Company Plans, Company Other Benefit
Obligations, and Company VEBAs for which a plan description or
summary plan description is not required;
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(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all registration statements filed with respect to
the Company Plan;
(iv) all insurance policies purchased by or to provide
benefits under the Company Plans;
(v) all contracts with third party administrators,
actuaries, investment managers, consultants, and other
independent contractors that relate to the Company Plans;
(vi) all reports submitted within the four years
preceding the date of this Agreement by third party
administrators, actuaries, investment managers, consultants, or
other independent contractors with respect to the Company Plans;
(vii) all notifications to employees of their rights
under ERISA Section 601 et seq. and IRC Section 4980B;
(viii) the Form 5500 filed in each of the most recent
three plan years with respect to the Company Plan, including all
schedules thereto and the opinions of independent accountants;
(ix) all notices that were given by the Company or any
ERISA Affiliate or any Company Plan to the IRS, or any
participant or beneficiary, pursuant to statute, within the four
years preceding the date of this Agreement, including notices
that are expressly mentioned elsewhere in this Section 3.13;
(x) all notices that were given by the IRS, or the
Department of Labor to the Company, any ERISA Affiliate of an
Company, or any Company Plan within the four years preceding the
date of this Agreement;
(xi) with respect to Qualified Plans, the most recent
determination letter for each Plan of the Company that is a
Qualified Plan; and
(d) Except as set forth in Part 3.13(vi) of the Shareholders'
Disclosure Letter:
(i) The Company has performed all of its respective
material obligations under all Company Plans. The Company has
made appropriate entries in its financial records and statements
for all obligations and liabilities under such Plans, that have
accrued but are not due.
(ii) No statement, either written or oral, has been made
by any Acquired Company to any Person with regard to any Plan
that was not in accordance with the
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Plan and that could have an adverse material economic consequence
to the Company or to Parent.
(iii) The Company, with respect to all Company Plans,
are, and the Company Plans are, in substantial compliance with
ERISA, the IRC, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section 3.13.
(A) No transaction prohibited by ERISA Section
406 and no "prohibited transaction" under IRC Section
4975(c) have occurred with respect to the Company Plan.
(B) Neither the Shareholders nor Company has any
liability to the IRS with respect to any Plan, including
any liability imposed by Chapter 43 of the IRC.
(C) Neither the Shareholders nor the Company has
any liability under ERISA Section 502 or Section 4071.
(D) All filings required by ERISA and the IRC as
to each Plan have been timely filed, and all notices and
disclosures to participants required by either ERISA or
the IRC have been timely provided.
(E) All contributions and payments made or
accrued with respect to all Company Plans, are deductible
under IRC Section 162 or Section 404. No amount, or any
asset of any Company Plan, is subject to tax as unrelated
business taxable income.
(iv) The Company Plan can be terminated within thirty
days, without payment of any additional contribution or amount
and without the vesting or acceleration of any benefits promised
by such Plan.
(v) Except as set forth in Part 3.13(b) of the
Shareholders' Disclosure Statement, since the Company's
inception, there has been no establishment or amendment of the
Company Plans.
(vi) Since December 31, 1995, no event has occurred or
circumstance exists that could result in a material increase in
premium costs of Company Plans that are insured, or a material
increase in benefit costs of such Plans and Obligations that are
self-insured.
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(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal
proceeding involving, the Company Plans, is pending or, to
Shareholders' Knowledge, is Threatened.
(viii) Except as otherwise described in Part 3.13 of the
Shareholders' Disclosure Letter, the Company has no Company Plan
which is a stock bonus, pension, or profit-sharing plan within
the meaning of IRC Section 401(a).
(ix) Each Qualified Plan of the Company is qualified in
form and operation under IRC Section 401(a); each trust for each
such Plan is exempt from federal income tax under IRC Section
501(a). No event has occurred or circumstance exists that will or
could give rise to disqualification or loss of tax-exempt status
of any such Plan or trust.
(x) The Company and each ERISA Affiliate of the Company
has met the minimum funding standard, and has made all
contributions required, under ERISA Section 302 and IRC Section
402.
(xi) No Company Plan is subject to Title IV of ERISA.
(xii) No amendment has been made, or is reasonably
expected to be made, to any Plan that has required or could
require the provision of security under ERISA Section 307 or IRC
Section 401(a)(29).
(xiii) No accumulated funding deficiency, whether or not
waived, exists with respect to any Company Plan; no event has
occurred or circumstance exists that may result in an accumulated
funding deficiency as of the last day of the current plan year of
any such Plan.
(xiv) Except to the extent required under ERISA Section
601 et seq. and IRC Section 4980B, the Company does not provide
health or welfare benefits for any retired or former employee and
is not obligated to provide health or welfare benefits to any
active employee following such employee's retirement or other
termination of service.
(xv) The Company has the right to modify and terminate
benefits to retirees (other than pensions) with respect to both
retired and active employees.
(xvi) Shareholders and the Company have complied with the
provisions of ERISA Section 601 et seq. and IRC Section 4980B.
(xvii) The consummation of the Contemplated Transactions
will not result in the payment, vesting, or acceleration of any
benefit.
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3.14 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.14 of the Shareholders'
Disclosure Letter and to the Shareholders' Knowledge,
(i) the Company is, and at all times since December 31,
1995 has been in substantial compliance with each Legal
Requirement that is or was applicable to it or to the conduct or
operation of its business or the ownership or use of any of its
assets except where the failure to so comply did not have, will
not have, and is not reasonably likely to have, a material
adverse effect on the business, financial condition and results
of operation of the Company;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) will, or is
reasonably likely to, constitute or result in a material
violation by the Company of, or a material failure on the part of
the Company to comply with, any Legal Requirement, or (B) will,
or is reasonably likely to, give rise to any material obligation
on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time since
December 31, 1995, any written notice or other communication or
any Oral Notice or Communication from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or
potential material violation of, or material failure to comply
with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential material obligation on the part of the
Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
(b) Part 3.14 of the Shareholders' Disclosure Letter contains
a complete and accurate list of each Governmental Authorization that is
held by or has been issued to the Company. Each Governmental
Authorization listed or required to be listed in Part 3.14 of the
Shareholders' Disclosure Letter is valid and in full force and effect.
Except as set forth in Part 3.14 of the Shareholders' Disclosure Letter:
(i) the Company is, and at all times since December 31,
1995, has been, in substantial compliance with all of the terms
and requirements of each Governmental Authorization identified or
required to be identified in Part 3.14 of the Shareholders'
Disclosure Letter;
(ii) no event has occurred or circumstance exists that,
to the Shareholders' Knowledge, will or is reasonably likely to
(with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a material violation of or a
material failure to comply with any term or requirement of any
Governmental Authorization
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listed or required to be listed in Part 3.14 of the Shareholders'
Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination
of, or any modification to, any Governmental Authorization listed
or required to be listed in Part 3.14 of the Shareholders'
Disclosure Letter;
(iii) the Company has not received, at any time since
December 31, 1995 any written notice or other communication or
any Oral Notice or Communication from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or
potential material violation of or material failure to comply
with any term or requirement of any Governmental Authorization,
or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed or required
to be listed in Part 3.14 of the Shareholders' Disclosure Letter
have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental
Bodies.
The Governmental Authorizations listed in Part 3.14 of the Shareholders'
Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
its business in the manner they currently conduct and operate such business
and to permit the Company to own and use their assets in the manner in which
they currently own and use such assets, except where the failure to hold such
Governmental Authorization would not have a materially adverse effect on the
business, financial condition and results of operation of the Company.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the Shareholders'
Disclosure Letter, there is no pending Proceeding commenced by or
against the Company:
(i) that otherwise relates to or that will, or is
reasonably likely to, adversely affect the business of, or any of
the assets owned or used by, the Company; or
(ii) that challenges, or that will, or is reasonably
likely to have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated
Transactions.
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To the Knowledge of Shareholders and the Company, (1) no such Proceeding
has been Threatened, and (2) no event has occurred or circumstance exists that
will, or is reasonably likely to give rise to or serve as a basis for the
commencement of any such Proceeding. Shareholders have delivered or made
available to Parent copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 3.15 of the Shareholders'
Disclosure Letter.
(b) Except as set forth in Part 3.15 of the Shareholders'
Disclosure Letter and to Shareholders' Knowledge:
(i) there is no Order to which the Company or any of
the assets owned or used by the Company, is subject;
(ii) the Shareholders are not subject to any Order that
relates to the business of, or any of the assets owned or used
by, the Company; and
(iii) no officer, director, agent, or employee of
the Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Part 3.15 of the Shareholders'
Disclosure Letter:
(i) the Company is, and at all times since December 31,
1995, has been, in substantial compliance with all of the terms
and requirements of each Order to which it, or any of the assets
owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that
will or, to the Shareholders' Knowledge is reasonably likely to
constitute or result in (with or without notice or lapse of time)
a violation of or failure to substantially comply with any term
or requirement of any Order to which the Company, or any of the
assets owned or used by the Company, is subject; and
(iii) the Company has not received, at any time since
December 31, 1995, any notice or other communication or any Oral
Notice or Communication from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential
violation of, or failure to substantially comply with, any term
or requirement of any Order to which the Company, is or has been
subject.
3.16 Absence of Certain Changes and Events. Except as set forth in
Part 3.16 of the Shareholders' Disclosure Letter or otherwise contemplated in
this Agreement, since the date of the 1996 Balance Sheet, the Company has
conducted its business only in the Ordinary Course of Business and there has
not been any:
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(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock, except
for any distribution by the Company in repayment of amounts owed by the
Company to the Shareholders, the distribution of Excluded Assets
described in Part 3.16 of the Shareholders' Disclosure Letter, any
proceeds from the sale thereof, and distributions since December 31,
1996 in contemplation of the payment of Shareholders' income taxes
relating to the income of the Company for calendar year ended December
31, 1996 at the Shareholders' respective effective rates (deemed to be
40%); provided any overages in such distributions for actual taxes owed
are returned to the Company once known to be overages;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any shareholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any director,
officer, or employee.
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of the Company;
(e) damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, or financial
condition of the Company;
(f) entry into, termination of, or receipt of notice of
termination by the Company of (i) any license, distributorship, dealer,
sales representative, joint venture, credit, or similar agreement, or
(ii) any Contract or transaction involving a total remaining commitment
by or to the Company of at least $50,000;
(g) sale (other than sales of inventory or obsolete or
unusable equipment and vehicles in the Ordinary Course of Business),
lease, or other disposition of any asset or property of the Company or
mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company, including the sale, lease, or
other disposition of any of the Intellectual Property, except as
contemplated hereby;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
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(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to do
any of the foregoing.
3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Shareholders' Disclosure Letter
contains a complete and accurate list, and Shareholders have delivered
or made available to Parent true and complete copies, of:
(i) each Applicable Contract that involves performance
of services or delivery of goods or materials by the Company of
an amount or value in excess of $10,000;
(ii) each Applicable Contract that involves performance
of services or delivery of goods or materials to the Company of
an amount or value in excess of $10,000;
(iii) each Applicable Contract that was not entered into
in the Ordinary Course of Business and that involves expenditures
or receipts of the Company in excess of $10,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or personal
property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $10,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current or
former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any
other Person;
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(viii) each Applicable Contract containing covenants that
in any way purport to restrict the business activity of the
Company or any affiliate of the Company or limit the freedom of
the Company or any affiliate of the Company to engage in any line
of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to
or by any Person based on sales, purchases, or profits, other
than direct payments for goods;
(x) each power of attorney by or to the Company that is
currently effective and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an
express undertaking by the Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures
in excess of $10,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification in
respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Shareholders'
Disclosure Letter:
(i) None of the Shareholders has or may acquire any
rights under, and none of the Shareholders has become subject to
any obligation or liability under, any Applicable Contract that
relates to the business of, or any of the assets owned or used
by, the Company; and
(ii) To the Shareholders' Knowledge, no officer,
director, agent, employee, consultant, or contractor of the
Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant,
or contractor to (A) engage in or continue any conduct, activity,
or practice relating to the business of the Company, or (B)
assign to the Company or to any other Person any rights to any
invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Shareholders'
Disclosure Letter and to the Shareholders' knowledge, each Applicable
Contract identified or required to be identified in Part 3.17(a) of the
Shareholders' Disclosure Letter is in full force and effect and is valid
and enforceable in accordance with its terms.
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(d) Except as set forth in Part 3.17(d) of the Shareholders'
Disclosure Letter:
(i) the Company is, and at all times since December 31,
1995, been in substantial compliance with all applicable terms
and requirements of each Applicable Contract identified or
required to be identified in Part 3.17(a) of the Shareholders'
Disclosure Letter under which such Company has or had any
obligation or liability or by which such Company or any of the
assets owned or used by such Company is or was bound;
(ii) to Shareholders' Knowledge, each other Person that
has or had any obligation or liability under any Applicable
Contract under which the Company has or had any rights is, and at
all times since December 31, 1995 has been, in substantial
compliance with all applicable terms and requirements of such
Applicable Contract;
(iii) to Shareholders' Knowledge, no event has occurred
or circumstance exists that (with or without notice or lapse of
time) will, or is reasonably likely to result in a material
violation or material breach of, or give the Company or other
party thereto the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; and
(iv) the Company has not given to or received from any
other Person, since December 31, 1995, any Oral Notice or
Communication regarding any actual, alleged, possible, or
potential violation or breach of, or default under, any
Applicable Contract.
(e) There are no pending renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts
paid or payable to the Company under current or completed Applicable
Contracts with any Person and no such Person has made written demand for
such renegotiation.
(f) The Applicable Contracts relating to the sale, design,
manufacture, or provision of products or services by the Company have
been entered into without the commission of any act alone or in concert
with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal Requirement.
3.18 Insurance.
(a) Except as set forth in Part 3.18 of the Shareholders'
Disclosure Letter, Shareholders have delivered or made available to
Parent:
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(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the
Company, or any director of the Company, in his or her capacity
as a director, is or has been covered at any time within the four
years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Part 3.18(b) of the Shareholders' Disclosure Letter
describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the
Company; and
(iii) all obligations of the Company to third parties
with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under
which such coverage is provided.
(c) Part 3.18(c) of the Shareholders' Disclosure Letter sets
forth, by year, for the current policy year and each of the four
preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $10,000, which sets
forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type
of insurance, and period of coverage; and
(C) the amount and a brief description of the
claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate
cost of such claims.
(d) Except as set forth on Part 3.18(d) of the Shareholders'
Disclosure Letter:
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(i) All policies to which the Company is a party or
that provide coverage to Shareholders, the Company, or any
director or officer of an Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that the
Shareholders reasonably believe is financially sound and
reputable;
(C) are sufficient for compliance with all Legal
Requirements and Applicable Contracts;
(D) will not be terminated in accordance with
its terms upon the consummation of the Contemplated
Transactions and no insurer has given notice of its intent
to terminate such policy upon the consummation of the
Contemplated Transactions; and
(E) do not provide for any retrospective premium
adjustment or other experienced-based liability on the
part of the Company.
(ii) Neither any of the Shareholders nor the Company has
received (A) any refusal of coverage or any notice that a defense
will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that
the issuer of any policy is not willing or able to perform its
obligations thereunder.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its obligations, under each policy to
which the Company is a party or that provides coverage to the
Company or director thereof (in his or her capacity as a
director).
(iv) The Company has given notice to the insurer of all
claims that may be insured thereby.
3.19 Environmental Matters.
Except as set forth in Part 3.19 of the Shareholders' Disclosure Letter:
(a) The Company is, and at all times has been, in substantial
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither any of the Shareholders nor the
Company has any basis to expect, nor has any of them or, to the
Shareholders' Knowledge, any other Person for whose conduct they are
responsible received, any actual or Threatened order, notice, or other
communication from (i) any
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Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any
actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which
Shareholders or the Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by
Shareholders, the Company, or any other Person for whose conduct they
are responsible, or from which Hazardous Materials of the Company have
been transported, treated, stored, handled, transferred, disposed or
recycled.
(b) There are no pending or, to the Knowledge of the Company
or the Shareholders, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any Environmental
Law, with respect to or affecting any of the Facilities or any other
properties and assets (whether real, personal, or mixed) in which
Shareholders or the Company has or had an interest.
(c) Neither any of the Shareholders nor the Company has any
basis to expect, nor has any of them or, to the Shareholders' Knowledge,
any other Person for whose conduct they are responsible, received, any
citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials,
or any alleged, actual, or potential violation or failure to comply with
any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which
Shareholders or the Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by
Shareholders, the Company, or any other Person for whose conduct the
Company is responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
(d) Neither any of the Shareholders nor the Company, nor, to
the Shareholders' Knowledge, any other Person for whose conduct they
are responsible, has any Environmental, Health, and Safety Liabilities
with respect to the Facilities, or with respect to any other properties
and assets (whether real, personal, or mixed) in which Shareholders or
the Company (or any predecessor) has or had an interest, or at any
property geologically or hydrologically adjoining the Facilities or any
such other property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in
land, water,
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sumps, or any other part of the Facilities, or incorporated into any
structure therein or thereon in quantities that would require
registration with or reporting to any regulatory agency or emergency
planning authority. Neither the Company nor any other Person for whose
conduct the Company is responsible has permitted or conducted, or is
aware of, any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether real, personal, or
mixed) in which Shareholders or the Company has or had an interest
except in substantial compliance with all applicable Environmental Laws.
(f) There has been no Release or, to the Knowledge of
Shareholders and the Company, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities, or
from or by any other properties and assets (whether real, personal, or
mixed) in which the Company has or had an interest, whether by
Shareholders, the Company, or any other Person for whom the Company is
responsible.
(g) Shareholders have delivered or made available to Parent
true and complete copies and results of any reports, studies, analyses,
tests, or monitoring possessed or initiated by Shareholders or the
Company pertaining to Hazardous Materials or Hazardous Activities in,
on, or under the Facilities, or concerning compliance by Shareholders,
the Company, or, to the Shareholders' Knowledge, any other Person for
whose conduct they are responsible, with Environmental Laws.
3.20 Employees.
(a) Part 3.20 of the Shareholders' Disclosure Letter contains
a complete and accurate list of the following information for each
employee or director of the Company with a salary of at least $30,000
per year (including each such employee on leave of absence or layoff
status), or for each officer of director: employer; name; job title;
current compensation paid or payable and any change in compensation
since December 31, 1996, vacation accrued, and service credited for
purposes of vesting and eligibility to participate under the Company's
pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any Director Plan.
(b) To Shareholders' Knowledge, no employee or director of the
Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any
other Person ("Proprietary Rights Agreement") that in any way adversely
affects or will affect (i) the performance of his duties as an employee
or director of the Company, or (ii) the ability of the Company to
conduct its business, including any
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Proprietary Rights Agreement with Shareholders or the Company by any
such employee or director. To Shareholders' Knowledge, no director,
officer, or other key employee of the Company intends to terminate his
employment with the Company.
(c) Part 3.20 of the Shareholders' Disclosure Letter also
contains a complete and accurate list of the following information for
each retired employee or director of the Company, or their dependents,
receiving benefits or scheduled to receive benefits in the future: name,
pension benefit, pension option election, retiree medical insurance
coverage, retiree life insurance coverage, and other benefits.
3.21 Labor Relations; Compliance. The Company has not been and is not
a party to any collective bargaining or other labor Contract since January 1,
1992. Since January 1, 1992, there has not been, there is not presently pending
or existing, and to Shareholders' Knowledge there is not Threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any Proceeding against or affecting the Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. To Shareholders' Knowledge, no event has occurred or circumstance exists
that provides, or is reasonably likely to provide, the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. The Company has
complied in all material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant closing. The
Company is not liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
3.22 Intellectual Property. Part 3.22 of the Shareholders' Disclosure
Letter sets forth each material item of Intellectual Property, and, except as
set forth in Part 3.22 of the Shareholders' Disclosure Letter, the Company
owns, or is licensed or otherwise has the right to use, all such Intellectual
Property which is used in the conduct of the business of the Company, and the
consummation of the Contemplated Transactions will not alter or impair any such
Intellectual Property in any material respect or the Company's right to use
same. Except as set forth in Part 3.22 of the Shareholders' Disclosure Letter
and except for such other claims which if adversely determined would not have a
material adverse effect on the Company, no claims have been asserted against
the Company by any Person with respect to the use of any such Intellectual
Property or challenging or questioning the validity or effectiveness of any
license or agreement relating thereto. Each of the trademarks, trade names and
copyrights used in the conduct of the business of the Company is valid and
enforceable (except as disclosed in Part 3.22 of the Shareholders' Disclosure
Letter) and to Shareholders' Knowledge, do not violate the rights of any
Person.
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3.23 Certain Payments. Neither the Company nor, to the Shareholders'
Knowledge, any director, officer, agent or employee of the Company, nor any
other Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any affiliate
of the Company, or (iv) in violation of any Legal Requirement, (b) established
or maintained any fund or asset that has not been recorded in the books and
records of the Company.
3.24 Disclosure.
(a) No representation or warranty of Shareholders in this
Agreement and no statement in the Shareholders' Disclosure Letter omits
to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not
misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances
in which they were made, not misleading.
3.25 Relationships with Related Persons. Neither any of the
Shareholders nor any Related Person of any of the Shareholders or of the
Company has any interest in any personal property whether tangible or
intangible), used in the Company's business. Except with respect to ownership
interests in the Company held by any of the Shareholders or a Related Person of
any of the Shareholders or the Company, neither any of the Shareholders nor any
Related Person of any such Shareholders or of the Company owns (of record or as
a beneficial owner) a material equity interest or any other material financial
or profit interest in a Person that has had material business dealings or a
material financial interest in any transaction with the Company since December
31, 1995, other than business dealings or transactions conducted in the
Ordinary Course of Business with the Company at substantially prevailing market
prices and on substantially prevailing market terms. Except as set forth in
Part 3.25 of the Shareholders' Disclosure Letter, neither any of the
Shareholders nor, to Shareholders' Knowledge, any Related Person of any
Shareholders or of the Company is a party to any Contract with, or has any
claim or right against, the Company.
3.26 Brokers or Finders. Shareholders and their agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
3.27 Minority Shareholders Representations and Warranties. Each of
the Minority Shareholders represents and warrants that he or she has the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement, and that he or she is the record and beneficial owner
and holder of all Shares identified to him or her on the signature page for
Minority
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Shareholders, free and clear of all Encumbrances, except as set forth on Part
3.27 of the Shareholders' Disclosure Letter.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco, jointly and severally, represents and warrants to
Shareholders as follows:
4.1 Organization and Good Standing. Each of Parent and Newco is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas. Newco is a wholly owned Subsidiary of Parent and
Parent is the record and beneficial owner of all of the outstanding capital
stock of Newco. Newco was formed by Parent for the sole purpose of effecting
the Merger, and has not conducted any operations or business except with
respect to actions contemplated herein.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of each of Parent and Newco, enforceable against Parent and
Newco in accordance with its terms. Upon the execution and delivery by
Parent of the Escrow Agreement, and the Registration Rights Agreement
(collectively, the "Parent's Closing Documents"), the Parent's Closing
Documents will constitute the legal, valid, and binding obligations of
Parent, enforceable against Parent in accordance with their respective
terms. Each of Parent and Newco has the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement and the
Parent's Closing Documents and to perform its obligations under this
Agreement and the Parent's Closing Documents.
(b) Except as set forth in Part 4.2 of the Parent's Disclosure
Letter, neither the execution and delivery of this Agreement by Parent
and Newco nor the consummation or performance of any of the Contemplated
Transactions by Parent and Newco will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated
Transactions pursuant to:
(i) any provision of Parent's or Newco's Organizational
Documents;
(ii) any resolution adopted by the board of directors or
the shareholders of Parent or Newco;
(iii) any Legal Requirement or Order to which Parent or
Newco may be subject; or
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(iv) any Contract to which Parent or Newco is a party or
by which Parent or Newco may be bound.
Except as set forth in Part 4.2 of the Parent's Disclosure Letter,
neither Parent nor Newco is or will be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 Capitalization. The authorized capital stock of Parent consists
of 50,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), of which 2,826,371 shares are issued and outstanding, and 5,000,000
shares of preferred stock, par value $.01 per share. The Parent's Board of
Directors has authorized the designation of 450,000 shares of the preferred
stock as the Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), and all of the authorized shares of Series A Preferred Stock are
issued and outstanding. The Parent's Board of Directors has authorized the
designation of 200,000 shares of the preferred stock as the Series B
Convertible Preferred Stock, of which 124,831 shares are issued and
outstanding. No other shares of preferred stock are presently outstanding. All
of the outstanding equity securities of Parent have been duly authorized and
validly issued and are fully paid and nonassessable. Parent's Disclosure
Letter sets forth the warrants, options, subscriptions or other rights or
preferences (including conversion or preemptive rights) outstanding to acquire
capital stock of Parent, or notes, securities or other instruments convertible
into or exchangeable for capital stock of Parent. Except as set forth on the
Parent's Disclosure Letter, no legend or other reference to any purported
Encumbrance appears upon any certificate representing any equity securities of
Parent. To Parent's Knowledge, there are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of
Parent except as set forth in Part 4.3 of Parent's Disclosure Letter. None of
the outstanding equity securities or other securities of Parent was issued in
violation of the Securities Act or any other Legal Requirement. All of the
Parent Stock, when delivered pursuant to the provision of this Agreement, will
be validly issued, fully paid and non-assessable, free and clear of all
Encumbrances, and will not be issued in violation of any preemptive rights.
Set forth on part 4.3 to the Parent's Disclosure Letter is a complete and
accurate list of all shareholders of Parent who own, beneficially or of record,
10% or more of the outstanding capital stock of Parent.
4.4 Financial Statements. Parent has delivered to Shareholders: (a)
audited consolidated balance sheets of Parent as at December 31 in each of the
years 1994 through 1996, and the related audited consolidated statements of
income, changes in shareholders' equity, and cash flow for each of the fiscal
years then ended, together with the report thereon of Deloitte & Touche,
independent certified public accountants. Such financial statements and notes
fairly present the financial condition and the results of operations, changes
in shareholders' equity, and cash flow of Parent as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or
in the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the
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audited balance sheet); the financial statements referred to in this Section
4.4 reflect the consistent application of such accounting principles throughout
the periods involved, except as disclosed in the notes to such financial
statements.
4.5 Certain Proceedings. Except as set forth in Part 4.5 of the
Parent's Disclosure Letter, there is no pending Proceeding that has been
commenced against Parent or Newco and that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To Parent's Knowledge, no such Proceeding has
been Threatened.
4.6 Taxes. Prior to the Merger, Parent will be in control of Newco
within the meaning of Section 368(c)(1) of the IRC. Parent has no plan or
intention to cause the Surviving Corporation to issue additional shares of its
stock, following the Merger, that would result in Parent losing control of
Newco within the meaning of Section 368(c)(1) of the IRC. Parent has no plan
or intention to reacquire any of its stock issued under the Merger. Parent has
no plan or intention to liquidate Newco; to merge Newco with and into another
corporation; to sell or otherwise dispose of any of the assets of the Company
acquired in the Merger, except for dispositions made in the Ordinary Course of
Business or transfers described in Section 368(a)(2)(C) of the IRC. It is the
intention of the Parent that following the Merger the Surviving Corporation
will continue the historic business of the Company and will use a significant
portion of the Company's business assets in the course of its business.
Parent, Newco and the Company will pay their respective expenses, if any,
incurred in connection with the Merger. Neither Parent nor Newco is an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the IRC.
No stock of Newco will be issued in the Merger. There is no intercompany
indebtedness existing between Parent and the Company or between Newco and the
Company that was issued, acquired, or will be settled at a discount.
4.7 Brokers or Finders. Parent and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold Shareholders harmless from any
such payment alleged to be due by or through Parent as a result of the action
of Parent or its officers or agents.
4.8 Litigation; Order. Except as set forth in Part 4.8 of the
Parent's Disclosure Letter, there is no action, Proceeding, claim or
investigation pending against Parent or Newco before any Governmental body that
if determined adversely to Parent or Newco may reasonably be expected to have a
material adverse effect on the present or future operations or financial
conditions of Parent or Newco, and, to the best of Parent's and Newco's
Knowledge, no such action, Proceeding, claim or investigation has been
Threatened. There is no Order to which Parent or any of the assets owned or
used by the Company is subject and no officer, director, agent or employee of
Parent is subject to any Order that prohibits such officer, director, agent or
employee from engaging in or continuing any conduct, activity or practice
relating to the business of Parent.
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4.9 Absence of Certain Changes. Except as set forth in Part 4.9 of
the Parent's Disclosure Letter, since December 31, 1996, except as contemplated
herein, there has not been with respect to Parent and its Subsidiaries, on a
consolidated basis:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations of Parent or its Subsidiaries which
change by itself or in conjunction with all other such changes, whether
or not arising in the ordinary course of business, has had, or can
reasonably be expected to have, an adverse effect on Parent and its
Subsidiaries, taken as a whole;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or
business of parent and its Subsidiaries, taken as a whole;
(c) any split, combination or recapitalization of the capital
stock of Parent or any declaration or payment of any dividend or making
of any other distribution or payment in respect of its capital stock or
redeeming, purchasing or otherwise acquiring or agreeing to redeem,
purchase or acquire any of its capital stock;
(d) any material change with respect to the management,
supervisory, development or other key personnel of Parent.
4.10 Disclosure.
Parent has furnished to Shareholders a copy of Parent's Disclosure
Letter. No representation or warranty of Parent and Newco in this Agreement
and Parent's Disclosure Letter contains an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
4.11 No Undisclosed Liabilities. Except as set forth in Part 4.11 of
the Parent's Disclosure Letter and except for obligations and liabilities
arising under the Applicable Contracts, neither the Parent nor Newco has any
liabilities or obligations of the type required to be reflected as liabilities
on a balance sheet prepared in accordance with GAAP except for liabilities or
obligations reflected or reserved against the Parent's balance sheet as of
December 31, 1996 and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
4.12 No Material Adverse Change. Except as set forth in Part 4.12 of
the Parent's Disclosure Letter, since December 31, 1996 there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of Parent or Newco, and to the Parent's Knowledge no event
has occurred or circumstance exists that will or is reasonably likely to result
in such a material adverse change.
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SECTION 5. COVENANTS OF SHAREHOLDERS
5.1 Access and Investigation. Between the date of this Agreement and
the Closing Date, the Company and the Shareholders will, and will cause the
Company and its Representatives to, (a) afford Parent and its Representatives
and prospective lenders and their Representatives (collectively, "Parent's
Advisors") full and free access to the Company's personnel, properties
(including subsurface testing), contracts, books and records, and other
documents and data, (b) furnish Parent and Parent's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Parent may reasonably request, and (c) furnish Parent and Parent's Advisors
with such additional financial, operating, and other data and information as
Parent may reasonably request.
5.2 Operation of the Business of the Company. Between the date of
this Agreement and the Closing Date, unless otherwise consented to by Parent
and except as contemplated herein, the Company and Shareholders will, and
Shareholders will cause the Company to:
(a) conduct such business of the Company only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of such Company, keep available the services of
the current officers, employees, and agents of the Company, and maintain
the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships
with the Company;
5.3 Negative Covenant. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Company and Shareholders will not, and will cause the Company not to, without
the prior consent of Parent, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of the
changes or events listed in Section 3.16 is likely to occur.
5.4 Excluded Assets. On or prior to the Closing Date, the Company
shall sell or distribute to Shareholders, and Shareholders shall purchase or
accept all of the Excluded Assets. In connection with this sale, Shareholders
shall assume all liabilities related to the Excluded Assets.
5.5 Required Approvals. As promptly as practicable after the date of
this Agreement, the Company and Shareholders will, and Shareholders will cause
the Company to, make all filings required by Legal Requirements to be made by
them in order to consummate the Contemplated Transactions. Between the date of
this Agreement and the Closing Date, the Company and Shareholders will, and
will cause the Company to, (a) cooperate with Parent with respect to all
filings that Parent reasonably elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Parent in obtaining all consents identified in Part 3.2 of the
Shareholders' Disclosure Letter; provided, however, that this
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Agreement will not require the Company or the Shareholders to incur any
unreasonable burden, financial or otherwise, to make such filing or obtain such
consent or Governmental Authorization.
5.6 Notification. Between the date of this Agreement and the Closing
Date, the Shareholders will promptly notify Parent in writing if any of the
Shareholders become aware of any fact or condition that causes or constitutes a
Breach of any of the Company's or Shareholders' representations and warranties
as of the date of this Agreement, or if the Shareholders become aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Shareholders' Disclosure Letter if the Shareholders' Disclosure Letter were
dated the date of the occurrence or discovery of any such fact or condition,
the Shareholders will promptly deliver to Parent a supplement to the
Shareholders' Disclosure Letter specifying such change. During the same period,
the Company and Shareholders will promptly notify Parent of the occurrence of
any Breach of any covenant of Shareholders in this Section 5 or of the
occurrence of any event, of which any of the Shareholders has Knowledge and
which will, or is reasonably likely to, make the satisfaction of the conditions
in Section 7 impossible or unlikely.
5.7 Payment of Indebtedness by Related Persons. Except as expressly
provided in this Agreement, Shareholders will cause all indebtedness owed to
the Company by any Shareholder or any Related Person of any Shareholder to be
paid in full prior to Closing.
5.8 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, the Company and the Shareholders will not,
and will cause the Company and each of their Representatives not to, directly
or indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Parent) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of the Company, or any
of the capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company. Shareholders and
the Company will promptly communicate to Parent the terms of any proposal
received or the fact that Shareholders or the Company has received inquiry with
respect to, or have participated in discussions or negotiations in respect of,
any such transaction, and the identity of any persons who initiated or
participated in such discussions or negotiations.
5.9 Best Efforts. Between the date of this Agreement and the Closing
Date, Shareholders will use their Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
5.10 Cooperation on Tax Matters.
(a) After the Closing Date, the Shareholders shall cooperate with
the Parent, as and to the extent reasonably requested by the other party, in
connection with the preparation and filing
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of any Tax Return, statement, report or form (including any report required
pursuant to Section 6042 of the IRC and all Treasury Regulations promulgated
thereunder), any audit, and litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retentions and (upon the other
party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding.
(b) The Shareholders agree, upon request, to use all reasonable
efforts to obtain any certificate or other document from any governmental
authority or any other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed on Parent or Surviving Corporation
(with respect, but not limited, to transactions contemplated hereby).
5.11 Other Tax Matters
(a) Without the prior written consent of the Parent, neither the
Shareholders nor the Company (to the extent it may affect or relate to the
Company, the Surviving Corporation or the Parent) shall make or change any Tax
election, change any annual Tax accounting period, adopt or change any method
of Tax accounting period, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim a
Tax refund, consent to any extension or waiver of the limitations period of the
limitations period applicable to any Tax claim or assessment or take or omit to
take any other action, if any such action or omission would have the effect of
increasing the Tax liability of the Company or the Parent.
(b) All Tax Returns not required to be filed on or before the
date hereof (including any applicable extensions) relating to any Pre-Closing
Tax Period will be filed when due in accordance with all applicable laws.
(c) All transfer, documentary, sales, use, stamp, registration,
value added and other such Taxes and fees incurred in connection with this
Agreement (including any applicable extensions) will be filed when due in
accordance with all applicable laws.
5.12 Filing of Short Period Returns. The Company and Shareholders
shall treat the day before the Closing Date as the last day of the taxable
period in which the Company is an S corporation, as defined in the IRC. All
Tax returns relating to Company's status as an S corporation for the present
taxable year of the Company, which are required and/or permitted by the
authorized taxing authorities (herein collectively referred to as the "S Short
Year Returns") shall be filed accordingly. In accordance with Section
1362(e)(6)(D) and related regulations of the IRC, the books of the Company
shall be closed at the close of the day before the Closing Date. The
Shareholders will cause its accounting firm to prepare, at the Shareholders'
expense, the S Short Year Returns.
5.13 Crystal City Property. Shareholders will transfer title to
any or all of the following items located in the Crystal City property, as
determined by Parent: the compressor, ice machines, receivers, accumulator,
condenser, rake bin, electrical components, vault refrigeration, valves and
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fittings. Neither Parent nor the Newco shall have any obligation under this
agreement, or under any lease agreement, to remove any of the items listed in
the preceding sentence.
SECTION 6. COVENANTS OF PARENT
6.1 Approvals of Governmental Bodies. As promptly as practicable
after the date of this Agreement, Parent will, and will cause each of its
Related Persons to, make all filings required by Legal Requirements to be made
by them to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Parent will, and will cause each Related Person
to, cooperate with Shareholders and the Company with respect to all filings
that the Company and/or the Shareholders are required by Legal Requirements to
make in connection with the Contemplated Transactions, and (ii) cooperate with
Shareholders in obtaining all consents identified in Part 3.2 of the
Shareholders' Disclosure Letter; provided that this Agreement will not require
Parent to dispose of or make any change in any portion of its business or to
incur any other unreasonable burden to obtain a Governmental Authorization.
6.2 Best Efforts. Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Parent will use its
Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3 Cooperation on Tax Matters The Parent agrees (i) to retain and
provide Shareholders with access to all books and records with respect to Tax
matters pertinent to the Company relating to any Pre-Closing Tax Period, and to
abide by all record retention agreements entered into with any Taxing
Authority, (ii) to give the Shareholders reasonable written notice prior to
destroying or discarding any such books and records and, if the Shareholders so
request, the Parent shall allow the Shareholders to take possession of such
books and records and (iii) to cooperate fully with the Shareholders regarding
whatever steps may be reasonably necessary to qualify the Merger as a tax-free
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the IRC.
6.4 Notification. Between the date of this agreement and the Closing
Date, the Parent will promptly notify Shareholders in writing if the Parent
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Company's, Shareholders', Parent's or Newco's representations and
warranties as of the date of this Agreement, or if Parent becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition known by Parent require any
change in the Parent's Disclosure Letter if the Parent' s Disclosure Letter
were dated the date of the occurrence or discovery of any such fact or
condition, Parent will promptly deliver to Shareholders a supplement to the
Parent's Disclosure Letter specifying such change. During the same period,
Parent will promptly notify Shareholders of the occurrence of any Breach, known
to the Parent, of any covenant of Shareholders, Company, Parent or Newco in
this Agreement or of the occurrence of any event that
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will or is reasonably likely to make the satisfaction of the conditions in
Section 7 or 8 impossible or unlikely.
6.5 Release of Personal Guarantee. Parent and Newco shall take all
such actions necessary or appropriate to cause Shareholders to be released at
or prior to Closing from any personal guarantees of payment or performance
relating to the Company's current and long-term indebtedness, notes payable,
current and long-term capital leases and any other obligations relating to the
Company, its assets or business (other than the Excluded Assets), subject to
Company and Shareholders' performance of all covenants and obligations required
hereunder. Concurrent with the Closing, Parent shall cause Newco to repay all
amounts owed to Xxxxxx X. Xxxxxx by the Company.
6.6 Excluded Assets. Parent and Newco shall take all such actions
necessary or appropriate to release the Excluded Assets from all liens and
encumbrances relating to the Company's current and long-term indebtedness,
notes payable, current and long-term capital leases and any other obligations
relating to the Company, subject to Company and Shareholders' performance of
all covenants and obligations required hereunder.
6.7 Maintaining Adequate Insurance. For the period that is five
years after the Closing Date, Parent shall maintain comprehensive general
liability insurance coverage and which names each of the Shareholders as
additional insureds under its comprehensive general liability insurance policy.
The limits of such coverage will be least $5,000,000 per occurrence. Parent
shall furnish the Shareholders with proof of this insurance on an annual basis.
For the period that is five years after the Closing Date, so long as Parent
maintains product liability coverage, Parent shall provide the same insurance
coverage to each of the Shareholders, naming each of the Shareholders as
additional insureds to its product liability insurance policy. Parent and Newco
shall maintain adequate liability insurance, including product liability
insurance, after the Closing, and the Shareholders shall be covered under such
insurance policies.
6.8 COBRA Compliance. On and after the Closing Date, Parent shall
have the sole responsibility and obligation for complying with the health care
continuation coverage requirements of Internal Revenue Code ("Code") Section
4980B and Section 601 et seq. of ERISA ("COBRA") that are applicable to the
Company's employees and the spouses and dependents of such employees and Parent
shall be solely responsible for providing COBRA continuation coverage to any
person entitled to such coverage in connection with any health plan sponsored
by Company or by Parent. Parent shall indemnify, defend and hold harmless
Company and its employees, officers, directors, successors, assigns,
subsidiaries, shareholders, agents, attorneys, representatives and affiliates
from and against any and all losses, liabilities, demands, claims, expenses,
judgments, costs, attorneys' fees, taxes and penalties arising under Code
Section 1980B or ERISA Section 601 et seq. with respect to any individual who
was an employee (or a spouse or dependent of such employee) of Company prior to
the Closing and who had or has a "qualifying event" (within the meaning of Code
Section 4980(B)(f)(3)) before, on or after the Closing.
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6.9 Registration Rights Agreement. Prior to the Closing, Parent
shall negotiate in good faith with Shareholders an agreement (the "Registration
Rights Agreement") which gives the Shareholders"piggyback" registration rights
and "demand" registration rights on the same or better terms and conditions as
those granted by Parent to other shareholders of Parent under other
registration rights agreements to which Parent is a party, or contemplates
entering into; provided, that such registration rights of Shareholders shall be
exercisable, subject to reasonable restrictions, at any time after an initial
public offering of the Parent Stock.
SECTION 7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE
Parent's obligation to consummate the Merger and to take the other
actions required to be taken by Parent at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Parent, in whole or in part):
7.1 Accuracy of Representations. All of Shareholders'
representations and warranties in this Agreement must have been accurate in
all material respects as of the date of this Agreement, and must be accurate in
all material respects as of the Closing Date as if made on the Closing Date.
7.2 Shareholders' Performance.
(a) All of the covenants and obligations that Shareholders are
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.8 must have been delivered, and each of the other covenants and
obligations in Sections 5 must have been performed and complied with in
all material respects.
7.3 Consents. Each of the Consents identified in Part 3.2 of the
Shareholders' Disclosure Letter must have been obtained and must be in full
force and effect, except where the failure to obtain each consent would not
have a materially adverse effect on the business, financial condition or result
of operation of the Company, or the ability of the parties to consummate the
Contemplated Transactions without the payment of additional consideration.
7.4 Additional Documents. Each of the following documents must have
been delivered to Parent:
(a) an opinion of Xxxx, Forward, Xxxxxxxx & Scripps, L.L.P.
dated the Closing Date reasonably acceptable to Parent;
(b) [Section intentionally omitted]
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(c) such other documents as Parent may reasonably request for
the purpose of (i) enabling its counsel to provide the opinion referred
to in Section 8.4(a), (ii) evidencing the accuracy of any of
Shareholders' representations and warranties, (iii) evidencing the
performance by Shareholders of, or the compliance by Shareholders
with, any covenant or obligation required to be performed or complied
with by such Shareholders, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating
the consummation or performance of any of the Contemplated Transactions.
7.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Parent, or against any Person
affiliated with Parent, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds. There must
not have been made or Threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Company, or (b) is
entitled to all or any portion of the Acquisition Price.
7.7 No Prohibition. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause Parent or any Person
affiliated with Parent to suffer any material adverse consequence under any
applicable Legal Requirement or Order.
7.8 Financing. Parent shall have obtained financing satisfactory to
it adequate to consummate the Merger.
7.9 Tax Certification. Parent shall have received a certification
signed by the Shareholders to the effect that none of the Shareholders is a
"foreign person" as defined in Section 1445 of the IRC.
7.10 Excluded Assets. The Company shall have sold or distributed, and
Shareholders or Shareholders' affiliates shall have purchased or received, all
of the Excluded Assets and, in connection therewith, Shareholders or
Shareholders' affiliates shall have assumed all liabilities related to the
Excluded Assets.
7.11 Effective Date and Closing. All documents required to be filed
under Texas and Arizona law to effect the Merger shall have been filed.
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7.12 Xxxxxx X. Xxxxxx Lease. The Company shall have obtained an
extension of that certain Lease Agreement, in which Xxxxxx X. Xxxxxx is the
lessor, relating to property located on Van Buren Street in Phoenix, Arizona.
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDERS'
OBLIGATION TO CLOSE
Shareholders' obligation to consummate the Merger and to take the other
actions required to be taken by Shareholders at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Shareholders, in whole or in part):
8.1 Accuracy of Representations. All of Parent's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 Parent's Performance.
(a) All of the covenants and obligations that Parent is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Parent must have delivered each of the documents required
to be delivered by Parent pursuant to Section 2.8 and must have
delivered the Cash Amount and the Stock Amount required to be made by
Parent pursuant to Sections 2.8(b) and 2.8(e).
(c) Parent must have consummated the acquisition of Mission
Party Ice, Inc. prior to or on the Effective Date.
8.3 Consents. Each of the Consents identified in Part 4.2 of the
Shareholders' Disclosure Letter must have been obtained and must be in full
force and effect.
8.4 Additional Documents. Parent must have caused the following
documents to be delivered to Shareholders:
(a) an opinion of Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.,
dated the Closing Date reasonably acceptable to Shareholders; and
(b) such other documents as Shareholders may reasonably
request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 7.4(a),
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(ii) evidencing the accuracy of any representation or warranty of
Parent, (iii) evidencing the performance by Parent of, or the compliance
by Parent with, any covenant or obligation required to be performed or
complied with by Parent, (ii) evidencing the satisfaction of any
condition referred to in this Section 8, or (v) otherwise facilitating
the consummation of any of the Contemplated Transactions.
8.5 No Proceedings. Since the date of this Agreement, there must not
have been commenced or Threatened against Shareholders, Company, or against any
Person affiliated with Company, any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
8.6 Release of Personal Guarantees. The current and long-term
indebtedness, the notes payable and the current long-term capitalized leases,
with respect to which the Shareholders have personally guaranteed payment or
performance, will either be paid off concurrently with the Closing by the
Company (or Parent on behalf of the Company), or Parent will take such actions
necessary to release Shareholders from such guarantees at or prior to the
Closing.
8.7 Offer of Employment. Xxxx Xxxxxxx shall have been offered
employment with the Parent as Chief Financial Officer and Xxxx Xxxxxxxxx shall
have been offered employment with Parent as Vice President, Southwest Region.
8.8 No Prohibition. Neither the consummation nor the performance of
any of the contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause Shareholders or any Person
affiliated with Shareholders to suffer any material adverse consequence under,
any applicable Legal Requirement or Order.
8.9 Effective Date and Closing. All documents required to be filed
under Texas and Arizona law to effect the Merger shall have been filed.
SECTION 9. TERMINATION
9.1 Termination Events. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by either Parent or Shareholders if a material Breach of
any provision of this Agreement has been committed by the other party
and such Breach has not been waived; provided, however, the party
discovering the Breach shall immediately notify the other party of the
Breach and that if the breaching party notifies the non-breaching party
immediately after such Breach, then the breaching party shall have a
period of 3 days after such notification, in the case of monetary
Breaches, and 10 days, in the case of all other Breaches,
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to cure such Breach, during which period such Breach shall be deemed to
have been waived by the non-Breaching party.
(b) by mutual consent of Parent and Shareholders; or
(c) by either Parent or Shareholders if the Closing has not
occurred (other than through the failure of any party seeking to
terminate this Agreement to comply substantially with its obligations
under this Agreement) on or before Ending Date, or such later date as
the parties may agree upon;
(d) "Ending Date" shall mean April 15, 1997, or, if Parent has
obtained by such date assurance(s) of sufficient financing to complete
the Merger, but such financing has been delayed for any reason, then
April 30, 1997.
9.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 9.2(b), 9.2(c) and Section 11 will survive.
(b) If Parent and Newco fail to consummate the transactions
contemplated on its part to occur on the Closing Date, in circumstances whereby
all conditions of the Closing set forth in Section 7 have been satisfied in all
material respects or waived, Shareholders and the Company shall be entitled to
terminate this Agreement and to be reimbursed by Parent and Newco for its out-
of-pocket expenses incurred directly in connection with the negotiation,
preparation and performance of this Agreement.
(c) If Shareholders and the Company fail to consummate the
transactions contemplated on their part to occur on the Closing Date, in
circumstances whereby all conditions of the Closing set forth in Section 8 have
been satisfied in all material respects or waived, Parent's and Newco's sole
remedy shall be to (i) to require Shareholders and the Company to consummate
and specifically perform the Contemplated Transactions, in accordance with the
terms of this Agreement, and to obtain from Shareholders any attorney fees
incurred in connection with procuring such specific performance or (ii)
terminate this Agreement and obtain reimbursement of its out-of-pocket expenses
incurred directly in connection with the negotiation, preparation and
performance of this Agreement.
SECTION 10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification; Knowledge. All
representations, warranties, covenants, and obligations in this Agreement, the
Shareholders' Disclosure Letter, the certificate delivered pursuant to Section
2.8(a)(iv), and any other certificate or document delivered pursuant to this
Agreement will survive the Closing. Shareholders shall not be liable under this
Section 10 for Damages (as hereinafter defined) resulting from any event
relating to a Breach of any representation,
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warranty, covenant or agreement made in this Agreement if either Parent or
Newco had actual knowledge of such Breach on or before the Closing Date. Upon
the Closing, none of the parties shall be liable under this Section 10 or
otherwise for Damages (as hereinafter defined) resulting from the Option
Agreement, the Master Lease Agreement, the Services Agreement and the
transactions contemplated thereby (the "Option Transaction Documents") and each
party hereby fully and forever releases the other party from any and all claims
or Damages arising under the Option Transaction Documents.
10.2 Indemnification and Payment of Damages by Shareholders. Except
as provided in Sections 10.5 and 10.6, Shareholders shall jointly and severally
indemnify and hold harmless Parent, Newco and the Surviving Corporation, and
their respective Representatives, shareholders, controlling persons, and
affiliates for, and will pay to the such Persons the amount of, any loss,
liability, claim, damage, or expense (including costs of investigation and
defense and reasonable attorneys' fees), whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty (other than
Section 3.19 or Section 3.27) made by the Company, Shareholders in this
Agreement, Shareholders' Disclosure Letter, or any other certificate or
document delivered by Shareholders pursuant to this Agreement as if such
representation or warranty were made on and as of the Closing Date,
other than any such Breach that is disclosed in a supplement to the
Shareholders' Disclosure Letter, or any Breach by the Shareholders of
subsections (e) through (k) of Section 3.11, with respect to which
Parent's sole remedy shall be subsection (d) of this Section 10.2;
(b) any Breach by Shareholders of any covenant or obligation
of such Shareholders in this Agreement;
(c) any product shipped or manufactured by, or any services
provided by, the Company prior to the Closing Date;
(d) any loss, liability or expense attributable to any federal
income tax payable by Parent or the Surviving Corporation resulting from
the Merger not being treated as a tax free merger under the IRC as a
result of (i) any act or omission of Shareholders or (ii) any Breach of
a representation, warranty or covenant of Shareholders contained herein.
Notwithstanding any of the foregoing, in the event that the Contemplated
Transactions are not consummated, neither Parent nor Newco shall be entitled to
indemnification for Breaches of covenants and agreements contained herein to be
performed at or prior to the Closing or the Breach of any representation or
warranty contained herein.
10.3 Indemnification and Payment of Damages by Shareholder--
Environmental Matters. Shareholders jointly and severally will indemnify and
hold harmless Parent, and Newco, and their
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respective Representatives, shareholders, controlling persons and affiliates
for, and will pay to Parent, Newco, the Surviving Corporation and the other
Indemnified Persons the amount of, any Damages (including costs of cleanup,
containment, or other remediation to the extent required to comply with any
Environmental Laws) arising, directly or indirectly, from or in connection
with:
(a) any Breach of Section 3.19;
(b) any Environmental, Health, and Safety Liabilities arising
out of or relating to: (i) (A) the ownership, operation, or condition at
any time on or prior to the Closing Date of the Facilities or any other
properties and assets (whether real, personal, or mixed and whether
tangible or intangible) in which Shareholders or the Company has or had
an interest, or (B) any Hazardous Materials that were present on the
Facilities or such other properties and assets at any time on or prior
to the Closing Date as a result of the introduction of such Hazardous
Materials by the Company or its Representatives or as a result of the
Company's or any successor-in-interest's operations; or (ii) (A) any
Hazardous Materials, wherever located, that were, or were allegedly,
generated, transported, stored, treated, Released, or otherwise handled
by Shareholders or the Company or by any other Person for whose conduct
the Company is responsible at any time on or prior to the Closing Date,
or (B) any Hazardous Activities that were, or were allegedly, conducted
by Shareholders or the Company or by any other Person for whose conduct
the Company is responsible; or
(c) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was
incurred, or manifested itself), personal injury, property damage
(including trespass, nuisance, wrongful eviction, and deprivation of the
use of real property), or other damage of or to any Person, including
any employee or former employee of the Company or any other Person for
whose conduct the Company is or responsible, in any way arising from or
allegedly arising from any Hazardous Activity conducted or allegedly
conducted by the Company with respect to the Facilities or the operation
of the Company prior to the Closing Date, or from Hazardous Material
that was (i) introduced, generated, stored, treated, related or disposed
of by the Company on or before the Closing Date on or at the Facilities
(or present on any other property, if such Hazardous Material emanated
from any of the Facilities and was present on any of the Facilities on
or prior to the Closing Date) or (ii) Released or allegedly Released by
the Company or any other Person for whose conduct the Company is
responsible, at any time on or prior to the Closing Date.
Parent and Newco shall first seek recovery and indemnification under any
applicable insurance and indemnification from the TRIARC Companies, Inc. and
Southeastern Public Service Company ("SEPSCO") to the extent allowed by any
applicable agreements and by law, pursuing and exhausting all available
remedies against the same, before seeking indemnification from Shareholders
under this Section 10.3.
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Parent and Newco will be entitled to control any cleanup required or
mandated by Governmental Authority (a "Cleanup"), any related Proceeding, and,
any other Proceeding with respect to which indemnity may be sought under this
Section 10.3. In any Cleanup or any such Proceeding, Parent or Newco must give
timely notice to the Shareholders of the institution of only such Cleanup and
the commencement of any such Proceeding and the Shareholders will be entitled
to participate (individually and through counsel of their selection) in such
Proceeding, including (but not limited to) discovery proceedings and
administrative meetings and hearings, at Shareholders' own expense. Parent or
Newco must apprise Shareholders, in a timely fashion and to a reasonable
extent, of matters relating to any such Proceeding. Neither Parent nor Newco
shall agree to the terms and conditions of any Cleanup or settle any such
Proceeding without the prior, written approval of the Shareholders.
Notwithstanding any provision in this Agreement to the contrary, in no
event will Parent, Newco, or any of their respective Representatives,
shareholders, controlling persons, and affiliates be entitled to
indemnification under this Section 10.3 or with respect to the representations
and warranties set forth in Section 3.19 to the extent to which any liability
arising from such indemnification claim are attributable to activities or
conduct of the Company (or the Surviving Corporation), Parent, Newco, or any of
their respective Representatives, shareholders, controlling persons, agents and
affiliates from and after the Closing Date.
10.4 Indemnification and Payment of Damages by Parent. Parent and
Newco, jointly and severally, will indemnify and hold harmless Shareholders,
and will pay to Shareholders the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any Breach of any representation or
warranty made by Parent or Newco in this Agreement or in any certificate
delivered by Parent or Newco pursuant to this Agreement, (b) any Breach by
Parent or Newco of any covenant or obligation of Parent or Newco in this
Agreement, (c) any violation by Parent or Newco of any state or federal
securities law in connection with the issuance of the Parent Stock, or (d) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such Person with Parent (or any Person acting on its behalf) in connection with
any of the Contemplated Transactions, or (e) any loss, liability or expense
attributable to any Tax payable by Shareholders resulting from the Merger not
being treated as a tax-free merger under the IRC as a result of (i) any act
or omission of Parent, Newco or the Surviving Corporation (excluding any act or
omission of the Company on or prior to the Closing Date or any act or omission
of the Shareholders at any time) or (ii) any Breach of representation, warranty
or covenant of Parent or Newco contained herein.
10.5 Time Limitations. Other than the representations set forth in
Sections 3.11, 3.13 or 3.19, Shareholders will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with on or prior to the
Closing Date or representations made again as of the Closing Date, unless on or
before two years from the Closing Date, Parent notifies Shareholders of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Parent. A claim with respect to Sections 3.11, 3.13, 10.2(c),
or 10.2(d), or a claim for indemnification or reimbursement based upon any
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covenant or obligation to be performed and complied with after the Closing
Date, must be made prior to the expiration of the applicable statutory period
of limitations, including any extensions to such period, and shall thereupon
terminate. A claim with respect to Section 3.19 or Section 10.3 must be made
prior to March 25, 2000, and shall thereupon terminate. If the Closing occurs,
Parent will have no liability (for indemnification or otherwise) with respect
to any representation or warranty, or covenant or obligation to be performed
and complied with prior to the Closing Date other than those set forth in
Section 4.6, unless on or before two years from the Closing Date, Shareholders
notify Parent of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Shareholders. A claim with
respect to Section 4.6 or a claim for indemnification or reimbursement based
upon any covenant or obligation to be performed and complied with after the
Closing Date must be made prior to the expiration of the applicable statutory
period of limitations, including any extensions to such period, and shall
thereupon terminate.
10.6 Limitations on Amount -- Shareholders.
(a) Shareholders will have no liability (for indemnification or
otherwise) with respect to the matters described in Section 10.2 and Section
10.3 until the total of all Damages with respect to such matters exceeds
$75,000 in the aggregate, and then only for the amount by which such Damages
exceed $75,000 (the "Basket"); provided, however, the Basket shall not apply to
any claim for indemnification arising out of a Breach of any representations,
warranties or covenants contained in Sections 3.3, 3.6, 3.11, 3.19, 5.10, 5.11
or 5.12, or any provisions herein to the extent of their relation to any of the
Excluded Assets, including, without limitation, Shareholders' obligation to
assume all liabilities related to the Excluded Assets (except liens in
connection with the Company's bank financing). The Shareholders' maximum
liability with respect to the matters described in Section 10.2 will be limited
to $3,000,000 (the "Cap"). Notwithstanding the foregoing, the maximum liability
of each of the Shareholders -- with respect to any any claim (for
indemnification or otherwise) arising out of a Breach of any of the Company's
representations, warranties or covenants contained in Sections 3.1(c), 3.3,
3.6, 3.11, 3.19, 5.10, 5.11 or 5.12, the indemnification obligations of
subparagraph 10.2(d) or 10.3, or any provisions herein to the extent of their
relation to any of the Excluded Assets, including, without limitation,
Shareholders' obligation to assume all liabilities related to the Excluded
Assets (except liens in connection with the Company's bank financing) -- will
be the amount of cash and/or stock consideration received by each such
Shareholder under this Agreement.
(b) In case any event shall occur which would otherwise entitle any
party to assert a claim for indemnification hereunder, no claim, loss,
liability, cost or expense shall be deemed to have been sustained by such party
to the extent of any proceeds received by such party from any insurance
policies with respect thereto and of any indemnity payments or contribution by
SEPSCO, Triarch or any other party against whom indemnification is established.
10.7 Contribution by Parent. With respect to any damages assessed
against Shareholders stemming directly from any Environmental Claim,
Shareholders' will be entitled to contribution
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from Parent, Newco and the Surviving Corporation to the extent such damages are
attributable to events occurring after the Closing.
10.8 Sole Remedy. The sole and exclusive remedy of the parties
hereunder for any and all claims under this Agreement discovered after the
Closing shall be the indemnities set forth in this Section 10, as limited by
the provisions set forth elsewhere in this Section 10. Notwithstanding any
provision in this Agreement to the contrary, no party shall be able to avoid
the limitations expressly set forth in this Section 10 or Section 9.2 by
electing to pursue any other remedy.
10.9 Procedure for Indemnification -- Third Party Claims.
(a) If a Person receives notice of the commencement any
Proceeding against it which might give any party indemnification rights
under this Section 10, then promptly thereafter such Person will, if a
claim is to thus be made against such party, give notice to such party
of the commencement of such Proceeding, but the failure to notify such
party will not relieve this Person of any liability that it may have to
such party, except to the extent this party is prejudiced by the
indemnifying party's failure to give such notice.
(b) Except with respect to any Proceeding relating to a Breach
of Section 3.19 or the indemnification obligation of Section 10.3:
(i) If any Proceeding referred to in Section 10.9(a)
is brought against an indemnified party and it gives timely notice
to the indemnifying party of the commencement of such Proceeding,
the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (A) the
indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint
representation would result in a conflict of interests preventing
such joint representation, or (B) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the
defense of such Proceeding with counsel reasonably satisfactory to
the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as
long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified
party in connection with the defense of such Proceeding, other
than reasonable costs of investigation.
(ii) If the indemnifying party assumes the defense of
a Proceeding, (A) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified
party's consent unless (1) there is no finding or admission of any
violation of Legal Requirements or any material violation of the
rights of any
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Person and no material effect on any other claims that may be made
against the indemnified party, and (2) the sole relief provided is
monetary damages that are paid in full by the indemnifying party;
and (B) the indemnified party will have no liability with respect
to any compromise or settlement of such claims effected without
its consent.
(iii) If the indemnified party objects to a settlement
which has otherwise been fully agreed to by the other parties to
the Proceeding, the indemnified party may prevent the indemnifying
party from making a settlement on indemnified party's behalf, in
which case, at the election of the indemnifying party, the
indemnifying party may pay the indemnified party the proposed cost
to them of such settlement, in cash, and the indemnified party
shall thereafter be responsible for such litigation matter and the
indemnifying parties shall thereafter have no further
indemnification responsibility with respect to such matter;
provided, however, this subsection (iii) shall not apply unless
under the settlement (1) there is no finding or admission of any
violation of Legal Requirements or any material violation of the
rights of any Person and no material effect on any other claims
that may be made against the indemnified party, and (2) the
settlement permits payment of a monetary amount that is paid in
full by the indemnifying party.
(iv) If the indemnifying party does not undertake to
defend such matter to which the indemnified party is entitled to
indemnification hereunder within a reasonable time after receiving
notice of the Proceeding's commencement, the indemnified party may
undertake such defense through counsel of its choice, at the cost
and expense of the indemnifying party, and the indemnified party
may settle such matter, and the indemnifying party shall reimburse
the indemnified party for the amount paid in such settlement and
any other liabilities, costs or expenses reasonably incurred by
the indemnified party in connection therewith, provided, however,
that under no circumstances shall the indemnified party settle any
third party claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld. The
indemnified party shall make available to the indemnifying party
all records, other materials and personnel reasonably required by
it for its use in contesting any third party claims and shall
cooperate fully with the indemnifying party in the defense of all
such claims.
(v) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable
probability that a Proceeding may materially adversely affect it
or its affiliates other than as a result of monetary damages for
which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party
will not be bound by any determination of a Proceeding so defended
or any compromise or settlement effected without its consent
(which may not be unreasonably withheld).
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10.10 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
10.11 Payment in Cash or Parent Stock. Payment of indemnification
claims under this Section 10 may be paid in either cash or Parent Stock, in the
sole discretion of Shareholders. The shares of Parent Stock shall be valued at
$10.00 per share for purposes of the payment of such indemnification claims.
10.12 Subrogation Rights. If Parent, Newco, the Surviving Corporation
or any of their respective Representatives, shareholders, controlling persons
or affiliates makes a claim for indemnification, (i) Shareholders shall have
rights of subrogation with respect to any lawful claim, right or demand of
Parent, Newco, the Company or the Surviving Corporation against any third
Person, including any common law or statutory rights of contribution or
indemnity, contractual rights or indemnification rights, (ii) Parent and Newco
shall (and shall cause the Surviving Corporation to) take all such actions
necessary to assign any and all such subrogation rights to the Shareholders,
and (iii) Parent and Newco shall (and shall cause the Surviving Corporation to)
preserve and assert any such claims of contribution and indemnity and to
provide reasonable assistance to Shareholders in asserting such subrogation
rights against any such Person.
10.13 Indemnification of Parent by Minority Shareholders.
(a) Minority Shareholders shall not be liable under this Section
10.12 for Damages resulting from any event relating to a Breach of any
representation, warranty, covenant or agreement made in this Agreement if
either Parent or Newco had actual knowledge of such Breach on or before the
Closing Date. Subject to Section 10.12(b), the Minority Shareholders shall
severally indemnify and hold harmless Parent, Newco and the Surviving
Corporation, and their respective Representatives, shareholders, controlling
persons, and affiliates for, and will pay to the such Persons the amount of
any Damages arising, directly or indirectly, from or in connection with any
Breach of Section 3.27.
(b) Minority Shareholders will have no liability (for indemnification
or otherwise) with respect any Breach of Section 3.27 unless on or before two
years from the Closing Date, Parent notifies the Minority Shareholders of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Parent. Minority Shareholders will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
3.27 or Section 10.12(b) until the total of all Damages with respect to such
matters exceeds $10,000 in the aggregate, and then only for the amount by which
such Damages exceed $10,000. The maximum liability for each Minority
Shareholder shall not exceed the amount of consideration each such Minority
Shareholder received under this Agreement.
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SECTION 11. GENERAL PROVISIONS
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party. Notwithstanding any provision in this Agreement to the
contrary, and in addition to any other rights Shareholders may have hereunder,
in the event that the Contemplated Transactions are not consummated, for any
reason other than the material Breach by Shareholders of any covenant,
agreement, representation or warranty, Parent shall pay to Shareholders and the
Company an amount equal to all of the out-of-pocket costs, fees and expenses
incurred by Shareholders and the Company in connection with the preparation,
execution and performance of this Agreement and the Contemplated Transactions,
including without limitation all fees and expenses of agents, representatives,
counsel and accountants. Prior to the Closing, the accounting and law firms
employed by the Company will submit a statement of services and fees to be paid
on the Closing. If Shareholders so elect, Parent shall pay such fees to these
firms, and the actual cash paid to the Shareholders and Minority Shareholders
pursuant to Section 2.8 shall be reduced accordingly, in proportion to the
percentage of Company stock owned by each Shareholder and Minority Shareholder.
11.2 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Parent and the
Shareholders mutually agree. Unless consented to by Parent and the Shareholders
in advance or required by Legal Requirements, prior to the Closing Shareholders
shall, and shall cause the Company to, and Parent shall and shall cause Newco
to, keep this Agreement strictly confidential and may not make any disclosure
of this Agreement to any Person. Shareholders and Parent will consult with each
other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Parent will have the right to be present for any
such communication.
11.3 Confidentiality. Each of Parent, Newco and Shareholders will
maintain in confidence, and will cause their respective the directors,
officers, employees, agents, and advisors to maintain in confidence, and not
use to the detriment of another party or the Company any written, oral, or
other information obtained in confidence from another party or the Company in
connection with this Agreement or the Contemplated Transactions, unless (a)
such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Transactions, or (c) the furnishing or
use of such information is required by or necessary or appropriate in
connection with legal proceedings.
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If the Contemplated Transactions are not consummated, each party will
return to the other party any documents, and all copies thereof, received or
obtained by it in connection with the Contemplated Transactions, without
retaining copies thereof, and will destroy all copies of analyses,
compilations, studies or other documents it has prepared containing or
reflecting any of such confidential information. Notwithstanding the return or
destruction of confidential information, each of the parties will continue to
be bound by the obligation of confidentiality and other obligations hereunder.
11.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the other
parties):
If to Parent: Packaged Ice, Inc.
Attention: President
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to: Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
Attention: Xxxx Xxxxxxxxxx, P.C.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
If to Shareholders: c/o Xxxxxx X. Xxxxxx
0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to: Xxxx, Forward, Xxxxxxxx and Scripps, L.L.P.
Attention: Xxxxxx Xxxxxxxx, Esq.
000 Xxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
If to the Company: Southwestern Ice, Inc.
Attention: Xxxx X. Xxxxxxx, Chief Financial Officer
0000 Xxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
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Facsimile No. (000) 000-0000
If to Minority
Shareholders: (to the addresses set forth in the Minority
Shareholder Investment Letters)
11.5 Arbitration. Except with respect to any claimed breach of the
provisions of Section 11.3 hereof, the parties agree that all disputes,
controversies or claims that may arise among them (including their agents and
employees), including without limitation any dispute, controversy or claim
arising out of or relating to this Agreement or any other agreement, or the
breach, termination or invalidity thereof, whether entered into or arising
prior, on or subsequent to the date hereof, shall be submitted to, and
determined by, binding arbitration. Such arbitration shall be conducted before
a single arbitrator pursuant to the Commercial Arbitration Rules then in effect
of the American Arbitration Association, except to the extent such rules are
inconsistent with this Section 11.5. Exclusive venue for such arbitration
shall be in Bexar County, Texas. The arbitrator shall apply the laws of the
State of Texas (without regard to conflict of law rules) in determining the
substance of the dispute, controversy or claim and shall decide the same in
accordance with applicable usages and terms of trade. Evidentiary questions
shall be governed by the Federal Rules of Evidence. The arbitrator's award
shall be in writing and shall set forth findings and conclusions upon which the
arbitrator based the award. The prevailing party in any such arbitration shall
be entitled to recover its reasonable attorneys' fees, costs and expenses
incurred in connection with the arbitration. Any award pursuant to such
arbitration shall be final and binding upon the parties and judgment on the
award may be entered in any federal or state court sitting or located in Bexar
County, Texas, or in any other court having jurisdiction. The provisions of
this Section 11.5 shall survive the termination of this Agreement.
Notwithstanding the foregoing, this Section 11.5 shall not prevent any party
from seeking injunctive relief from a court of competent jurisdiction under
appropriate circumstances, provided, however, such action shall not constitute
a waiver of the provisions of this Section 11.5.
11.6 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7 Waiver. Except as expressly provided herein, the rights and
remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the documents referred to in this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver
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that may be given by a party will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
11.8 Entire Agreement and Modification. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter; provided, however, the Option Agreement dated as
of September 6, 1996 among the Parent and the Company and all documents entered
into in connection therewith (including without limitation the Master Lease
Agreement and the Services Agreement) shall survive the execution of this
Agreement, and shall remain in effect in the event this Agreement is terminated
for any reason. If the Closing occurs, the Option Agreement, Master Lease and
Services Agreement shall terminate and be of no further force and effect. This
Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
11.9 Disclosure Letters.
The disclosures in the Disclosure Letters, and those in any supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
11.10 Assignments, Successors, and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that Parent may assign any of its rights
under this Agreement to any Subsidiary of Parent. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.11 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.12 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances
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require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.13 Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.14 Governing Law. This Agreement will be governed by the laws of
the State of Texas without regard to conflicts of laws principles.
11.15 Enforcement; Venue; Service of Process. In the event either
party shall seek enforcement of any covenant, warranty or other term or
provision of this Agreement or seek to recover damages fore the breach thereof,
the party which prevails in such proceedings shall be entitled to recover
reasonable attorneys' fees and expenses actually incurred by it in connection
therewith.
11.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
PARENT: PACKAGED ICE, INC.
By:
-------------------------------
Xxxxx X. Xxxxxx, President
NEWCO: PACKAGED ICE SOUTHWESTERN, INC.
By:
-------------------------------
Xxxxx X. Xxxxxx, President
THE COMPANY: SOUTHWESTERN ICE, INC.
By:
-------------------------------
Xxxx X. Xxxxxxx,
Chief Financial Officer
SHAREHOLDERS: ----------------------------------
Xxxxxx X. Xxxxxx
----------------------------------
Xxxx X. Xxxxxxx
----------------------------------
Xxxx Xxxxxxxxx
[SIGNATURE PAGE FOLLOWS]
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SIGNATURE PAGE FOR MINORITY SHAREHOLDERS
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(Signature)
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(Printed name)
----------------------------------
(Shares owned of Company's
common stock)
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(Address)
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(City, state, zip code)
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(Social Security Number)
