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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of March
25, 1997, by and among Packaged Ice, Inc., a Texas corporation ("Parent"),
Packaged Ice Mission, Inc., a Texas corporation ("Newco") and a direct
wholly-owned subsidiary of Parent, Mission Party Ice, Inc., a Texas corporation
(the "Company") and X. X. Xxxxx III ("Shareholder").
R E C I T A L S :
WHEREAS, the respective Boards of Directors of Parent, Newco and the
Company have each approved the merger of the Company with and into Newco (the
"Merger"), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein the parties hereto covenant and agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUISITION PRICE" has the meaning set forth in Section 2.5(d).
"APPLICABLE CONTRACT" means any Contract to which the Company is a party or
bound (a) under which the Company has or may acquire any rights, (b) under
which the Company has or may become subject to any obligation or liability, or
(c) by which the Company or any of the assets owned or used by it is or may
become bound.
"BALANCE SHEET" has the meaning set forth in Section 3.4.
"BASKET" has the meaning set forth in Section 10.6.
"BEST EFFORTS" means the efforts that a reasonably prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as reasonably practicable; provided,
however, that an obligation to use Best Efforts under this Agreement does not
require the Person subject to that obligation to take actions that would result
in a materially adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions.
"BREACH" means that a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in such representation or warranty or breach
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of, or any failure to perform or comply with any covenant, obligation, or other
provision contained herein.
"CAP" has the meaning set forth in Section 10.6.
"CASH AMOUNT" has the meaning set forth in Section 2.5(e).
"CLOSING" has the meaning set forth in Section 2.7.
"CLOSING BALANCE SHEET" means the audited balance sheet of the Company as at
December 31, 1996.
"CLOSING DATE" means the date and time as of which the Closing actually takes
place.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by this
Agreement, including:
(a) the Merger;
(b) the execution, delivery, and performance of the Noncompetition
Agreement, the Registration Rights Agreement and the Escrow Agreement;
(c) the performance by the parties of their respective covenants
and obligations under this Agreement; and
(d) Newco's acquisition of the Company through the Merger.
"CONTRACT" means any agreement, contract, obligation, promise, or undertaking
(whether written or oral) that is legally binding.
"DAMAGES" has the meaning set forth in Section 10.2.
"EFFECTIVE DATE" has the meaning set forth in Section 2.3.
"ENCUMBRANCE" means any charge, claim, community property interest, condition,
equitable interest including any equitable servitude, lien, option, pledge,
security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENDING DATE" has the meaning set forth in Section 9.1(e).
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"ENVIRONMENT" means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwater, drinking water supply, stream sediments, ambient air,
plant and animal life, and any other environmental medium or natural resource.
"ENVIRONMENTAL CLAIM" has the meaning set forth in Section 10.13.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" means any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL INDEMNIFICATION RIGHTS" has the meaning set forth in Section
10.13.
"ENVIRONMENTAL LAW" means any law, regulation, ordinance, order, injunction,
decree, consent decree, judgement or administrative directive relating to the
Environment, public health and safety, occupational health and safety and
transportation including without limitation all such standards of conduct or
bases of obligations relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, control or cleanup of any waste,
hazardous materials, substances, chemical substances or mixtures, pesticides,
toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
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"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGENT" shall mean Texas Commerce Bank National Association.
"STPI" means Southwest Texas Packaged Ice, Inc., a Texas corporation.
"STPI AGREEMENT" has the meaning set forth in Section 10.6.
"ESCROW AGREEMENT" has the meaning set forth in Section 2.8(c).
"ESCROW AMOUNT" has the meaning set forth in Section 2.5(e).
"EXCLUDED ASSETS" means (i) the assets of the Company relating to MIECO more
particularly described in Part 3.6 of the Shareholder's Disclosure Letter under
the subheading "Equipment Rental Business"(excluding the accounts receivable
owed by STPI to the Company) which assets were transferred to Southwest Texas
Equipment Distributors on January 2, 1997, (ii) the Company's real property
which is described in Part 3.6 of the Shareholder's Disclosure Letter under the
subheading "Excluded Real Property" and (iii) one painting more particularly
described in Part 3.6 of the Shareholder's Disclosure Letter under the
subheading "Excluded Personal Property."
"FACILITIES" means any real property, leaseholds, or other interests currently
or formerly owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Company.
"GAAP" means generally accepted accounting principles as employed in the United
States of America. Wherever in this Agreement reference is made to a
calculation to be made in accordance with GAAP, such reference shall be deemed
to be to the GAAP from time to time applicable as at the date on which such
calculation is made or required to be made in accordance with GAAP.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district, or other
legally recognized jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other legally
recognized government;
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(c) governmental or legally recognized quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body legally exercising, or legally entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release,
storage, transfer, transportation, treatment, or use (including any withdrawal
or other use of groundwater) of Hazardous Materials in, on, under, about, or
from the Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that increases the danger or poses an
unreasonable risk of harm to persons or property on or off the Facilities or
that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic under or pursuant to any Environmental Law,
including any admixture or solution thereof having hazardous characteristics,
and specifically including petroleum and any derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade names, copyrights,
technology, trade secrets, know-how, formulas and processes which are owned or
used by the Company.
"INTERIM BALANCE SHEET" has the meaning set forth in Section 3.4.
"IRC" means the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" means the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a reasonably prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonable investigation concerning the existence of such fact or
other matter.
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A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as a
director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has Knowledge of such fact or other matter; provided,
however, the Company will be deemed to have Knowledge of a particular fact or
other matter if Shareholder has such Knowledge.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, existing principle of common law, regulation, statute, or treaty.
"MASTER LEASE" has the meaning set forth in Section 5.4.
"MERGER" has the meaning set forth in Section 2.1.
"MIECO" means the former division operated by the Company under the name
"Mission Ice Equipment Company, the assets of which were transferred to, and
the liabilities of which were assumed by STED effective January 2, 1997 in
exchange for a promissory note in the principal amount of $316,520.00.
"NONCOMPETITION AGREEMENT" has the meaning set forth in Section 2.8(a)(ii).
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Legal Requirement (other than
common law principles) designed to provide safe and healthful working
conditions and to reduce occupational safety and health hazards, and any
governmental program designed to provide safe and healthful working conditions.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" An action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority).
"ORGANIZATIONAL DOCUMENTS" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement
and any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a
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limited partnership; (d) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and (e)
any amendment to any of the foregoing.
"PARENT'S CLOSING DOCUMENTS" has the meaning set forth in Section 4.2.
"PARENT'S DISCLOSURE LETTER" means the disclosure schedule delivered by Parent
to Shareholder concurrently with the execution and delivery of this Agreement,
and any supplements thereto delivered to the Shareholder prior to or
concurrently with the Closing, which schedule and supplements are incorporated
herein by reference.
"PARENT STOCK" has the meaning set forth in Section 2.5(d).
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" has the meaning set forth in Section 3.13.
"PLAN OF MERGER" shall have the meaning set forth in 2.8(c)(ii).
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the close of
business on the Closing Date.
"PROCEEDING" means any action, arbitration, audit, hearing, litigation, or suit
(whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Body or arbitrator.
"REAL ESTATE CONTRACT" has the meaning set forth in Section 5.4.
"RELATED PERSON" means, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
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Related Person also means, with respect to a specified Person other
than an individual:
(e) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(f) any Person that holds a Material Interest in such specified
Person;
(g) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(h) any Person in which such specified Person holds a Material
Interest;
(i) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and
(j) any Related Person of any individual described in clause (b)
or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 10% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"RELEASE" means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section 6.10.
"REPRESENTATIVE" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" means the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SHARE PRICE" has the meaning set forth in Section 2.5(c).
"SHAREHOLDER'S CLOSING DOCUMENTS" has the meaning set forth in Section 3.2.
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"SHAREHOLDER'S DISCLOSURE LETTER" means the disclosure schedule, delivered by
the Company and the Shareholder to Parent concurrently with the execution and
delivery of this Agreement, and any supplements thereto delivered prior to or
concurrently with the Closing, which schedule and supplements are incorporated
herein by reference.
"SHARES" means all of the shares of the $.01 par value common stock of the
Company owned by the Shareholder.
"STED" means South Texas Equipment Distributors, Inc., a Texas corporation.
"STOCK AMOUNT" has the meaning set forth in Section 2.5(e).
"STPI" means Southwest Texas Packaged Ice, Inc., a Texas corporation.
"STPI AGREEMENT" has the meaning set forth in Section 10.6.
"SUBSIDIARY" means, with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to
elect a majority of that corporation's or other Person's board of directors or
similar governing body, or otherwise having the power to direct the business
and policies of that corporation or other Person (other than securities or
other interests having such power only upon the happening of a contingency that
has not occurred) are held, directly or indirectly by the Owner; when used
without reference to a particular Person, "Subsidiary" means a Subsidiary of
the Company.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.1.
"TAX" means any tax (including without limitation any tax on gross income, net
income, franchise, gross receipts, royalty, capital gains, value added, sales,
property, ad valorem, transfer, license, use, profits, windfall profits,
withholding on amounts paid to or by the Company, payroll, employment, excise,
severance, stamp, occupation, premium, gift, or estate), levy, assessment,
tariff, duty (including customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency, or fee.
"TAX RETURN" means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment
of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" means a substantial likelihood of a Release that would
require action in order to prevent or mitigate damage to the Environment
resulting from such Release.
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"THREATENED" means a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
(to the extent of Shareholder's Knowledge) if any other event has occurred or
any other circumstances exist, with respect to which the Shareholder would
reasonably conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
SECTION 2. MERGER; CLOSING
2.1 Merger. In accordance with the provisions of the business
corporation laws of the States of Texas, at the Effective Date, the Company
shall be merged (the "Merger") into Newco and Newco shall be the surviving
corporation (the "Surviving Corporation) and as such shall continue to be
governed by the laws of the State of Texas. For federal income tax purposes, it
is intended that the Merger shall qualify as a reorganization pursuant to
Sections 368(a)(1)(A) and (a)(2)(D) of the IRC.
2.2. Continuing of Corporate Existence. Except as may otherwise be
set forth herein, the corporate existence and identity of Newco, with all its
purposes, powers, franchises, privileges, rights and immunities, shall continue
unaffected and unimpaired by the Merger, and the corporate existence and
identity of the Company, with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and into that
of Newco, and the Surviving Corporation shall be vested fully therewith and the
separate corporate existence and identity of the Company shall thereafter cease
except to the extent continued by statute.
2.3. Effective Date. The Merger shall become effective upon the
occurrence of the issuance of the certificate of merger (the "Effective Date")
by the Secretary of State of the State of Texas upon filing on the Closing Date
of the articles of merger (with the Plan of Merger attached thereto) with the
Secretary of the State of Texas pursuant to Article 5.04 of the Texas Business
Corporation Act (the "Articles of Merger").
2.4. Corporate Government.
(a) The Articles of Incorporation of Newco as in effect
on the Effective Date, shall continue in full force and effect and
shall be the Articles of Incorporation of the Surviving Corporation;
provided, however, Article I of the Articles of Incorporation of Newco
shall be amended to read in its entirety as follows:
"The name of the corporation shall be "Mission Party Ice, Inc."
(b) The Bylaws of Newco, as in effect as of the Effective
Date, shall continue in full force and effect and shall be the Bylaws
of the Surviving Corporation.
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(c) The members of the Board of Directors and the
officers of the Surviving Corporation shall be the persons holding
such offices with Newco as of the Effective Date.
2.5. Conversion of Shares. The manner and basis of converting the
Shares shall be as follows:
(a) Each Share which is issued and outstanding
immediately prior to the Effective Date shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
automatically converted into the right to receive the Share Price
which shall be payable, without interest thereon, upon the surrender
of the certificate formerly representing such Share, in accordance
with Section 2.5(e) below.
(b) Each Share shall, by virtue of the Merger and without
any action on the part of the holder thereof, be canceled and retired
and cease to exist.
(c) As used herein, the term "Share Price" shall mean an
amount equal to (x)/(y), where (x) is the Acquisition Price (as
defined below), and where (y) is the total number of outstanding
Shares.
(d) As used herein, the term "Acquisition Price" shall
mean $5,575,660, approximately 51.23% of which will be paid to the
Shareholder in the form of Parent's common stock, par value $.01 per
share ("Parent Stock"), valued at $10.00 per share.
(e) At the Closing, Parent will pay to Shareholder the
Acquisition Price as follows: (i) $2,719,160 in cash (the "Cash
Amount") and (ii) 285,650 newly issued shares of Parent Stock valued
at $10 per share (the "Stock Amount"). Five percent (5%) of the
Acquisition Price will be placed in escrow (the "Escrow Amount") for a
period of twelve months, to be held by the Escrow Agent in accordance
with the Escrow Agreement, approximately 51.2% of which (14,283
shares) shall be in the form of Parent Stock and approximately 48.8%
of which ($135,953) shall be cash.
(f) Each share of common stock, par value $.01 per share,
of Newco ("Newco Stock") which shall be outstanding immediately prior
to the Effective Date shall, at the Effective Date, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into one share of common stock of the Surviving Corporation.
(g) The stock transfer books of the Company shall be
closed as of the close of business on the Effective Date, and no
transfer of record of any of the Shares shall take place thereafter.
(h) No fractional shares of Parent Stock and no
certificates or scrip therefor shall be issued.
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(i) All of the Parent Stock, when delivered pursuant to
the provisions of this Agreement, shall be validly issued, fully paid
and nonassessable.
(j) At the Effective Date, the holders of certificates
representing Shares shall thereupon cease to have any rights with
respect to such Shares and shall surrender certificates representing
the Shares to Parent whereupon such holders shall receive a
certificate or certificates for the number of shares of Parent Stock
and/or cash to which such holder is entitled under this Section 2.5.
2.6 Rights and Liabilities of the Surviving Corporation. As of
the Effective Date, the Surviving Corporation shall have the following rights
and obligations, pursuant to Article 5.06 of the Texas Business Corporation
Act:
(a) All rights, title and interests to all real estate
and other property owned by the Company and Newco shall be allocated
to and vested in the Surviving Corporation without reservation or
impairment, without further act or deed, and without any transfer or
assignment having occurred, but subject to any existing liens or other
encumbrances thereon.
(b) All liabilities and obligations of the Company and Newco shall
be allocated to the Surviving Corporation, and the Surviving Corporation shall
be the primary obligor therefor and, except as otherwise provided by law or
contract, no other party to the merger, other than the Surviving Corporation,
shall be liable thereon.
(c) A proceeding pending by or against the Company may be
continued as if the Merger did not occur, or the Surviving Corporation to which
the liability, obligation, asset or right associated with such proceeding is
allocated to and vested in may be substituted in the proceeding.
(d) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the laws of the State of Texas.
2.7 Closing. Consummation of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Parent's
counsel at 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.
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2.8 Closing Obligations. At the Closing:
(a) Shareholder will deliver to Parent:
(i) certificates representing the Shares, to be
surrendered to Newco and Parent;
(ii) Noncompetition Agreement in the form of Exhibit
2.8(a)(ii), executed by Shareholder (the "Noncompetition
Agreement");
(iii) a certificate executed by Shareholder
representing and warranting to Parent and Newco that
Shareholder's representations and warranties in this Agreement
are accurate in all respects as of the Closing Date as if made
on the Closing Date (giving full effect to any supplements to
the initial disclosure of the Shareholder's Disclosure Letter
which were delivered by Shareholder to Parent prior to the
Closing Date in accordance with Section 5.6); and
(iv) investment letter executed by Shareholder in the
form attached hereto as Exhibit 2.8(a)(iv), (the "Investment
Letter").
(b) Parent will deliver to Shareholder:
(i) the Cash Amount (less the amount to be placed in
escrow) by bank cashier's or certified check payable to the
order of Shareholder or wire transfer in immediately available
funds to an account designated by Shareholder, as may be
selected by Shareholder;
(ii) the Stock Amount (less the amount to be placed
in escrow), issued to Shareholder;
(iii) the Noncompetition Agreement executed by
Parent;
(iv) a certificate executed by Parent to the effect
that, except as otherwise stated in such certificate, each of
Parent's representations and warranties in this Agreement is
accurate in all respects as of the Closing Date as if made on
the Closing Date ("Parent's Certificate"); and
(v) the Registration Rights Agreement executed by
Parent.
(c) Parent and Shareholder will enter into:
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(i) an escrow agreement substantially in the form of
Exhibit 2.8(c)(i) with such revisions and modifications as may
be required by the Escrow Agent and are reasonably acceptable
to Shareholder and Parent (the "Escrow Agreement"); and
(ii) the Articles of Merger, together with the Plan
of Merger in the form attached hereto as Exhibit 2.8(c)(ii)
(the "Plan of Merger"), shall be executed by Newco and the
Company and filed with the Secretary of State of the State of
Texas.
(d) Parent will deliver to the Escrow Agent to the held
in escrow pursuant to the Escrow Agreement;
(i) approximately 5% of the Cash Amount; and
(ii) approximately 5% of the Stock Amount issued
in the name of the Shareholder.
SECTION 3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SHAREHOLDER
Except as set forth in Shareholder's Disclosure Letter, which shall
indicate the Section to which such exception relates, the Company and
Shareholder represent and warrant to Parent and Newco as follows:
3.1 Organization and Good Standing.
(a) Part 3.1 of the Shareholder's Disclosure Letter contains a
complete and accurate list for the Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is
authorized to do business. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of
its jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and
to perform all its obligations under Applicable Contracts. The Company
is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by
it, or the nature of the activities conducted by it, requires such
qualification. The Company has no Subsidiaries.
(b) Shareholder has delivered to Parent copies of the
Organizational Documents of the Company, as currently in effect.
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3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Company and the Shareholder, enforceable against the
Company and the Shareholder in accordance with its terms. Upon the
execution and delivery by Shareholder of the Escrow Agreement and the
Noncompetition Agreement (collectively, the "Shareholder's Closing
Documents"), the Shareholder's Closing Documents will constitute the
legal, valid, and binding obligations of Shareholder, enforceable
against Shareholder in accordance with their respective terms. The
Company and the Shareholder have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement
and the Shareholder's Closing Documents and to perform their
respective obligations under this Agreement and the Shareholder's
Closing Documents. The Shareholder has held a shareholder meeting (or
has executed a consent) and has duly adopted all resolutions required
by law to approve the Merger.
(b) Except as set forth in Part 3.2 of the Shareholder'
Disclosure Schedule, neither the execution and delivery of this
Agreement by Shareholder and the Company nor the consummation or
performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the board of
directors or the shareholders of the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person a
valid basis to challenge any of the Contemplated Transactions
or to exercise any remedy or obtain any relief under, any
Legal Requirement or any Order to which the Company or
Shareholder, or any of the assets owned or used by the
Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the
Company;
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Company.
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Except as set forth in Part 3.2 of the Shareholder's
Disclosure Letter, neither Shareholder nor Company is required to give any
notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
(c) Shareholder is acquiring the Parent Stock for his own
account and not with a view to the distribution thereof within the
meaning of Section 2(11) of the Securities Act. The Shareholder is
an "accredited investor" as such term is defined in Rule 501(a) under
the Securities Act.
3.3 Capitalization. The authorized equity securities of the
Company consist of 1,000,000 shares of common stock, par value $.01 per share,
of which 1,000 shares are issued and outstanding and constitute the Shares.
Shareholder is the record and beneficial owner and holder of the Shares, free
and clear of all Encumbrances. Except as set forth in Part 3.3 of the
Shareholder's Disclosure Letter, no legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in violation of the
Securities Act or any other Legal Requirement. The Company does not own and has
no Contract to acquire, any equity securities or other securities of any Person
(other than the Company) or any direct or indirect equity or ownership interest
in any other business.
3.4 Financial Statements. Shareholder has delivered to Parent:
(a) unaudited balance sheets of the Company as at December 31, 1993 and
December 31, 1994, and the related unaudited statements of income, changes in
shareholders' equity, and cash flow for each of the fiscal years then ended,
(b) a balance sheet of the Company as at December 31, 1995 (including the
notes thereto, if any, the "Balance Sheet"), and the related statements of
income, changes in shareholders' equity, and cash flow for the fiscal year then
ended, (c) an unaudited balance sheet of the Company as at September 30, 1996
(the "Interim Balance Sheet") and the related unaudited statements of income,
changes in shareholders' equity, and cash flow for the nine months then ended,
including in each case the notes thereto, if any, and (d) the audited Closing
Balance Sheet, and the audited statements of income, changes in shareholder's
equity, and cash flow for the fiscal year then ended, including in each case
the notes thereto, if any. Such financial statements and notes fairly present
the financial condition and the results of operations, changes in shareholders'
equity, and cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, and, with respect to the
Closing Balance Sheet, in accordance with GAAP, subject, in the case of
unaudited financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse), the absence of notes and such other differences as are described in
Part 3.4 of Shareholder's Disclosure Letter; the financial statements referred
to in this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements, or in
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Part 3.4 of the Shareholder's Disclosure Letter. Notwithstanding the
foregoing, such financial statements do not reflect the assets, liabilities or
results of operations of MIECO.
3.5 Books and Records. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Parent, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the Boards of Directors, and committees of
the Boards of Directors of the Company, and no meeting of any such
shareholders, Board of Directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. All of those
books and records are in the possession of the Company.
3.6 Title to Properties; Encumbrances. Part 3.6 of the
Shareholder's Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned or previously owned
by the Company. Shareholder has delivered or made available to Parent copies
of the deeds and other instruments (as recorded) by which the Company acquired
or disposed of such real property and interests, and copies of all title
insurance policies, opinions, abstracts, and surveys in the possession of
Shareholder or the Company and relating to such property or interests. Except
for the real property described in Part 3.6 of the Shareholder's Disclosure
Letter under the subheading "Excluded Real Property" which will be distributed
to the Shareholder, or its assigns, prior to Closing, the Company does not own
any real property. The Company owns (with good and indefeasible title in the
case of real property, subject only to the matters permitted by the following
sentence) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) reflected as owned in the books and records of
the Company, including all of the properties and assets reflected in the
Closing Balance Sheet (except for assets held under capitalized leases
disclosed or not required to be disclosed in Part 3.6 of the Shareholder's
Disclosure Letter and personal property sold since the date of the Closing
Balance Sheet in the Ordinary Course of Business, or otherwise as permitted
herein), and all of the properties and assets purchased or otherwise acquired
by the Company since the date of the Closing Balance Sheet (except for personal
property acquired and sold since the date of the Closing Balance Sheet in the
Ordinary Course of Business and consistent with past practice or otherwise as
permitted herein), which subsequently purchased or acquired properties and
assets (other than accounts receivable, inventory and short-term investments)
are listed in Part 3.6 of the Shareholder's Disclosure Letter. All material
properties and assets reflected in the Closing Balance Sheet are free and clear
of all Encumbrances and are not, in the case of real property, subject to any
rights of way, building use restrictions, exceptions, variances, reservations,
or limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Closing Balance Sheet
as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute
a default) exists, (b) mortgages or security interests incurred in connection
with the purchase of property or assets after the date of the Closing Balance
Sheet (such mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default) exists, (c) liens
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for current taxes not yet due, and (d) statutory and nonstatutory landlord
liens, and (e) liens on property which do not materially affect the operation
of the business of the Company.
3.7 Condition and Sufficiency of Assets. Except as set forth in
Part 3.7 of the Shareholder's Disclosure Letter, the property and assets of the
Company are in good operating condition and repair (ordinary wear and tear
excepted) and are adequate for the uses to which they are being put, and none
of such property and assets is in need of repairs except for ordinary, routine
repairs that are due to ordinary wear and tear, or are not material in nature
or cost. The property and assets of the Company are sufficient for the
continued conduct of the Company's business after the Closing in substantially
the same manner as conducted prior to the Closing.
3.8 Accounts Receivable.
(a) All accounts receivable of the Company that are reflected on
the Closing Balance Sheet (collectively, the "Accounts Receivable") represent
valid obligations arising from sales actually made or services actually
performed in the Ordinary Course of Business. Unless paid prior to the Closing
Date, the Accounts Receivable are current and collectible net of the respective
reserves shown on the Closing Balance Sheet. Subject to such reserves, each of
the Accounts Receivable either has been or will be collected in full, without
any set-off, within one hundred eighty (180) days after the day on which it
first becomes due and payable. There is no contest, claim, or right of
set-off, other than returns in the Ordinary Course of Business, under any
Contract with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable.
(b) Part 3.8(b) of the Shareholder's Disclosure Letter lists all
accounts receivable which the Company has written off during the last three
fiscal years ending December 31, 1996. Parent agrees to reimburse Shareholder
for any amounts which the Surviving Corporation receives after the Closing for
such accounts, less any costs incurred after the Closing Date in collecting
such payments.
3.9 Inventory. The inventory of the Company, whether or not
reflected in the Closing Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, all of which have been written off
or written down to net realizable value in the Closing Balance Sheet. All
inventories not written off have been priced at the lower of cost or net
realizable value on a first in, first out basis. The quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company.
3.10 No Undisclosed Liabilities. Except as set forth in Part 3.10
of the Shareholder's Disclosure Letter and obligations and liabilities arising
under the Applicable Contracts, the Company has no liabilities or obligations
of the type required to be reflected as liabilities on a balance sheet prepared
in accordance with GAAP, except for liabilities or obligations reflected or
reserved against in the Balance Sheet, the Interim Balance Sheet or the Closing
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
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3.11 Taxes.
(a) The Company has filed or caused to be filed (on a
timely basis since inception) all Tax Returns that are or were
required to be filed by or with respect to any of them, either
separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. Shareholder has delivered or made
available to Parent copies of all such Tax Returns relating to income
or franchise taxes filed since inception. The Company has paid, or
made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to
any assessment received by Shareholder or the Company, except such
Taxes, if any, as are listed in Part 3.11 of the Shareholder's
Disclosure Letter and are being contested in good faith and as to
which adequate reserves have been provided in the Closing Balance
Sheet.
(b) The United States federal income and state franchise
Tax Returns of the Company subject to such Taxes have been audited by
the IRS or relevant state tax authorities as set forth on Part 3.11 of
the Disclosure Letter. Part 3.11 of the Shareholder's Disclosure
Letter contains a complete and accurate list of all audits of all such
Tax Returns, including a reasonably detailed description of the nature
and outcome of each audit. All deficiencies proposed as a result of
such audits have been paid, reserved against, settled, or, as
described in Part 3.11 of the Shareholder's Disclosure Letter, are
being contested in good faith by appropriate proceedings. Part 3.11 of
the Shareholder's Disclosure Letter describes all adjustments to the
United States federal income Tax Returns filed by the Company or any
group of corporations including the Company for all taxable years
since December 31, 1993, and the resulting deficiencies proposed by
the IRS. Except as described in Part 3.11 of the Shareholder's
Disclosure Letter, neither the Shareholder nor the Company has given
or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any
statute of limitations relating to the payment of Taxes of the Company
or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to
Taxes on the respective books of the Company are adequate and are at
least equal to that Company's liability for Taxes. There exists no
proposed tax assessment against the Company except as disclosed in the
Closing Balance Sheet or in Part 3.11 of the Shareholder's Disclosure
Letter. No consent to the application of Section 341(f)(2) of the IRC
has been filed with respect to any property or assets held, acquired,
or to be acquired by the Company. All Taxes that the Company is or was
required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to
the proper Governmental Body or other Person. The Shareholder is not
subject to withholding under Section 1445 of the IRC with respect to
any transaction contemplated hereby. The Company has not been a
member of any affiliated group (as defined in IRC Section 1504(a) or
consolidated, combined or unitary group for purposes of any other
Taxes. None of the material property used by the Company is subject
to a lease, other than a "true" lease for federal income tax purposes.
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(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There
is no tax sharing agreement that will require any payment by the
Company after the date of this Agreement. The Company has had a valid
election to be taxed as an S corporation in effect since its inception
and through the date of the Merger.
(e) There is no plan or intention by the Shareholder, and
to the Knowledge of the Company, there is no plan or intention on the
part of the Shareholder to sell, exchange, or otherwise dispose of a
number of shares of Parent Stock to be received by them hereunder that
would reduce the Shareholder's ownership of Parent Stock to a number
of shares having a value, as of the Effective Date, of less than fifty
percent (50%) of the value of all of the formerly outstanding Shares
as of the Effective Date. For the purposes of this representation,
the Shares exchanged for cash or other property, surrendered by
dissenters or exchanged for cash in lieu of fractional shares of
Parent Stock will be treated as outstanding Shares on the Effective
Date. The Shares and shares of Parent Stock held by Shareholder and
otherwise sold, redeemed, or disposed of prior or subsequent to the
Effective Date will be considered in making this representation.
(f) To Shareholder's Knowledge, Newco will acquire at
least ninety percent (90%) of the fair market value of the net assets
and at least seventy percent (70%) of the fair market value of the
gross assets held by the Company immediately prior to the Merger. For
the purposes of this representation, amounts paid by the Company to
dissenters, amounts paid by the Company to Shareholder who receive
cash or other property, the Company's assets used to pay its
reorganization expenses, and all redemptions and distributions (except
for regular normal dividends) made by the Company immediately
preceding the transfer, will be included as assets of the Company held
immediately prior to the Merger.
(g) To Shareholder's Knowledge, the liabilities of the
Company assumed by Newco and the liabilities to which the transferred
assets of the Company are subject were incurred by the Company in the
ordinary course of its business.
(h) Parent, Newco, the Company and the Shareholder will
pay their respective expenses, if any, incurred in connection with
the Merger.
(i) To Shareholder's Knowledge, there is no intercompany
indebtedness existing between Parent and the Company or between Newco
and the Company that was issued, acquired, or will be settled at a
discount.
(j) To Shareholder's Knowledge, the Company is not under
the jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the IRC.
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(k) To Shareholder's Knowledge, the fair market value of
the assets of the Company transferred to Newco will equal or exceed
the sum of the liabilities assumed by Newco, plus the amount of
liabilities, if any, to which the transferred assets are subject.
(l) To Shareholder's Knowledge, the Company is not an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of
the IRC.
3.12 No Material Adverse Change. Except for seasonal fluctuations
which could be significant, since the date of the Closing Balance Sheet, there
has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and to the
Shareholder's Knowledge no event has occurred or circumstance exists that will
or is reasonably likely to result in such a material adverse change.
3.13 Employee Benefits.
(a) As used in this Section 3.13, the following terms
have the meanings set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit
Obligation owed, adopted, or followed by the Company or an ERISA Affiliate of
the Company.
"COMPANY PLAN" means all Plans of which the Company or an
ERISA Affiliate of the Company is or was a Plan Sponsor, or to which the
Company or an ERISA Affiliate of the Company otherwise contributes or has
contributed, or in which the Company or an ERISA Affiliate of the Company
otherwise participates or has participated. All references to Plans are to
Company Plans unless the context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees of
the Company or any ERISA Affiliate of an Company.
"ERISA AFFILIATE" means, with respect to the Company, any
other person that, together with the Company, would be treated as a single
employer under IRC Section 414.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA Section
3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations,
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon
the amount of service rendered, sabbatical policies, severance payment
policies, and fringe benefits within the meaning of IRC Section 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
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"PENSION PLAN" has the meaning given in ERISA Section 3(2)(A).
"PLAN" has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Section 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet
the requirements of IRC Section 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer
Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC Section 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA Section 3(1).
(b) (i) Part 3.13(b) of the Shareholder's Disclosure
Letter contains a complete and accurate list of all Company Plans, and
identifies as such all Company Plans that are Qualified Plans.
Neither the Company nor any ERISA Affiliate of the Company has ever
established, maintained or contributed to or otherwise participated
in, or had an obligation to maintain, contribute to, or otherwise
participate in, any Company Other Benefit Obligations, Company VEBAs,
defined benefit Pension Plans, Title IV Plans, or Multi-Employer
Plans.
(ii) Part 3.13(b) of the Shareholder's Disclosure
Letter contains a complete and accurate list of (A) all ERISA
Affiliates of the Company , and (B) all Plans of which any
such ERISA Affiliate is or was a Plan Sponsor, in which any
such ERISA Affiliate participates or has participated, or to
which any such ERISA Affiliate contributes or has contributed.
(iii) Part 3.13(b) of the Shareholder's Disclosure
Letter sets forth the financial cost of all obligations owed
under the Company Plans.
(c) Shareholder has delivered to Parent, or will deliver
to Parent within ten days of the date of this Agreement:
(i) all documents that set forth the terms of the
Company Plans, and of any related trust, including (A) all
plan descriptions and summary plan descriptions of Company
Plans for which Shareholder or the Company are required to
prepare, file, and distribute plan descriptions and summary
plan descriptions, and (B) all summaries and descriptions
furnished to participants and beneficiaries regarding
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Company Plans, Company Other Benefit Obligations, and Company
VEBAs for which a plan description or summary plan description
is not required;
(ii) all personnel, payroll, and employment manuals
and policies;
(iii) all registration statements filed with respect
to the Company Plan;
(iv) all insurance policies purchased by or to
provide benefits under the Company Plans;
(v) all contracts with third party administrators,
actuaries, investment managers, consultants, and other
independent contractors that relate to the Company Plans;
(vi) all reports submitted within the four years
preceding the date of this Agreement by third party
administrators, actuaries, investment managers, consultants,
or other independent contractors with respect to the Company
Plans;
(vii) all notifications to employees of their rights
under ERISA Section 601 et seq. and IRC Section 4980B;
(viii) the Form 5500 filed in each of the most
recent three plan years with respect to the Company Plan,
including all schedules thereto and the opinions of
independent accountants;
(ix) all notices that were given by the Company or
any ERISA Affiliate or any Company Plan to the IRS, or any
participant or beneficiary, pursuant to statute, within the
four years preceding the date of this Agreement, including
notices that are expressly mentioned elsewhere in this Section
3.13;
(x) all notices that were given by the IRS, or
the Department of Labor to the Company, any ERISA Affiliate of
an Company, or any Company Plan within the four years
preceding the date of this Agreement;
(xi) with respect to Qualified Plans, the most
recent determination letter for each Plan of the Company that
is a Qualified Plan; and
(d) Except as set forth in Part 3.13(d) of the
Shareholder's Disclosure Letter:
(i) The Company has performed all of respective
obligations under all Company Plans. The Company has made
appropriate entries in its financial records and statements
for all obligations and liabilities under such Plans, that
have accrued but are not due.
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(ii) No statement, either written or oral, has
been made by any Acquired Company to any Person with regard
to any Plan that was not in accordance with the Plan and that
could have an adverse economic consequence to the Company or
to Parent.
(iii) The Company, with respect to all Company
Plans, is, and the Company Plans are, in full compliance with
ERISA, the IRC, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section
3.13.
(A) No transaction prohibited by ERISA
Section 406 and no "prohibited transaction" under
IRC Section 4975(c) have occurred with respect to
the Company Plan.
(B) Neither the Shareholder nor Company
has any liability to the IRS with respect to any
Plan, including any liability imposed by Chapter 43
of the IRC.
(C) Neither the Shareholder nor the
Company has any liability under ERISA Section 502 or
Section 4071.
(D) All filings required by ERISA and
the IRC as to each Plan have been timely filed, and
all notices and disclosures to participants required
by either ERISA or the IRC have been timely provided.
(E) All contributions and payments made
or accrued with respect to all Company Plans, are
deductible under IRC Section 162 or Section 404. No
amount, or any asset of any Company Plan, is subject
to tax as unrelated business taxable income.
(iv) The Company Plan can be terminated within
sixty days, without payment of any additional contribution or
amount and without the vesting or acceleration of any benefits
promised by such Plan.
(v) Since the Company's inception, there has been
no amendment of the Company Plans.
(vi) No event has occurred or circumstance exists
that could result in a material increase in premium costs of
Company Plans that are insured, or a material increase in
benefit costs of such Plans and Obligations that are
self-insured.
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(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal
proceeding involving, the Company Plans, is pending or, to
Shareholder's Knowledge, is Threatened.
(viii) Except as otherwise described in Part 3.13 of
the Shareholder's Disclosure Letter, the Company has no
Company Plan which is a stock bonus, pension, or
profit-sharing plan within the meaning of IRC Section 401(a).
(ix) Each Qualified Plan of the Company is
qualified in form and operation under IRC Section 401(a); each
trust for each such Plan is exempt from federal income tax
under IRC Section 501(a). No event has occurred or
circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan
or trust.
(x) The Company and each ERISA Affiliate of the
Company has met the minimum funding standard, and has made all
contributions required, under ERISA Section 302 and IRC
Section 402.
xi) No Company Plan is subject to Title IV of
ERISA.
(xii) No amendment has been made, or is reasonably
expected to be made, to any Plan that has required or could
require the provision of security under ERISA Section 307 or
IRC Section 401(a)(29).
(xiii) No accumulated funding deficiency, whether or
not waived, exists with respect to any Company Plan; no event
has occurred or circumstance exists that may result in an
accumulated funding deficiency as of the last day of the
current plan year of any such Plan.
(xiv) Except to the extent required under ERISA
Section 601 et seq. and IRC Section 4980B, the Company does
not provide health or welfare benefits for any retired or
former employee and is not obligated to provide health or
welfare benefits to any active employee following such
employee's retirement or other termination of service.
(xv) The Company has the right to modify and
terminate benefits to retirees (other than pensions) with
respect to both retired and active employees.
(xvi) Shareholder and the Company have complied
with the provisions of ERISA Section 601 et seq. and IRC
Section 4980B.
(xvii) The consummation of the Contemplated
Transactions will not result in the payment, vesting, or
acceleration of any benefit.
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3.14 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Part 3.14 of the Shareholder's
Disclosure Letter and to the Shareholder's Knowledge,
(i) the Company is, and at all times since December
31, 1995 has been in substantial compliance with each Legal
Requirement that is or was applicable to it or to the conduct
or operation of its business or the ownership or use of any of
its assets except where the failure to so comply did not have,
will not have, and is not reasonably likely to have, an
adverse effect on the business, financial condition and
results of operation of the Company;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) will, or
is reasonably likely to, constitute or result in a violation
by the Company of, or a failure on the part of the Company to
comply with, any Legal Requirement, or (B) will, or is
reasonably likely to, give rise to any obligation on the part
of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time
since December 31, 1995, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or
potential obligation on the part of the Company to undertake,
or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) Part 3.14 of the Shareholder's Disclosure Letter
contains a complete and accurate list of each Governmental
Authorization that is held by or has been issued to the Company.
Each Governmental Authorization listed or required to be listed in
Part 3.14 of the Shareholder's Disclosure Letter is valid and in full
force and effect. Except as set forth in Part 3.14 of the
Shareholder's Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995, has been, in substantial compliance with
all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part
3.14 of the Shareholder's Disclosure Letter;
(ii) no event has occurred or circumstance exists
that, to the Shareholder's Knowledge, will or is reasonably
likely to (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of
or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in
Part 3.14 of the Shareholder's Disclosure Letter, or (B)
result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination
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of, or any modification to, any Governmental Authorization
listed or required to be listed in Part 3.14 of the
Shareholder's Disclosure Letter;
(iii) the Company has not received, at any time
since December 31, 1995 any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or
required to be listed in Part 3.14 of the Shareholder's
Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings
required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the
Shareholder's Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
its business in the manner they currently conduct and operate such business
and to permit the Company to own and use their assets in the manner in which
they currently own and use such assets, except where the failure to hold such
Governmental Authorization would not have an adverse effect on the business,
financial condition and results of operation of the Company.
3.15 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.15 of the Shareholder's
Disclosure Letter, there is no pending Proceeding commenced by
or against the Company:
(i) that otherwise relates to or that will, or is
reasonably likely to, adversely affect the business of, or any
of the assets owned or used by, the Company; or
(ii) that challenges, or that will, or is
reasonably likely to have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Shareholder, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that will, or
is reasonably likely to give rise to or serve as a basis for the commencement
of any such Proceeding. Shareholder has delivered or made available
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to Parent copies of all pleadings, correspondence, and other documents relating
to each Proceeding listed in Part 3.15 of the Shareholder's Disclosure Letter.
(b) Except as set forth in Part 3.15 of the Shareholder's
Disclosure Letter and to Shareholder's Knowledge:
(i) there is no Order to which the Company or any
of the assets owned or used by the Company, is subject;
(ii) the Shareholder is not subject to any Order
that relates to the business of, or any of the assets owned or
used by, the Company; and
(iii) no officer, director, agent, or employee of
the Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the
business of the Company.
(c) Except as set forth in Part 3.15 of the Shareholder's
Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995, has been, in substantial compliance with
all of the terms and requirements of each Order to which it,
or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists
that will, or to the Shareholder's Knowledge is reasonably
likely to, constitute or result in (with or without notice or
lapse of time) a violation of or failure to substantially
comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is
subject; and
(iii) the Company has not received, at any time
since December 31, 1995, any notice or other communication
(whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible, or
potential violation of, or failure to substantially comply
with, any term or requirement of any Order to which the
Company, is or has been subject.
3.16 Absence of Certain Changes and Events. Except as set forth in
Part 3.16 of the Shareholder's Disclosure Letter or otherwise contemplated in
this Agreement, since the date of the Closing Balance Sheet, the Company has
conducted its business only in the Ordinary Course of Business and there has
not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of
capital stock of the Company; issuance of any security convertible
into such capital stock; grant of any registration rights; purchase,
redemption,
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retirement, or other acquisition by the Company of any shares of any such
capital stock; or declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock, except for distributions
since September 30, 1996 in contemplation of the payment of income taxes
relating to the income of the Company at the Shareholder's effective rate, not
to exceed $100,000, and the distribution of the property as contemplated in
Section 5.3;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any shareholder, director, officer,
or (except in the Ordinary Course of Business) employee or entry into
any employment, severance, or similar Contract with any director,
officer, or employee, except for bonuses of up to $100,000 to its key
executives and employees in addition to bonuses accrued as of
September 30, 1996;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee benefit
plan for or with any employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets, business,
or financial condition of the Company;
(f) entry into, termination of, or receipt of notice of
termination by the Company of (i) any license, distributorship,
dealer, sales representative, joint venture, credit, or similar
agreement, or (ii) any Contract or transaction involving a total
remaining commitment by or to the Company of at least $50,000;
(g) sale (other than sales of inventory or obsolete or
unusable equipment and vehicles in the Ordinary Course of Business),
lease, or other disposition of any asset or property of the Company or
mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company, including the sale,
lease, or other disposition of any of the Intellectual Property,
except as contemplated hereby;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
(i) material change in the accounting methods used by the
Company, except as disclosed on the Closing Balance Sheet; or
(j) agreement, whether oral or written, by the Company to
do any of the foregoing.
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3.17 Contracts; No Defaults.
(a) Part 3.17(a) of the Shareholder's Disclosure Letter
contains a complete and accurate list, and Shareholder has delivered
or made available to Parent true and complete copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by
the Company of an amount or value in excess of $10,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to
the Company of an amount or value in excess of $10,000;
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of $10,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional sales agreements having a value
per item or aggregate payments of less than $10,000 and with
terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current
or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any
other Person;
(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of
the Company or any affiliate of the Company or limit the
freedom of the Company or any affiliate of the Company to
engage in any line of business or to compete with any Person;
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(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(x) each power of attorney by or to the Company
that is currently effective and outstanding;
(xi) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or
provides for an express undertaking by the Company to be
responsible for consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $10,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the
Shareholder's Disclosure Letter:
(i) the Shareholder does not have, and may not,
acquire any rights under, and the Shareholder has not become
subject to any obligation or liability under, any Applicable
Contract that relates to the business of, or any of the assets
owned or used by, the Company; and
(ii) to the Shareholder's Knowledge, no officer,
director, agent, employee, consultant, or contractor of the
Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any
conduct, activity, or practice relating to the business of the
Company, or (B) assign to the Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the
Shareholder's Disclosure Letter and to the Shareholder's knowledge,
each Applicable Contract identified or required to be identified in
Part 3.17(a) of the Shareholder's Disclosure Letter is in full force
and effect and is valid and enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the
Shareholder's Disclosure Letter:
(i) the Company is, and at all times since
December 31, 1995 has been, in substantial compliance with all
applicable terms and requirements of each
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Applicable Contract identified or required to be identified in
Part 3.17(a) of the Shareholder's Disclosure Letter under
which such Company has or had any obligation or liability or
by which such Company or any of the assets owned or used by
such Company is or was bound;
(ii) to Shareholder's Knowledge, each other Person
that has or had any obligation or liability under any
Applicable Contract under which the Company has or had any
rights is, and at all times since December 31, 1995 has been,
in substantial compliance with all applicable terms and
requirements of such Applicable Contract;
(iii) to Shareholder's Knowledge, no event has
occurred or circumstance exists that (with or without notice
or lapse of time) will, or is reasonably likely to, result in
a material violation or breach of, or give the Company or
other party thereto the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) the Company has not given to or received from
any other Person, since December 31, 1995, any notice or other
communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or
default under, any Applicable Contract.
(e) There are no pending renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts
paid or payable to the Company under current or completed Applicable
Contracts with any Person and no such Person has made written demand
for such renegotiation.
(f) The Applicable Contracts relating to the sale,
design, manufacture, or provision of products or services by the
Company have been entered into without the commission by the Company
or Shareholder of any act alone or in concert with any other Person,
or any consideration having been paid or promised, that is or would be
in violation of any Legal Requirement.
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3.18 Insurance.
(a) Except as set forth in Part 3.18 of the Shareholder's
Disclosure Letter, Shareholder has delivered or made available to
Parent:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the
Company, or any director of the Company, in his or her
capacity as a director, is or has been covered at any time
within the four years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Part 3.18(b) of the Shareholder's Disclosure Letter
describes:
(i) any self-insurance arrangement by or
affecting the Company, including any reserves established
thereunder;
(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk
by the Company; and
(iii) all obligations of the Company to third
parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy
under which such coverage is provided.
(c) Part 3.18(c) of the Shareholder's Disclosure Letter
sets forth, by year, for the current policy year and each of the four
preceding policy years:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $10,000, which
sets forth:
(A) the name of the claimant;
(B) a description of the policy by
insurer, type of insurance, and period of coverage;
and
(C) the amount and a brief description
of the claim; and
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(iii) a statement describing the loss experience
for all claims that were self-insured, including the number
and aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the
Shareholder's Disclosure Letter:
(i) All policies to which the Company is a party
or that provide coverage to Shareholder, the Company, or any
director or officer of an Company:
(A) are valid, outstanding, and
enforceable;
(B) are issued by an insurer that the
Shareholder reasonably believes is financially sound
and reputable;
(C) are sufficient for compliance with
all Legal Requirements and Applicable Contracts;
(D) will not be terminated in accordance
with its terms upon the consummation of the
Contemplated Transactions and no insurer has given
notice of its intent to terminate such policy upon
the consummation of the Contemplated Transactions;
and
(E) do not provide for any retrospective
premium adjustment or other experienced- based
liability on the part of the Company.
(ii) Neither the Shareholder nor the Company has
received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will
not be renewed or that the issuer of any policy is not willing
or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and
has otherwise performed all of its obligations, under each
policy to which the Company is a party or that provides
coverage to the Company or director thereof (in his or her
capacity as a director).
(iv) The Company has given notice to the insurer
of all claims that may be insured thereby.
3.19 Environmental Matters.
Except as set forth in Part 3.19 of the Shareholder's Disclosure
Letter:
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(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Neither the Shareholder nor the Company
has any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held to be responsible received, any
actual or Threatened order, notice, or other communication from (i)
any Governmental Body or private citizen acting in the public
interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply
with any Environmental Law, or of any actual or Threatened obligation
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which
Shareholder or the Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or
processed by Shareholder, the Company, or any other Person for whose
conduct the Company is or may be held responsible, or from which
Hazardous Materials of the Company have been transported, treated,
stored, handled, transferred, disposed or recycled.
(b) There are no pending or, to the Knowledge of the
Company or the Shareholder, Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health,
and Safety Liabilities or arising under or pursuant to any
Environmental Law, with respect to or affecting any of the Facilities
or any other properties and assets (whether real, personal, or mixed)
in which Shareholder or the Company has or had an interest.
(c) Neither the Shareholder nor the Company has any basis
to expect, nor has any of them or any other Person for whose conduct
they are or may be held responsible, received, any citation,
directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials,
or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health,
and Safety Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which
Shareholder or the Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by
Shareholder, the Company, or any other Person for whose conduct the
Company is or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(d) Neither the Shareholder nor the Company, nor any
other Person for whose conduct they are or may be held responsible,
has any Environmental, Health, and Safety Liabilities with respect to
the Facilities or with respect to any other properties and assets
(whether real, personal, or mixed) in which Shareholder or the Company
(or any predecessor), has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such
other property or assets.
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(e) There are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in
land, water, sumps, or any other part of the Facilities, or
incorporated into any structure therein or thereon in quantities that
would require registration with or reporting to any regulatory agency
or emergency planning authority. None of the Company, any other
Person for whose conduct the Company may be held responsible, or any
independent contractor hired by the Company has permitted or
conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Shareholder or the Company has or
had an interest except in full compliance with all applicable
Environmental Laws.
(f) There has been no Release or, to the Knowledge of
Shareholder and the Company, Threat of Release, of any Hazardous
Materials at or from the Facilities or at any other locations where
any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed from or by the
Facilities, or from or by any other properties and assets (whether
real, personal, or mixed) in which Shareholder or the Company has or
had an interest, whether by Shareholder, the Company, or any other
Person for whom the Company may be held responsible.
(g) Shareholder has delivered or made available to Parent
true and complete copies and results of any reports, studies,
analyses, tests, or monitoring possessed or initiated by Shareholder
or the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance
by Shareholder, the Company, or any other Person for whose conduct
they are or may be held responsible, with Environmental Laws.
3.20 Employees.
(a) Part 3.20 of the Shareholder's Disclosure Letter
contains a complete and accurate list of the following information for
each employee of the Company with a salary of at least $30,000 per
year (including each such employee on leave of absence or layoff
status), or for each officer of director: employer; name; job title;
current compensation paid or payable and any change in compensation
since December 31, 1995; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under the Company's
pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any Director Plan.
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(b) To Shareholder's Knowledge, no employee or director
of the Company is a party to, or is otherwise bound by, any agreement
or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and
any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the
Company to conduct its business, including any Proprietary Rights
Agreement with Shareholder or the Company by any such employee or
director. To Shareholder's Knowledge, no director, officer, or other
key employee of the Company intends to terminate his employment with
the Company.
(c) Part 3.20 of the Shareholder's Disclosure Letter also
contains a complete and accurate list of the following information for
each retired employee or director of the Company, or their dependents,
receiving benefits or scheduled to receive benefits in the future:
name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other
benefits.
3.21 Labor Relations; Compliance. The Company has not been and is
not a party to any collective bargaining or other labor Contract since January
1, 1992. Since January 1, 1992, there has not been, there is not presently
pending or existing, and to Shareholder's Knowledge there is not Threatened,
(a) any strike, slowdown, picketing, work stoppage, or employee grievance
process, (b) any Proceeding against or affecting the Company relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the Company or its
premises, or (c) any application for certification of a collective bargaining
agent. To Shareholder's Knowledge, no event has occurred or circumstance exists
that provides, or is reasonably likely to provide, the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by the
Company, and no such action is contemplated by the Company. The Company has
complied in all respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing. The Company is not
liable for the payment of any compensation, damages, taxes, fines, penalties,
or other amounts, however designated, for failure to comply with any of the
foregoing Legal Requirements.
3.22 Intellectual Property. Part 3.22 of the Shareholder's
Disclosure Letter sets forth each material item of Intellectual Property, and,
except as set forth in Part 3.22 of the Shareholder's Disclosure Letter, the
Company owns, or is licensed or otherwise has the right to use, all such
Intellectual Property which is used in the conduct of the business of the
Company, and the consummation of the Contemplated Transactions will not alter
or impair any such Intellectual Property in any material respect or the
Company's right to use same. Except as set forth in Part 3.22 of the
Shareholder's Disclosure Letter and except for such other claims which if
adversely determined would not have a material adverse effect on the Company,
no claims have been asserted
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against the Company by any Person with respect to the use of any such
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement relating thereto. Each of the
trademarks, trade names and copyrights used in the conduct of the business of
the Company is valid and enforceable (except as disclosed in Part 3.22 of the
Shareholder's Disclosure Letter) and to Shareholder's Knowledge, do not violate
the rights of any Person.
3.23 Certain Payments. Neither the Company nor any director,
officer, agent or employee of the Company, nor any other Person acting for or
on behalf of the Company, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in money, property,
or services (i) to obtain favorable treatment in securing business, (ii) to pay
for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any affiliate of the Company, or (iv) in violation of any Legal
Requirement, (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Company.
3.24 Disclosure.
(a) No representation or warranty of Shareholder in this
Agreement and no statement in the Shareholder's Disclosure Letter
omits to state a material fact necessary to make the statements herein
or therein, in light of the circumstances in which they were made, not
misleading.
(b) No notice given pursuant to Section 5.6 will contain
any untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
(c) To the Shareholder's Knowledge, there is no fact that
has specific application to either Shareholder, the Company or STPI
(other than general economic, industry or competitive conditions) and
that materially adversely affects or, as far as Shareholder can
reasonably foresee, materially threatens, the assets, business,
financial condition, or results of operations of the Company and STPI,
taken as a whole, that has not been set forth in this Agreement, the
Shareholder's Disclosure Letter, the STPI Agreement or the
Shareholders' Disclosure Letter (as defined in the STPI Agreement).
3.25 Relationships with Related Persons. Neither the Shareholder
nor any Related Person of Shareholder or of the Company has any interest in any
personal property whether tangible or intangible), used in the Company's
business. Except with respect to ownership interests in the Company, STPI or
Parent held by the Shareholder or a Related Person of the Shareholder or the
Company, neither the Shareholder nor any Related Person of the Shareholder or
of the Company
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owns (of record or as a beneficial owner) a material equity interest or any
other material financial or profit interest in a Person that has had material
business dealings or a material financial interest in any transaction with the
Company since December 31, 1995, other than business dealings or transactions
conducted in the Ordinary Course of Business with the Company at substantially
prevailing market prices and on substantially prevailing market terms. Except
as set forth in Part 3.25 of the Shareholder's Disclosure Letter or as
otherwise related to STPI, neither the Shareholder nor, to Shareholder's
Knowledge, any Related Person of Shareholder or of the Company is a party to
any Contract with, or has any claim or right against, the Company.
3.26 Brokers or Finders. Shareholder and his agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco, jointly and severally, represent and warrant to
Shareholder as follows:
4.1 Organization and Good Standing. Each of Parent and Newco is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas. Newco is a wholly owned Subsidiary of Parent and
Parent is the record and beneficial owner of all of the outstanding capital
stock of Newco. Newco was formed by Parent for the sole purpose of effecting
the Merger, and has not conducted any operations or business except with
respect to actions contemplated herein.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and
binding obligation of each of Parent and Newco, enforceable against
Parent and Newco in accordance with its terms. Upon the execution and
delivery by Parent and Newco of the Escrow Agreement, the
Noncompetition Agreement and the execution and delivery of the
Registration Rights Agreement by Parent (collectively, the "Parent's
Closing Documents"), the Parent's Closing Documents will constitute
the legal, valid, and binding obligations of Parent or Newco, as the
case may be, enforceable against Parent and Newco in accordance with
their respective terms. Each of Parent and Newco has the absolute and
unrestricted right, power, and authority to execute and deliver this
Agreement and the Parent's Closing Documents and to perform its
obligations under this Agreement and the Parent's Closing Documents.
Parent and Newco have duly adopted all resolutions required by law to
approve the Merger and the Plan of Merger.
(b) Except as set forth in Part 4.2 of the Parent's
Disclosure Letter, neither the execution and delivery of this
Agreement by Parent and Newco nor the consummation or performance of
any of the Contemplated Transactions by Parent and Newco will give any
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Person the right to prevent, delay, or otherwise interfere with any of
the Contemplated Transactions pursuant to:
(i) any provision of Parent's or Newco's
Organizational Documents;
(ii) any resolution adopted by the board of
directors or the shareholders of Parent or Newco;
(iii) any Legal Requirement or Order to which
Parent or Newco may be subject; or
(iv) any Contract to which Parent or Newco is a
party or by which Parent or Newco may be bound.
Except as set forth in Part 4.2 of the Parent's Disclosure Letter,
neither Parent nor Newco is or will be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 Capitalization. The authorized capital stock of Parent
consists of 50,000,000 shares of Parent Stock, of which 2,826,371 shares are
issued and outstanding, and 5,000,000 shares of preferred stock, par value $.01
per share. The Parent's Board of Directors has authorized the designation of
450,000 shares of the preferred stock as the Series A Convertible Preferred
Stock (the "Series A Preferred Stock"), and all of the authorized shares of
Series A Preferred Stock are issued and outstanding. The Parent's Board of
Directors has authorized the designation of 200,000 shares of the preferred
stock as the Series B Convertible Preferred Stock, of which 124,831 shares are
issued and outstanding. All of the outstanding equity securities of Parent
have been duly authorized and validly issued and are fully paid and
nonassessable. Part 4.3 of Parent's Disclosure Letter sets forth the warrants,
options, subscriptions or other rights or preferences (including conversion or
preemptive rights) outstanding to acquire capital stock of Parent, or notes,
securities or other instruments convertible into or exchangeable for capital
stock of Parent. Except as set forth in Part 4.3 of the Parent's Disclosure
Letter, no legend or other reference to any purported Encumbrance appears upon
any certificate representing any equity securities of Parent. To Parent's
Knowledge, there are no Contracts relating to the issuance, sale, or transfer
of any equity securities or other securities of Parent except as set forth in
Part 4.3 of Parent's Disclosure Letter. None of the outstanding equity
securities or other securities of Parent was issued in violation of the
Securities Act or any other Legal Requirement. All of the Parent Stock, when
delivered pursuant to the provision of this Agreement, will be validly issued,
fully paid and non-assessable, free and clear of all Encumbrances, and will not
be issued in violation of any preemptive rights. Set forth on Part 4.3 of the
Parent's Disclosure Letter is a complete and accurate list of all shareholders
of Parent who own, beneficially or of record, 10% or more of the outstanding
capital stock of Parent.
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4.4 Financial Statements. Parent has delivered to Shareholder:
(a) audited consolidated balance sheets of Parent as at December 31 in each of
the years 1994 through 1996, and the related audited consolidated statements of
income, changes in shareholders' equity, and cash flow for each of the fiscal
years then ended, together with the report thereon of Deloitte & Touche,
independent certified public accountants, (b) an unaudited consolidated balance
sheet of Parent as at September 30, 1996 (the "Parent's Interim Balance Sheet")
and the related unaudited consolidated statements of income, changes in
shareholders' equity, and cash flow for the nine months then ended, including
in each case the notes thereto. Such financial statements and notes fairly
present the financial condition and the results of operations, changes in
shareholders' equity, and cash flow of Parent as at the respective dates of and
for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or
in the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the audited
balance sheet); the financial statements referred to in this Section 4.4 reflect
the consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements.
4.5 Certain Proceedings. Except as set forth in Part 4.5 of the
Parents Disclosure Letter, there is no pending Proceeding that has been
commenced against Parent or Newco and that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To Parent's Knowledge, no such Proceeding has
been Threatened.
4.6 Taxes. Prior to the Merger, Parent will be in control of
Newco within the meaning of Section 368(c)(1) of the IRC. Parent has no plan or
intention to cause the Surviving Corporation to issue additional shares of its
stock, following the Merger, that would result in Parent losing control of
Newco within the meaning of Section 368(c)(1) of the IRC. Parent has no plan or
intention to reacquire any of its stock issued under the Merger. Parent has no
plan or intention to liquidate Newco; to merge Newco with and into another
corporation; to sell or otherwise dispose of any of the assets of the Company
acquired in the Merger, except for dispositions made in the Ordinary Course of
Business or transfers described in Section 368(a)(2)(C) of the IRC. It is the
intention of the Parent that following the Merger the Surviving Corporation
will continue the historic business of the Company and will use a significant
portion of the Company's business assets in the course of its business.
Parent, Newco and the Company will pay their respective expenses, if any,
incurred in connection with the Merger. Neither Parent nor Newco is an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the IRC.
No stock of Newco will be issued in the Merger.
4.7 Brokers or Finders. Parent and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection
with this Agreement and will indemnify and hold Shareholder harmless from any
such payment alleged to be due by or through Parent as a result of the action
of Parent or its officers or agents.
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4.8 Litigation. Except as set forth in Part 4.8 of the Parent's
Disclosure Letter, there is no action, Proceeding, claim or investigation
pending against Parent or Newco before any Governmental body that if determined
adversely to Parent or Newco may reasonably be expected to have a material
adverse effect on the present or future operations or financial conditions of
Parent or Newco, and, to the best of Parent's and Newco's Knowledge, no such
action, Proceeding, claim or investigation has been Threatened.
4.9 Absence of Certain Changes. Except as set forth in Part 4.9
of the Parent's Disclosure Letter, since the date of Parent's Interim Balance
Sheet, except as contemplated herein, there has not been with respect to Parent
and its Subsidiaries, on a consolidated basis:
(a) any change in the financial condition, properties,
assets, liabilities, business or operations of Parent or its
Subsidiaries which change by itself or in conjunction with all other
such changes, whether or not arising in the ordinary course of
business, has had, or can reasonably be expected to have, an adverse
effect on Parent and its Subsidiaries, taken as a whole;
(b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
properties, assets or business of Parent and its Subsidiaries, taken
as a whole;
(c) any split, combination or recapitalization of the
capital stock of Parent or any declaration or payment of any dividend
or making of any other distribution or payment in respect of its
capital stock or redeeming, purchasing or otherwise acquiring or
agreeing to redeem, purchase or acquire any of its capital stock; or
(d) any material change with respect to the management,
supervisory, development or other key personnel of Parent.
4.10 Disclosure.
(a) Parent has furnished to Shareholder a copy of
Parent's Disclosure Letter. The representations and warranties of
Parent and Newco in this Agreement and Parent's Disclosure Letter do
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) No notice given pursuant to Section 6.4 will contain
any untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
(c) To Parent's Knowledge, there is no fact that has
specific application to either Parent or any of its Subsidiaries
(other than general economic, industry or competitive
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conditions) and that materially adversely affects or, as far as Parent
can reasonably foresee, materially threatens, the assets, business,
financial condition, or results of operations of the Parent and its
Subsidiaries, taken as a whole, that has not been set forth in this
Agreement or the Parent's Disclosure Letter.
4.11 No Undisclosed Liabilities. Except as set forth in Part 4.11
of the Shareholder's Disclosure Letter and obligations and liabilities arising
under contracts to which Parents is a party or bound, the Parent has no
liabilities or obligations of the type required to be reflected as liabilities
on a balance sheet prepared in accordance with GAAP, except for liabilities or
obligations reflected or reserved against in the Parent's Interim Balance Sheet
or the Parent's audited balance sheet as at December 31, 1996 and current
liabilities incurred in the Ordinary Course of Business since the respective
dates thereof.
SECTION 5. COVENANTS OF SHAREHOLDER
5.1 Access and Investigation. Between the date of this Agreement
and the Closing Date, the Company and the Shareholder will, and will cause the
Company and its Representatives to, (a) afford Parent and its Representatives
and prospective lenders and their Representatives (collectively, "Parent's
Advisors") full and free access to the Company's personnel, properties
(including subsurface testing), contracts, books and records, and other
documents and data, (b) furnish Parent and Parent's Advisors with copies of all
such contracts, books and records, and other existing documents and data as
Parent may reasonably request, and (c) furnish Parent and Parent's Advisors
with such additional financial, operating, and other data and information as
Parent may reasonably request.
5.2 Operation of the Business of the Company. Between the date of
this Agreement and the Closing Date, unless otherwise consented to by Parent
and except as contemplated herein, the Company and Shareholder will, and
Shareholder will cause the Company to:
(a) conduct such business of the Company only in the
Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of such Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;
(c) confer with Parent concerning operational matters of
a material nature; and
(d) otherwise report periodically as reasonably requested
by Parent concerning the status of the business, operations, and
finances of the Company.
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5.3 Excluded Assets. Except as otherwise expressly permitted by
this Agreement, between the date of this Agreement and the Closing Date, the
Company and Shareholder will not, and will cause the Company not to, without
the prior consent of Parent, take any affirmative action, or fail to take any
reasonable action within their or its control, as a result of which any of the
changes or events listed in Section 3.16 is likely to occur. The Company has,
or prior to the Closing shall, sell, and the Shareholder or its affiliate shall
purchase (or with respect to the property described in Section 3.6 of the
Shareholder's Disclosure Letter under the headings "Excluded Real Property" and
"Excluded Personal Property", the Company shall distribute to Shareholder), all
of the Excluded Assets to the Shareholder or its affiliate; and, in connection
with such sale and distribution, Shareholder or its affiliate shall assume all
liabilities related to the Excluded Assets; provided, however, STED shall be
the party assuming the liabilities with support to MIECO.
5.4 Master Lease. On or prior to Closing, the Company shall
assign to Shareholder or its assigns, and Shareholder or its assigns shall
assume, all rights, obligations and duties, of the Company with respect to that
certain Contract for Purchase and Sale of Real Estate, dated February 15, 1995,
by and among J. Xxxxxxx Xxxx, Xxxx X. Xxxx, X. X. Xxxx, Inc., Mission Ice
Services of Laredo, Inc. and the Company (the "Real Estate Contract") whereby
Shareholder, or his assigns, will purchase the certain real property currently
leased by the Company on or before February 28, 1998. Notwithstanding any
covenant contained in this Agreement to the contrary, the Surviving Corporation
and the Shareholder, or its assigns with respect to property acquired pursuant
to the Real Estate Contract, will enter into a master lease agreement in the
form of Exhibit 5.4 attached hereto (the "Master Lease").
5.5 Required Approvals. As promptly as practicable after the date
of this Agreement, the Company and Shareholder will, and Shareholder will cause
the Company to, make all filings required by Legal Requirements to be made by
them in order to consummate the Contemplated Transactions. Between the date of
this Agreement and the Closing Date, the Company and Shareholder will, and will
cause the Company to, (a) cooperate with Parent with respect to all filings
that Parent reasonably elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Parent in obtaining all consents identified in Schedule 4.2; provided, however,
that this Agreement will not require the Company or the Shareholder to incur
any unreasonable burden, financial or otherwise, to make such filing or obtain
such consent or Governmental Authorization.
5.6 Notification. Between the date of this Agreement and the
Closing Date, the Shareholder will promptly notify Parent in writing if the
Shareholder becomes aware of any fact or condition that causes or constitutes a
Breach of any of the Company's or Shareholder's representations and warranties
as of the date of this Agreement, or if the Shareholder becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or
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discovery of such fact or condition. Should any such fact or condition require
any change in the Shareholder's Disclosure Letter if the Shareholder's
Disclosure Letter were dated the date of the occurrence or discovery of any
such fact or condition, the Shareholder will promptly deliver to Parent a
supplement to the Shareholder's Disclosure Letter specifying such change.
During the same period, the Company and Shareholder will promptly notify Parent
of the occurrence of any Breach of any covenant of Shareholder in this Section 5
or of the occurrence of any event, of which Shareholder has Knowledge and which
will, or is reasonably likely to, make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.7 Payment of Indebtedness by Related Persons. Except as
expressly provided in this Agreement and except with respect to any amounts
owed by STPI to the Company, Shareholder will cause all indebtedness owed to
the Company by Shareholder or any Related Person of the Shareholder to be paid
in full at or prior to Closing.
5.8 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, the Company and the Shareholder will not, and
will cause the Company and each of their Representatives not to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non- public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Parent) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of the Company, or any
of the capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company. Shareholder and the
Company will promptly communicate to Parent the terms of any proposal received
or the fact that Shareholder or the Company has received inquiry with respect
to, or have participated in discussions or negotiations in respect of, any such
transaction, and the identity of any persons who initiated or participated in
such discussions or negotiations.
5.9 Best Efforts. Except as set forth in the proviso of
Section 5.5, between the date of this Agreement and the Closing Date,
Shareholder will use their Best Efforts to cause the conditions in Sections 7
and 8 to be satisfied.
5.10 Filing of Short Period Returns. The Company and the
Shareholder shall treat the day before the Closing Date as the last day of the
taxable period in which the Company is an S corporation, as defined in the IRC.
All Tax returns relating to Company's status as an S corporation for the
present taxable year of the Company, which are required and/or permitted by the
authorized taxing authorities (herein collectively referred to as the "S Short
Year Returns") shall be filed accordingly. In accordance with
Section 1362(e)(6)(D) and related regulations of the IRC, the books of the
Company shall be closed at the close of the day before the Closing Date. The
Shareholder will cause its accounting firm to prepare, at the Shareholder's
expense, the S Short Year Returns.
5.11 Cooperation on Tax Matters.
(a) The Shareholder shall cooperate fully with the Parent, as
and to the extent reasonably requested by the other party, in connection with
the preparation and filing of any Tax Return, statement, report or form
(including any report required pursuant to Section 6042 of the IRC
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and all Treasury Regulations promulgated thereunder), any audit, and litigation
or other proceeding with respect to Taxes. Such cooperation shall include the
retentions and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding.
(b) The Shareholder agrees, upon request, to use all
reasonable efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (with respect, but not
limited, to transactions contemplated hereby).
5.12 Other Tax Matters
(a) Without the prior written consent of the Parent, neither
the Shareholder nor the Company (to the extent it may affect or relate to the
Company, the Surviving Corporation or the Parent) shall make or change any Tax
election, change any annual Tax accounting period, adopt or change any method
of Tax accounting period, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim a
Tax refund, consent to any extension or waiver of the limitations period of the
limitations period applicable to any Tax claim or assessment or take or omit to
take any other action, if any such action or omission would have the effect of
increasing the Tax liability of the Company, the Surviving Corporation or the
Parent.
(b) All Tax Returns not required to be filed on or before the
date hereof (including any applicable extensions) relating to any Pre-Closing
Tax Period will be filed when due in accordance with all applicable laws.
5.13 Employee Benefit Plan. Prior to the Closing, Shareholder
take all actions necessary to cause the Company to cease participation in its
401K plan (the "401k Plan") and to cause all of its functions as employer,
settlor, sponsor or administrator of the 401K to be transferred to another of
the companies participating in the 401k Plan, other than STPI; provided,
however, that the Shareholder may cause the Company and each of the affiliates
of the Company participating in the 401k plan to terminate the such plan
effective prior to Closing.
SECTION 6. COVENANTS OF PARENT
6.1 Approvals of Governmental Bodies. As promptly as practicable
after the date of this Agreement, Parent will, and will cause each of its
Related Persons to, make all filings required by Legal Requirements to be made
by them to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Parent will, and will cause each Related Person
to, cooperate with Shareholder and the Company with respect to all filings that
Shareholder and/or the Company is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with
Shareholder in obtaining all consents identified in Part 3.2 of
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the Shareholder's Disclosure Letter; provided that this Agreement will not
require Parent to dispose of or make any change in any portion of its business
or to incur any other unreasonable burden to obtain a Governmental
Authorization.
6.2 Best Efforts. Except as set forth in the proviso to
Section 6.1, between the date of this Agreement and the Closing Date, Parent
will use its Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
6.3 Cooperation on Tax Matters The Parent agrees (i) to retain
and provide Shareholders with access to all books and records with respect to
Tax matters pertinent to the Company relating to any Pre-Closing Tax Period,
and to abide by all record retention agreements entered into with any Taxing
Authority, (ii) to give the Shareholder reasonable written notice prior to
destroying or discarding any such books and records and, if the Shareholder so
requests, the Parent shall allow the Shareholder to take possession of such
books and records and (iii) to cooperate fully with the Shareholder regarding
whatever steps may be reasonably necessary to qualify the Merger as a tax-free
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the IRC.
6.4 Notification. Between the date of this Agreement and the
Closing Date, the Parent will promptly notify Shareholder in writing if the
Parent becomes aware of any fact or condition that causes or constitutes a
Breach of any of Company's, Shareholder's, Parent's or Newco's representations
and warranties as of the date of this Agreement, or if Parent becomes aware of
the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute
a Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition known by Parent require any
change in the Parent's Disclosure Letter if the Parent's Disclosure Letter were
dated the date of the occurrence or discovery of any such fact or condition,
Parent will promptly deliver to Shareholder a supplement to the Parent's
Disclosure Letter specifying such change. During the same period, Parent will
promptly notify Shareholder of the occurrence of any Breach, known to the
Parent, of any covenant of Shareholder, Company, Parent or Newco in this
Agreement or of the occurrence of any event that will or is reasonably likely
to make the satisfaction of the conditions in Section 7 or 8 impossible or
unlikely.
6.5 Release of Personal Guarantees. Parent and Newco shall take
all such actions necessary or appropriate to cause Shareholder to be released
at or prior to Closing from any personal guarantees of payment or performance
relating to the Company's current and long-term indebtedness, notes payable,
current and long-term capital leases and any other obligations relating to the
Company, its assets or business (other than the Excluded Assets), subject to
Company and Shareholder's performance of all covenants and obligations required
hereunder.
6.6 Increase in Tax Liability. Without the prior written consent
of the Shareholder, neither the Parent nor the Surviving Corporation (to the
extent it may affect or relate to the Company, the Surviving Corporation or the
Parent) shall make or change any Tax election, change
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any annual Tax accounting period, adopt or change any method of Tax accounting
period, file any amended Tax Return, enter into any closing agreement, settle
any Tax claim or assessment, surrender any right to claim a Tax refund, consent
to any extension or waiver of the limitations period of the limitations period
applicable to any Tax claim or assessment, or take or omit to take any other
action, if any such action or omission would have the effect of increasing the
Tax liability of the Company or the Shareholder with respect to periods ending
on or prior to the Closing.
6.7 Employee Options. At the request of Shareholder, Parent shall
take all actions necessary and appropriate to issue options covering up to
10,000 shares of Parent Stock to certain employees of Parent or its
Subsidiaries as may be determined by the Shareholder.
6.8 Payment of Indebtedness to Related Persons. Concurrent with
or immediately following the Closing, Parent and Newco will cause all
indebtedness owed by the Company to any Related Person of the Shareholder
(other than STPI) to be paid in full.
6.9 Master Lease. At the request of Shareholder, but in no
event later than February 28, 1998, the Surviving Corporation shall, and the
Parent shall cause the Surviving Corporation to, enter into the Master Lease in
the form of Exhibit 5.4 attached hereto. Concurrent therewith, Parent shall
execute the Guaranty, in the form of Exhibit 6.9 attached hereto, with respect
to the obligations and performance of the Surviving Corporation under the
Master Lease.
6.10 Registration Rights Agreement. Prior to the Closing, Parent
shall negotiate in good faith with Shareholder an agreement (the "Registration
Rights Agreement") which gives the Shareholder "piggyback" registration rights
and "demand" registration rights on the same or better terms and conditions as
those granted by Parent to other shareholders of Parent under other
registration rights agreements to which Parent is a party, or contemplates
entering into; provided, that such registration rights of Shareholder shall be
exercisable, subject to reasonable restrictions, at any time after an initial
public offering of the Parent Stock.
6.11 STPI Merger. Parent agrees that it will not, and will not
permit Subco to, consummate the transactions contemplated by the STPI Agreement
unless the transactions contemplated herein are consummated concurrent
therewith.
6.12 401k Plan. After the Closing, Parent shall cause the
Surviving Corporation to use its best efforts in cooperating in the winding up
of the 401k Plan.
SECTION 7. CONDITIONS PRECEDENT TO PARENT'S OBLIGATION TO CLOSE
Parent's obligation to consummate the Merger and to take the other
actions required to be taken by Parent at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Parent, in whole or in part):
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7.1 Accuracy of Representations. All of Shareholder's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing Date as if made
on the Closing Date, without giving effect to any supplements to the initial
disclosure of the Shareholder's Disclosure Letter.
7.2 Shareholder's Performance.
(a) All of the covenants and obligations that Shareholder
is required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
duly performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to
Section 2.8 must have been delivered, and each of the other covenants
and obligations in Sections 5 must have been performed and complied
with in all material respects.
7.3 Consents. Each of the Consents identified in Part 3.2 of the
Shareholder's Disclosure Letter and Part 4.2 of the Parent's Disclosure Letter
must have been obtained and must be in full force and effect, except where the
failure to obtain each consent would not have a materially adverse effect on
the business, financial condition or result of operation of the Company, or the
ability of the parties to consummate the Contemplated Transactions without the
payment of additional consideration.
7.4 Additional Documents. Each of the following documents must
have been delivered to Parent:
(a) an opinion of Xxx & Xxxxx Incorporated, dated the
Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Parent may reasonably request
for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
Shareholder's representations and warranties, (iii) evidencing the
performance by Shareholder of, or the compliance by Shareholder
with, any covenant or obligation required to be performed or complied
with by such Shareholder, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating
the consummation or performance of any of the Contemplated
Transactions.
7.5 No Proceedings. Since the date of this Agreement, there must
not have been commenced or Threatened against Parent, or against any Person
affiliated with Parent, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with,
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any of the Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of the
Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds. There
must not have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Company, or (b) is
entitled to all or any portion of the Acquisition Price.
7.7 No Prohibition. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause Parent or any Person
affiliated with Parent to suffer any material adverse consequence under any
applicable Legal Requirement or Order.
7.8 Financing. Parent shall have obtained financing satisfactory
to it adequate to consummate the Merger.
7.9 Tax Certification. Parent shall have received a certification
signed by the Shareholder to the effect that Shareholder is not a "foreign
person" as defined in Section 1445 of the IRC.
7.10 Excluded Assets. The Company shall have sold or distributed,
and Shareholder shall have purchased or received, all of the Excluded Assets
and, in connection therewith, Shareholder shall have assumed all liabilities
related to the Excluded Assets.
7.11 Assignment of the Real Estate Contract. The Company shall
have assigned to Shareholder, or his assigns, the Real Estate Contract as
contemplated in Section 5.4 hereof.
7.12 Employee Benefit Plan. The Boards of Directors of the
Company and each of its affiliates participating in the 401k Plan shall have
adopted a resolution terminating such plan.
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDER'S
OBLIGATION TO CLOSE
Shareholder's obligation to consummate the Merger and to take the
other actions required to be taken by Shareholder at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Shareholder, in whole or in part):
8.1 Accuracy of Representations. All of Parent's representations
and warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
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8.2 Parent's Performance.
(a) All of the covenants and obligations that Parent is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to
Section 2.8 must have been delivered and Parent must have delivered the
Cash Amount and the Stock Amount required to be made by Parent
pursuant to Sections 2.8(b) and 2.8(d).
(c) Parent must have consummated the acquisition of
Southwest Texas Packaged Ice, Inc. prior to or on the Effective Date
pursuant to the STPI Agreement.
8.3 Consents. Each of the Consents identified in Part 3.2 of the
Shareholder's Disclosure Letter and Part 4.2 of the Parent's Disclosure Letter
must have been obtained and must be in full force and effect.
8.4 Additional Documents. Parent must have caused the following
documents to be delivered to Shareholder:
(a) an opinion of Akin, Gump, Strauss, Xxxxx & Xxxx,
L.L.P., dated the Closing Date in form and substance satisfactory to
Shareholder, in substantially the form of Exhibit 8.4 (a); and
(b) such other documents as Shareholder may reasonably
request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of
any representation or warranty of Parent, (iii) evidencing the
performance by Parent of, or the compliance by Parent with, any
covenant or obligation required to be performed or complied with by
Parent, (ii) evidencing the satisfaction of any condition referred to
in this Section 8, or (v) otherwise facilitating the consummation of
any of the Contemplated Transactions.
8.5 No Proceedings. Since the date of this Agreement, there must
not have been commenced or Threatened against Shareholder, Company, or against
any Person affiliated with Company, any Proceeding (a) involving any challenge
to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the Contemplated
Transactions.
8.6 Release of Personal Guarantees. The current and long-term
indebtedness, the notes payable and the current long-term capitalized leases,
with respect to which the Shareholder has personally guaranteed payment or
performance, will either be paid off concurrently with the Closing
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by the Company (or Parent on behalf of the Company), or Parent will take such
actions necessary to release Shareholder from such guarantees at or prior to
the Closing.
8.7 Employment of Shareholder. Shareholder shall be employed by
Parent as its vice president and chief operating officer on mutually agreeable
terms.
8.8 No Prohibition. Neither the consummation nor the performance
of any of the contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or materially conflict
with, or result in a material violation of, or cause Shareholder or any Person
affiliated with Shareholder to suffer any material adverse consequence under,
any applicable Legal Requirement or Order.
8.9 Assignment of the Real Estate Contract. The Company shall
have assigned to Shareholder, or his assigns, the Real Estate Contract as
contemplated in Section 5.4 hereof.
8.10 Release of Obligations related to the Transfer of MIECO. The
Company shall have been released from any and all obligations relating to any
debt assumed by Southwest Texas Equipment Distributors, Inc. in connection
with the transfer of MIECO.
8.11 STPI Merger. The transactions contemplated by the STPI
Agreement shall be consummated concurrently with the Closing.
8.12 Registration Rights. Parent and Shareholder shall have
entered into a Registration Rights Agreement in a form reasonably satisfactory
to Shareholder, consistent with Section 6.10.
8.13 Employee Benefit Plan. The Boards of Directors of the Company
and each of its affiliates participating in the 401k Plan shall have authorized
the termination of such plan.
8.14 Southwestern Ice, Inc. The transactions contemplated by
that Agreement and Plan of Merger, dated March 25, 1997 by and among Parent,
Southwestern Ice, Inc. ("SWI"), Packaged Ice Southwestern, Inc. and the
shareholders of SWI must have been consummated prior to or concurrent with the
Closing.
SECTION 9. TERMINATION
9.1 Termination Events. This Agreement may, by notice given prior
to or at the Closing, be terminated:
(a) by either Parent or Shareholder if a material Breach
of any provision of this Agreement has been committed by the other
party and such Breach has not been waived;
(b) [Section intentionally omitted.]
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(c) by mutual consent of Parent and Shareholder; or
(d) by either Parent or Shareholder if the Closing has
not occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before Ending Date, or such later date as the
parties may agree upon;
(e) "Ending Date" shall mean April 15, 1997, or, if
Parent has obtained by April 15, 1997 assurance(s) of sufficient
financing to complete the Merger, but such financing has been delayed
for any reason, then April 30, 1997.
9.2 Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 9.2(b), 9.2(c) and Section 11 will survive.
(b) Without limiting the applicability of Section 11.1, if Parent
and Newco fail to consummate the transactions contemplated on its part to occur
on the Closing Date, in circumstances whereby all conditions of the Closing set
forth in Section 7 have been satisfied in all material respects or waived,
Shareholder and the Company shall be entitled to terminate this Agreement and
to be reimbursed by Parent and Newco for its out-of-pocket expenses incurred
directly in connection with the negotiation, preparation and performance of
this Agreement and a management fee equal to $12,500 per month relating to the
services of Shareholder for the period from January 20, 1997 through the date
of termination of this Agreement.
(c) If Shareholder and the Company fail to consummate the
transactions contemplated on their part to occur on the Closing Date, in
circumstances whereby all conditions of the Closing set forth in Section 8 have
been satisfied in all material respects or waived, Parent's and Newco's sole
remedy shall be to (i) to require Shareholder and the Company to consummate and
specifically perform the Contemplated Transactions, in accordance with the
terms of this Agreement, and to obtain from Shareholder any attorney fees
incurred in connection with procuring such specific performance or (ii)
terminate this Agreement and obtain reimbursement of its out-of-pocket expenses
incurred directly in connection with the negotiation, preparation and
performance of this Agreement.
SECTION 10. INDEMNIFICATION; REMEDIES
10.1 Survival; Right to Indemnification; Knowledge. Subject to
Section 10.5 hereof, all representations, warranties, covenants, and obligations
in this Agreement, the Shareholder's Disclosure Letter, the Parent's Disclosure
Letter, the certificates delivered pursuant to Section
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2.8(a)(iii) and 2.8(b)(iv), and any other certificate or document delivered
pursuant to this Agreement will survive the Closing. Shareholder shall not be
liable under this Section 10 for Damages (as hereinafter defined) resulting from
any event relating to a Breach of any representation, warranty, covenant or
agreement made in this Agreement if either Parent or Newco had actual knowledge
of such Breach on or before the Closing Date.
10.2 Indemnification and Payment of Damages by Shareholder.
Subject to the limitations and terms set forth in Section 9.2 and this Section
10, Shareholder will indemnify and hold harmless Parent, Newco and the
Surviving Corporation, and their respective Representatives, shareholders,
controlling persons, and affiliates for, and will pay to such Persons the
amount of, any loss, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
the Company or Shareholder in this Agreement, Shareholder's Disclosure
Letter, or any other certificate or document delivered by Shareholder
pursuant to this Agreement as if such representation or warranty were
made on and as of the Closing Date, other than any such Breach that is
disclosed in the Shareholder's Disclosure Letter as a supplement to
the initial disclosure in the Shareholder's Disclosure Letter as of
the time of the execution of this Agreement, or any Breach by
Shareholder of subsections (e) through (l) of Section 3.11, with
respect to which the Parent's sole remedy shall be subsection (e) of
this Section 10.2.
(b) any Breach by Shareholder of any covenant or
obligation of such Shareholder in this Agreement;
(c) any product shipped or manufactured by, or any
services provided by, the Company prior to the Closing Date;
(d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with
Shareholder or the Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions; or
(e) any loss, liability or expense attributable to any
tax payable by Parent or the Surviving Corporation resulting from the
Merger not being treated as a tax free merger under the IRC as a
result of (i) any negligent act or omission of Shareholder or (ii) any
Breach of a representation, warranty or covenant of Shareholder
contained herein.
Notwithstanding any of the foregoing, in the event that the Contemplated
Transactions are not consummated, neither Parent nor Newco shall be entitled to
indemnification for Breaches of
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covenants and agreements contained herein to be performed at or prior to the
Closing or the Breach of any representation or warranty contained herein.
10.3 Indemnification and Payment of Damages by
Shareholder--Environmental Matters. In addition to the provisions of Section
10.2, Shareholder will indemnify and hold harmless Parent, and Newco, and
their respective Representatives, shareholders, controlling persons and
affiliates for, and will pay to Parent, Newco, the Surviving Corporation and
the other Indemnified Persons the amount of, any Damages (including costs of
cleanup, containment, or other remediation to the extent required to comply
with any Environmental Laws) arising, directly or indirectly, from or in
connection with:
(a) any Environmental, Health, and Safety Liabilities
arising out of or relating to: (i) (A) the ownership, operation, or
condition at any time on or prior to the Closing Date of the
Facilities or any other properties and assets (whether real, personal,
or mixed and whether tangible or intangible) in which Shareholder or
the Company has or had an interest, or (B) any Hazardous Materials
that were present on the Facilities or such other properties and
assets at any time on or prior to the Closing Date as a result of the
introduction of such Hazardous Materials by the Company or its
Representatives or as a result of the Company's or any
successor-in-interest's operations; or (ii) (A) any Hazardous
Materials, wherever located, that were, or were allegedly, generated,
transported, stored, treated, Released, or otherwise handled by
Shareholder or the Company or by any other Person for whose conduct
the Company is or may be held responsible at any time on or prior to
the Closing Date, or (B) any Hazardous Activities that were, or were
allegedly, conducted by Shareholder or the Company or by any other
Person for whose conduct the Company is or may be held responsible; or
(b) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was
incurred, or manifested itself), personal injury, property damage
(including trespass, nuisance, wrongful eviction, and deprivation of
the use of real property), or other damage of or to any Person,
including any employee or former employee of the Company or any other
Person for whose conduct the Company is or may be held responsible, in
any way arising from or allegedly arising from any Hazardous Activity
conducted or allegedly conducted by the Company with respect to the
Facilities or the operation of the Company prior to the Closing Date,
or from Hazardous Material that was (i) introduced, generated, stored,
treated, related or disposed of by the Company on or before the
Closing Date on or at the Facilities (or present on any other
property, if such Hazardous Material emanated from any of the
Facilities and was present on any of the Facilities on or prior to the
Closing Date) or (ii) Released or allegedly Released by the Company or
any other Person for whose conduct the Company is or may be held
responsible, at any time on or prior to the Closing Date.
Shareholder will be entitled to control any cleanup, any related
Proceeding, and any other Proceeding with respect to which indemnity may be
sought under this Section 10.3 or with respect
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to Section 3.19. The procedure described in Section 10.9 will apply to any claim
relating to a matter covered by this Section 10.3. Notwithstanding any
provision in this Agreement to the contrary, in no event will Parent, Newco, or
any of their respective Representatives, shareholders, controlling persons, and
affiliates be entitled to indemnification under this Section 10.3 or with
respect to the representations and warranties set forth in Section 3.19 to the
extent to which any liability arising from such indemnification claim are
attributable to activities or conduct of the Company (or the Surviving
Corporation), Parent, Newco, or any of their respective Representatives,
shareholders, controlling persons, agents and affiliates from and after the
Closing Date.
10.4 Indemnification and Payment of Damages by Parent. Parent and
Newco, jointly and severally, will indemnify and hold harmless Shareholder, and
will pay to Shareholder the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any Breach of any representation or
warranty made by Parent or Newco in this Agreement or in any certificate
delivered by Parent or Newco pursuant to this Agreement, (b) any Breach by
Parent or Newco of any covenant or obligation of Parent or Newco in this
Agreement, (c) any violation by Parent or Newco of any state or federal
securities law in connection with the issuance of the Parent Stock, or (d) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such Person with Parent (or any Person acting on its behalf) in connection with
any of the Contemplated Transactions, (e) any loss, liability or expense
attributable to any Tax payable by Shareholder resulting from the Merger not
being treated as a tax-free merger under the IRC as a result of (i) any
negligent act or omission of Parent, Newco or the Surviving Corporation
(excluding any act or omission of the Company on or prior to the Closing Date
or any act or omission of the Shareholder at any time) or (ii) any Breach of
representation, warranty or covenant of Parent or Newco contained herein, or
(f) any loss, liability or expense arising out of or relating to any claims by
Southco, Inc. or Xxxxx Xxxx against the Company or Shareholder other than with
respect to the payment or performance by the Company prior to the Closing Date
under the Promissory Note dated November 21, 1994, payable by Southwest Texas
Packaged Ice, Inc. in the original principal amount of $105,619.56.
10.5 Time Limitations. If the Closing occurs, Shareholder will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with on or prior to the Closing Date or representations made again as
of the Closing Date, other than those in Sections 3.11, 3.13 and 3.19, unless
on or before two years from the Closing Date, Parent notifies Shareholder of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Parent. A claim with respect to Section 3.19 or Section
10.3 must be made prior to the fifth anniversary hereof, and shall thereupon
terminate. A claim with respect to Section 3.11 or Section 3.13, or a claim
for indemnification or reimbursement based upon any covenant or obligation to
be performed and complied with after the Closing Date, including without
limitation, any indemnification claims made under Section 10.2(d) or Section
10.2(e), must be made prior to the expiration of the applicable statutory
period of limitations, including any extensions to such period, and shall
thereupon terminate. If the Closing occurs, Parent will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied
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with prior to the Closing Date other than those set forth in Section 4.6,
unless on or before two years from the Closing Date, Shareholder notifies
Parent of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Shareholder; a claim with respect to Section
4.6 or a claim for indemnification or reimbursement based upon any covenant or
obligation to be performed and complied with after the Closing Date must be
made prior to the expiration of the applicable statutory period of limitations,
including any extensions to such period, and shall thereupon terminate.
10.6 Limitations on Amount -- Shareholder.
(a) Shareholder will have no liability (for
indemnification or otherwise) with respect to the matters described in
Section 10.2 and 10.3 until the total of all Damages with respect to
such matters and the matters described in Section 10.2 and 10.3 of the
Agreement and Plan of Merger, of even date herewith, among Parent,
Packaged Ice STPI, Inc., STPI and the shareholders of STPI (the "STPI
Agreement") exceeds $75,000 in the aggregate, and then only for the
amount by which such Damages exceed $75,000 (the "Basket"); provided,
however, the Basket shall not apply to any claim for indemnification
arising out of a Breach of any representations, warranties or
covenants contained in Sections 3.3, 3.6, 3.11, 5.10, 5.11 or 5.12 or
any provisions herein to the extent of their relation to any of the
Excluded Assets, including, without limitation, Shareholder's or
STED's, as the case may be, obligation to assume all liabilities
related to the Excluded Assets. The Shareholder's maximum liability
with respect to the matters described in Section 10.2 and Section 10.2
of the STPI Agreement will be limited to $2,000,000 in the aggregate
(the "Cap"); provided, however, this Cap will not apply to a claim for
indemnification arising out of a Breach of any of the Company's
representations, warranties or covenants contained in Sections 3.1(c),
3.3, 3.6, 3.11, 3.19, 5.10, 5.11 or 5.12, the indemnification
obligation of Section 10.2(e), or any provisions herein to the extent
of their relation to any of the Excluded Assets, including, without
limitation, Shareholder's or STED's, as the case may be, obligation to
assume all liabilities related to the Excluded Assets. Notwithstanding
the foregoing, the maximum liability with respect to matters described
in Sections 10.2 and 10.3, in this Agreement and the STPI Agreement
shall be equal to the sum of the Acquisition Price of this Agreement
and the Acquisition Price of the STPI Agreement. In addition, this
Section 10.6 will not apply to any claim for indemnification based upon
the fraud of the Shareholder.
(b) In case any event shall occur which would otherwise
entitle any party to assert a claim for indemnification hereunder, no
claim, loss, liability, cost or expense shall be deemed to have been
sustained by such party to the extent of any proceeds received by such
party from any insurance policies with respect thereto.
10.7 [Section omitted intentionally.]
10.8 Escrow. Upon notice to Shareholder, Parent may give notice of
a Claim in such amount under the Escrow Agreement. Neither the exercise of nor
the failure to give a notice of a
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Claim under the Escrow Agreement will constitute an election of remedies or
limit Parent in any manner in the enforcement of any other remedies that may be
available to it.
10.9 Sole Remedy. The sole and exclusive remedy of the parties
hereunder for any and all claims under this Agreement discovered after the
Closing shall be the indemnities set forth in this Section 10, as limited by
the provisions set forth elsewhere in this Section 10. Notwithstanding any
provision in this Agreement to the contrary, no party shall be able to avoid
the limitations expressly set forth in this Section 10 or Section 9.2 by
electing to pursue any other remedy.
10.10 Procedure for Indemnification -- Third Party Claims.
(a) If a Person receives notice of the commencement any
Proceeding against it which might give any party indemnification
rights under this Section 10, then promptly thereafter such Person
will, if a claim is to thus be made against such party, give notice to
such party of the commencement of such Proceeding, but the failure to
notify such party will not relieve this Person of any liability that
it may have to such party, except to the extent this party is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.10(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would result in a
conflict of interests preventing such joint representation, or (ii)
the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding
and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as
long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding,
in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable
costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation
of Legal Requirements or any material violation of the rights of any
Person and no material effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and
(ii) the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent.
If the indemnifying party does not undertake to defend such matter to
which the indemnified party is entitled to indemnification hereunder
within 10 days after receiving notice of the Proceeding's
commencement, the indemnified party may
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undertake such defense through counsel of its choice, at the cost and
expense of the indemnifying party, and the indemnified party may
settle such matter, and the indemnifying party shall reimburse the
indemnified party for the amount paid in such settlement and any other
liabilities, costs or expenses incurred by the indemnified party in
connection therewith, provided, however, that under no circumstances
shall the indemnified party settle any third party claim without the
written consent of the indemnifying party, which consent shall not be
unreasonably withheld. The indemnified party shall make available to
the indemnifying party all records, other materials and personnel
reasonably required by it for its use in contesting any third party
claims and shall cooperate fully with the indemnifying party in the
defense of all such claims.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability
that a Proceeding may materially adversely affect it or its affiliates
other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified
party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement effected without
its consent (which may not be unreasonably withheld).
10.11 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
10.12 Payment in Cash or Parent Stock. Payment of indemnification
claims under this Section 10 may be paid in either cash or Parent Stock, in the
sole discretion of Shareholder. The shares of Parent Stock shall be valued at
$10.00 per share for purposes of the payment of such indemnification claims.
10.13 Subrogation Rights. If Parent, Newco the Surviving
Corporation or any of their respective Representatives, shareholders,
controlling persons and affiliates makes a claim for indemnification with
respect to the environmental representations and warranties set forth in
Section 3.19 hereof or under Section 10.3 hereof (an "Environmental Claim"), (i)
Shareholder shall have rights of subrogation with respect to any lawful claim,
right or demand of Parent, Newco, the Company or the Surviving Corporation
against any third Person to the extent such claim, right or demand relates to
such Environmental Claim (the "Environmental Indemnification Rights"),
including any common law or statutory rights of contribution or indemnity,
contractual rights or indemnification rights from X.X. Xxxx or his affiliates
pursuant to that certain Contract for Purchase and Sale of Real Estate, dated
February 15, 1995, by and among J. Xxxxxxx Xxxx, J. Xxxxxxx Xxxx, Mission Ice
Services of Laredo, Inc. and the Company and that certain Lease Agreement dated
March 1, 1988 between X. X. Xxxx, Inc. and the Company and that certain Asset
Sale Agreement, dated February 8, 1988 by and between X.X. Xxxxx III, agent for
corporation to be formed as "Mission Party Ice, Inc." and X.X. Xxxx, Inc.,
formerly known as Mission Ice and Fuel Company, Inc.
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or any other agreement, (ii) Parent and Newco shall, and shall cause the
Surviving Corporation to, take all such actions necessary to assign any and all
of such Environmental Indemnification Rights to Shareholder and (iii) Parent
and Newco shall, and shall cause the Surviving Corporation to, preserve and
assert any such claims of contribution and indemnity and to provide reasonable
assistance to Shareholder in asserting such Environmental Indemnification
Rights against a Person.
SECTION 11. GENERAL PROVISIONS
11.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Shareholder will cause the
Company not to incur or pay any out-of-pocket expenses after December 31, 1996
in connection with this Agreement. In the event of termination of this
Agreement, the obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this Agreement by another
party. Notwithstanding any provision in this Agreement to the contrary, and in
addition to any other rights Shareholder may have hereunder, in the event that
the Contemplated Transactions are not consummated, for any reason other than
the Breach by Shareholder of any covenant, agreement, representation or
warranty, Parent shall pay to Shareholder and the Company an amount equal to
the sum of (i) all of the out-of-pocket costs, fees and expenses incurred by
Shareholder and the Company in connection with the preparation, execution and
performance of this Agreement and the Contemplated Transactions, including
without limitation all fees and expenses of agents, representatives, counsel
and accountants and (ii) $12,500 per month as a management fee relating to the
services of Shareholder for the period commencing on January 20, 1997 and
ending on the date of termination of this Agreement.
11.2 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Parent and the
Shareholder mutually agree. Unless consented to by Parent and the Shareholder
in advance or required by Legal Requirements, prior to the Closing Shareholder
shall, and shall cause the Company to, and Parent shall and shall cause Newco
to, keep this Agreement strictly confidential and may not make any disclosure
of this Agreement to any Person. Shareholder and Parent will consult with each
other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Parent will have the right to be present for any
such communication.
11.3 Confidentiality. Each of Parent, Newco and Shareholder will
maintain in confidence, and will cause their respective the directors,
officers, employees, agents, and advisors to maintain in confidence, and not
use to the detriment of another party or the Company any written, oral, or
other information obtained in confidence from another party or the Company in
connection with this Agreement or the Contemplated Transactions, unless (a)
such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (b) the use of such information is necessary or
appropriate
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in making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by or necessary or appropriate in connection with
legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return to the other party any documents, and all copies thereof, received or
obtained by it in connection with the Contemplated Transactions, without
retaining copies thereof, and will destroy all copies of analyses,
compilations, studies or other documents it has prepared containing or
reflecting any of such confidential information. Notwithstanding the return or
destruction of confidential information, each of the parties will continue to
be bound by the obligation of confidentiality and other obligations hereunder.
11.4 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the other
parties):
If to Parent or Newco: Packaged Ice, Inc.
Attention: President
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 Shareholder: X. X. Xxxxx III
000 Xxx Xxxx
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
If to the Company: Mission Party Ice, Inc.
Attention: President
X.X. Xxx 00000
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
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with a copy to: Xxx & Xxxxx Incorporated
Attention: Xxxxx X. Xxxxx, Xx., Esq.
000 X. Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
11.5 Arbitration. Except with respect to any claimed breach of the
provisions of Section 11.3 hereof, the parties agree that all disputes,
controversies or claims that may arise among them (including their agents and
employees), including without limitation any dispute, controversy or claim
arising out of or relating to this Agreement or any other agreement, or the
breach, termination or invalidity thereof, whether entered into or arising
prior, on or subsequent to the date hereof, shall be submitted to, and
determined by, binding arbitration. Such arbitration shall be conducted before
a single arbitrator pursuant to the Commercial Arbitration Rules then in effect
of the American Arbitration Association, except to the extent such rules are
inconsistent with this Section 11.5. Exclusive venue for such arbitration shall
be in San Antonio, Bexar County, Texas. The arbitrator shall apply the laws of
the State of Texas (without regard to conflict of law rules) in determining the
substance of the dispute, controversy or claim and shall decide the same in
accordance with applicable usages and terms of trade. Evidentiary questions
shall be governed by the Federal Rules of Evidence. The arbitrator's award
shall be in writing and shall set forth findings and conclusions upon which the
arbitrator based the award. The prevailing party in any such arbitration shall
be entitled to recover its reasonable attorneys' fees, costs and expenses
incurred in connection with the arbitration. Any award pursuant to such
arbitration shall be final and binding upon the parties and judgment on the
award may be entered in any federal or state court sitting or located in Bexar
County, Texas, or in any other court having jurisdiction. The provisions of
this Section 11.5 shall survive the termination of this Agreement.
Notwithstanding the foregoing, this Section 11.5 shall not prevent any party
from seeking preliminary injunctive relief from a court of competent
jurisdiction, provided, however, such action shall not constitute a waiver of
the provisions of this Section 11.5 with respect to any other dispute, as this
Section 11.5 shall continue to govern any and every other such dispute between
the parties, including, without limitation, the right of a party to any other
damages, other injunctive relief and any other remedy, at law or in equity.
11.6 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7 Waiver. Except as expressly provided herein, the rights and
remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the
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documents referred to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
11.8 Entire Agreement and Modification. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Parent and Shareholder dated November
22, 1996) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
11.9 Disclosure Letters.
(a) The disclosures in the Shareholder's Disclosure
Letter and the Parent's Disclosure Letter must relate only to the
representations and warranties in the Section of the Agreement to which
they expressly relate and not to any other representation or warranty
in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the
Shareholder's Disclosure Letter and the Parent's Disclosure Letter
(other than an exception expressly set forth as such in such
disclosure documents with respect to a specifically identified
representation or warranty), the statements in the body of this
Agreement will control.
11.10 Assignments, Successors, and No Third-Party Rights. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that Parent may assign any of its rights
under this Agreement to any Subsidiary of Parent. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give
any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.11 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or
degree will remain in full force and effect to the extent not held invalid or
unenforceable.
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11.12 Section Headings, Construction. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
11.13 Time of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
11.14 Governing Law. This Agreement will be governed by the laws of
the State of Texas without regard to conflicts of laws principles.
11.15 Enforcement; Venue; Service of Process. In the event either
party shall seek enforcement of any covenant, warranty or other term or
provision of this Agreement or seek to recover damages fore the breach thereof,
the party which prevails in such proceedings shall be entitled to recover
reasonable attorneys' fees and expenses actually incurred by it in connection
therewith. Subject to Section 11.5, and without waiving the same, the parties
hereto agree that this Agreement is performable in Bexar County, Texas and that
the sole and exclusive venue for any proceeding involving any claim arising
under or relating to this Agreement shall be in Bexar County, Texas. The
parties hereto agree that the service of process or any other papers upon them
or any of them by either of the methods specified in clauses (a) and (c) of,
and otherwise in accordance with, Section 11.4 hereto shall be deemed good,
proper, and effective service upon them.
11.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
(SIGNATURE PAGE FOLLOWS)
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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:
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Xxxxx X. Xxxxxx,
Chief Executive Officer
NEWCO: PACKAGED ICE MISSION, INC.
By:
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Xxxxx X. Xxxxxx,
Chief Executive Officer
THE COMPANY: MISSION PARTY ICE, INC.
By:
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X.X. Xxxxx III,
President
SHAREHOLDER: ---------------------------------------
X.X. Xxxxx III
