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EXHIBIT 10.11
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
March 24, 1998, by and among Packaged Ice Southeast, Inc., a Texas corporation
("Buyer"), and Xxxxxx Xxxxxxxxxx and Xxxxxx Xxxxxxxxxx (individually
"Shareholder" and collectively "Shareholders").
PRELIMINARY STATEMENTS
Shareholders own all of the outstanding shares of capital stock of
Southern Bottled Water Company, Inc., an Alabama corporation (hereinafter, the
"Company"), such shares hereinafter referred to as the "Stock".
The Company is engaged in the manufacture and sale of bottled water
products (such business being herein referred to as the "Business").
Shareholders are desirous of selling to Buyer, and Buyer is desirous
of purchasing from Shareholders, all of the Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties hereafter set forth, the
parties hereby agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible. The Assets shall include, but shall not be
limited to, those items specifically described in Exhibit A attached hereto.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business which are used in the direct manufacturing,
distribution and sale of bottled water products which equipment will be
conveyed to Buyer at the Closing, free and clear of the Capital Leases, liens,
claims and any other Encumbrances whatsoever. The property comprising the
Capital Leases is described in Exhibit B attached hereto.
"Closing" shall mean the consummation of this Agreement.
"Closing Date" shall mean the date on which this Agreement is
consummated.
"Company Plans" shall have the meaning set forth in Section 3.17 of
this Agreement.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
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"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage, lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, adverse claim, deed of
trust, or restriction on transfer of any nature whatsoever other than those
held by Buyer or granted by the Company at Buyer's request.
"Environmental Action" shall have the meaning set forth in Section
3.10 of this Agreement.
"Escrow Agreement" shall have the meaning set forth in Section 2.2(b)
of this Agreement.
"Escrow Agent" shall mean Regions Bank, Anniston, Alabama.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"Excluded Assets" shall mean those assets of the Company that will be
distributed to the Shareholders prior to Closing and shall not belong to the
Company on the Closing Date. The Excluded Assets will be described in Schedule
3.13(a) attached hereto.
"Financial Statements" shall have the meaning set forth in Section
3.3 of this Agreement.
"Hazardous Materials" shall have the meaning set forth in Section 3.10
of this Agreement.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
of this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Leases" shall have the meaning set forth in Section 3.12 of this
Agreement.
"Liabilities" shall have the meaning set forth in Section 2.2(c) of
this Agreement.
"Noncompetition Agreement" shall have the meaning set forth in Section
5.9 of this Agreement.
"Owned Real Property" shall have the meaning set forth in Section 5.10
of this Agreement.
"Personal Property" shall have the meaning set forth in Section 3.13
of this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.2 of
this Agreement.
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"Real Property" shall have the meaning as set forth in Section 3.12
of this Agreement.
"Shareholders' Disclosure Memorandum" shall mean that schedule
delivered to Buyer no later than two business days prior to the execution of
this Agreement and which is attached hereto and incorporated herein by
reference that lists and describes all disclosures by Shareholders concerning
the Assets and the Business which are the subject of this Agreement.
"Stock" shall mean all of the capital stock of the Company outstanding
on the Closing Date.
"Taxes" shall have the meaning as set forth in Section 11.1 hereof.
"Title Insurance Policy" shall have the meaning set forth in Section
5.10 of this Agreement.
"Trade Accounts Payable" shall mean those accounts payable accrued by
the Company that relate directly to the manufacture, storage, distribution and
sale of bottled water products.
"UCC Reports" shall have the meaning as set forth in Section 5.10 of
this Agreement.
"Undertaking Agreement" shall have the meaning set forth in Section
2.2(d) of this Agreement.
II. PURCHASE AND SALE
2.1. STOCK PURCHASE. At the Closing, subject to the terms, covenants
and conditions contained herein, Shareholders shall sell to Buyer, and Buyer
shall purchase from Shareholders, all of the Stock.
2.2 PURCHASE PRICE.
(a) The purchase price for the Stock shall be $8,365,091
(the "Purchase Price"), plus or minus the adjustments set forth hereinbelow,
and payable as follows:
(b) The Purchase Price, less the Escrow Amount
(hereinafter defined) less liabilities, and plus or minus the adjustments set
forth herein, shall be paid to Shareholders in cash, by wire transfer. $337,800
of the Purchase Price shall be placed in escrow (the "Escrow Amount") with the
Escrow Agent pursuant to the escrow agreement in the form attached hereto as
Exhibit 2.2(b) (the "Escrow Agreement").
(c) The Purchase Price shall be reduced by all of the
Company's debts, obligations and other liabilities including, without
limitation, all current liabilities (save and except the Trade Accounts Payable
and accrued expenses), all long term liabilities, all interest bearing debt,
Encumbrances, and Capital Leases (collectively, the "Liabilities") as of the
Closing Date. Prior to the Closing the parties will estimate the amount of
Liabilities and the cash payable to the Shareholders at the Closing will be
reduced by the amount of estimated Liabilities as of the Closing
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Date, and such amount will be paid directly the Company's creditors to
discharge Encumbrances and Capital Leases.
(d) The cash portion of the Purchase Price remaining
after the estimated Liabilities have been paid and discharged shall be paid
directly to the Shareholders on a pro rata basis based on their ownership of
the Stock in exchange for all of the Stock owned by the Shareholders. The
intent and effect of this Section 2.2(d) is to convey all of the outstanding
Stock of the Company to Buyer with there being no Liabilities (except Trade
Accounts Payables and accrued expenses) or other Encumbrances immediately after
Closing. Shareholders hereby agree that all Liabilities (except Trade Accounts
Payable and accrued expenses) which are not discharged at Closing shall be
assumed by the Shareholders through an Undertaking Agreement in the form
attached hereto as Exhibit 2.2(d).
21 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall also
be subject to the following adjustments:
(a) If, as of the Closing Date, the Company's current
assets, including cash, accounts receivable and inventory, are less than the
sum of its Trade Accounts Payable and accrued expenses, the Purchase Price
shall be reduced by an amount equal to the sum of its Trade Accounts Payable
and accrued expense minus current assets; if the Company's current assets
exceed the sum of its Trade Accounts Payable and accrued expenses, the Purchase
Price shall be increased by the amount equal to the current assets minus Trade
Accounts Payable and accrued expenses.
(b) On or before 30 days after the Closing Date,
Shareholders shall deliver to Buyer the balance sheet of the Company as of the
Closing Date compiled by a Certified Public Accountant (the "Closing Date
Balance Sheet) certified by Shareholders to be true and correct. The Closing
Date Balance Sheet shall (i) fairly present the financial position of the
Company as of the close of business on the Closing Date compiled in a
consistently applied manner, and (ii) include a detailed schedule of
Liabilities. The Closing Date Balance Sheet shall be used to calculate any
post closing adjustments to the Purchase Price as of the Closing Date and the
amount of any Liabilities to be paid by Shareholders, all in accordance with
the terms and conditions set forth in this Agreement.
(c) To the extent the Shareholders received at Closing an
amount of cash in excess of what they are entitled to hereunder, Shareholders
shall pay to Buyer such amount within five (5) days after such determination.
To the extent Shareholders are entitled to a greater amount of cash than they
received at Closing, then Buyer shall pay such amount within five (5) days
after such determination.
III. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders, jointly and severally, represent and warrant to Buyer as
follows:
3.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Alabama
and has all requisite power and
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authority to own, lease and operate the Business as presently conducted and to
enter into this Agreement and to perform its obligations hereunder and is duly
qualified to do business in any foreign jurisdiction in which it is currently
conducting business operations. All shares of issued and outstanding capital
stock of the Company are owned by Shareholders and are validly issued, fully
paid and nonassessable. Other than this Agreement, there is no subscription,
option, warrant, call, right, agreement or commitment relating to the issuance,
sale, delivery, repurchase or transfer by Shareholders or the Company
(including any right of conversion or exchange under any outstanding security
or other instrument) of any of its capital stock or other securities, and there
are no other outstanding shares of the Company's capital stock other than the
Stock. Shareholders own and have good and marketable title to the Stock, free
and clear of all Encumbrances. Upon the sale of the Stock to Buyer at Closing,
Shareholders will transfer to Buyer the entire legal and beneficial interest in
the Stock, free and clear of any Encumbrances. There are no voting trusts,
proxies or any other agreements or understandings with respect to the voting of
the Stock. All Shareholders are the valid legal owners of the shares of stock
in the Company that he or she purports to own, and no such shares are subject
to any external or ancillary agreement with any third party.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. This
Agreement has been duly executed and delivered by Shareholders and constitutes
the valid and binding obligation of Shareholders, enforceable against them in
accordance with its terms. The execution, delivery and performance of this
Agreement by Shareholders and the consummation of the transactions contemplated
hereby will not require the consent, approval or authorization of any third
party or governmental authority, and will not, with or without the giving of
notice, the passage of time, or both, violate, conflict with, result in a
default, breach or loss of rights under, or result in the creation of any lien,
claim or encumbrance pursuant to, any lien, encumbrance, instrument, agreement,
or understanding, or any law, regulation, rule, order, judgment or decree, to
which Shareholders are a party or by which they are bound or affected.
3.3 FINANCIAL STATEMENTS. Shareholders have previously caused to
be furnished to Buyer the Company's unaudited balance sheet as of December 31,
1997, and the related statements of income and statements of cash flow for the
fiscal year then ended, and the unaudited balance sheet of the Company as of
February 28, 1998 and the related unaudited statement of income and statement
of cash flow for the 2-month period ending February 28, 1998 (such balance
sheets and related statements are collectively referred to herein as the
"Financial Statements"). The Financial Statements taken as a whole present
fairly the financial position of the Company and the Business as of December
31, 1997 and February 28, 1998, respectively, and the results of operations for
such periods, compiled in a consistently applied manner.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by Shareholders in Section 3.3 of
Shareholders' Disclosure Memorandum and except for trade accounts payable
arising in the ordinary course of business and consistent with past practice
since the date of the Company's February 28, 1998 Balance Sheet, Shareholders
have operated the Company in the ordinary course and the Company has incurred
no liabilities which would be required by GAAP to be reflected on a balance
sheet of the Company as of the date hereof or disclosed in the notes thereto.
Since December 31, 1997 there has not been any adverse
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change in the Business, operations, properties, prospects, Assets or condition
of the Company, and no event has occurred or circumstance exists that may
result in such an adverse change.
3.4 SHAREHOLDER DEBT. There are no Encumbrances held by
Shareholders against the Company, the Assets, or the Business.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. All items
comprising the Assets have been continuously used by the Company in connection
with the Business and are now in serviceable condition, unless expressly
disclosed to the contrary by Shareholders in Section 3.5 of Shareholders'
Disclosure Memorandum.
3.6 GOOD TITLE. Except as set forth in Section 3.6 of
Shareholders' Disclosure Memorandum, the Company has good, legal and marketable
title to all of the Assets, free and clear of Encumbrances. Except as set
forth in Section 3.6 of Shareholders' Disclosure Memorandum, all items of
Personal Property or Real Property used in the Business are owned by the
Company.
3.7 LITIGATION. Except as set forth on Section 3.7 of
Shareholders' Disclosure Memorandum, there is no claim, action, suit,
proceeding or investigation (judicial, governmental or otherwise), nor any
order, decree or judgment in effect against or relating to Shareholders, the
Company or the Assets, or the transactions contemplated by this Agreement, and
to Shareholders' knowledge, none is threatened. Neither the Company nor any of
the Shareholders is aware of any event or circumstance that will, or is
reasonably likely to, give rise to or serve as a basis for the commencement of
any claim, action, suit or proceeding against the Company or the Assets.
3.8 COMPLIANCE WITH LAWS. Except as set forth in Section 3.8 of
Shareholders' Disclosure Memorandum, to the Shareholders' knowledge,
Shareholders and the Company have complied with all laws, rules, regulations,
ordinances, orders, judgments and decrees relating to the Company, the Stock
and the Assets. To the Shareholders' knowledge, the ownership and use of the
Assets and the conduct of the Business as it specifically relates to the Assets
does not conflict with the rights of any other person.
3.9 TAXES. Except as set forth in Section 3.9 of Shareholders'
Disclosure Memorandum, the Company has, within the time and manner prescribed
by law, filed all material returns, declarations, reports and statements
required to be filed by it (together, "Returns") in respect of any Taxes and
each such Return has been prepared in compliance in all material respects with
all applicable laws and regulations and is true and correct in all material
respects, and the Company has, within the time and in the manner prescribed by
applicable law, paid all Taxes that are shown to be due and payable with
respect to the periods covered thereby. The Company is an "S-corporation"
under the Code, has had in effect since its corporate inception, or such other
date as set forth in Section 3.9 of Shareholders' Disclosure Memorandum, a
valid, binding, timely filed election to be taxed pursuant to Subchapter S of
the Code, and is not liable for any federal income taxes as a "C-corporation"
under the Code.
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Except as set forth in Section 3.9 of Shareholders' Disclosure
Memorandum (i) the Company has not requested or been granted an extension of
the time for filing any Return which has not yet been filed; (ii) the Company
has not consented to extend to a date later than the date hereof the time in
which any Tax may be assessed or collected by any taxing authority; (iii) no
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Tax has been proposed, asserted or assessed by any
taxing authority against the Company; (iv) there is no action, suit, taxing
authority proceeding, or audit now in progress, pending or, to Shareholders'
knowledge, threatened against or with respect to the Company; (v) no claim has
been made by a taxing authority in a jurisdiction where the Company does not
file Tax Returns that the Company is subject to Taxes assessed by such
jurisdiction; (vi) there are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the Assets; (vii) the Company will not be
required to include any amount in taxable income or exclude any item of
deduction or loss from taxable income for any taxable period (or a portion
thereof) ending after the Closing Date as a result of any of the following: (A)
a change in method of accounting for a taxable period ending on or prior to the
Closing Date, (B) any "closing agreement," as described in Code Section 7121
(or any corresponding provision of state, local or foreign income Tax law)
entered into on or prior to the Closing Date, (C) any sale reported on the
installment method where such sale occurred on or prior to the Closing Date,
and (D) any prepaid amount received on or prior to the Closing Date; and (viii)
Company has no obligation or liability for the payment of Taxes of any other
person as a result from any expressed obligation to indemnify another person,
or as a result of such Company assuming or succeeding to the Tax liability of
any other person as successor, transferee or otherwise.
3.10 ENVIRONMENTAL. To the Shareholders' knowledge, the Company
has complied in all respects with all laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof) which have jurisdiction over the Company concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to occupational safety and health, good
manufacturing practices for food products, wetlands, emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes (collectively, "Hazardous
Materials") into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of Hazardous Materials,
and no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice ("Environmental Action") has been filed or commenced
against any of them alleging any failure so to comply, nor is the Company or
any Shareholder aware of any circumstance or conditions which may cause any
such Environmental Action to be filed or commenced against the Company.
Without limiting the generality of the preceding sentence, and to the
Shareholders' knowledge, the Company has obtained and been in compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under any applicable law or regulation, and
has complied, in all respects, with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in such laws.
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3.11 INSURANCE. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to
the Company's and have been sufficient to protect the Company, the Assets and
the Business in all respects. The Company has not been refused any insurance
with respect to its Assets or operations, and its coverage has not been
limited, terminated or canceled by any insurance carrier to which it has
applied for any such insurance or with which it has carried insurance, during
the last three (3) years. Section 3.11 of Shareholders' Disclosure Memorandum
lists all claims, which (including related claims which in the aggregate)
exceed $5,000 which have been made by the Company in the last three years under
any workers' compensation, general liability, property or other insurance
policy applicable to Shareholders, the Business or any of the Assets. Except
as set forth on Section 3.11 of Shareholders' Disclosure Memorandum, there are
no pending or threatened claims under any insurance policy. Such claim
information includes the following information with respect to each accident,
loss, or other event: (a) the identity of the claimant; (b) the nature of the
claim; (c) the date of the occurrence; (d) the status as of the report date and
(e) the amounts paid or expected to be paid or recovered.
3.12 REAL PROPERTY.
(a) Section 3.12 of Shareholders' Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel of real
property owned by, leased to or used by the Company (the "Real Property") and
(ii) a complete and accurate list of all current leases, lease amendments,
subleases, assignments, licenses and other agreements to which the Real
Property is subject (collectively, the "Leases"), together with the name and
address of each tenant, the commencement and expiration date of each lease, the
monthly rent and additional rent payable under each lease and the date to which
such rent has been paid, the amount of any deposits, security or otherwise made
under such lease and whether the consent of any party to the lease (or their
mortgage) is required to consummate the transactions contemplated hereby. The
Company has delivered to Buyer true and complete copies of the Leases.
(b) Except as disclosed in Section 3.12 of Shareholders'
Disclosure Memorandum, and to the Shareholders' knowledge, (i) each of the
Leases is in full force and effect and has not been amended or modified; (ii)
neither the Company, nor any other party thereto, is in default thereunder, nor
is there any event which with notice or lapse of time, or both, would
constitute a default thereunder; (iii) the Company has received no notice that
any party to any Lease intends to cancel, terminate or refuse to renew the same
or to exercise or decline to exercise any option or other right thereunder; and
(iv) no rental under the Leases has been paid more than one month in advance.
(c) To the Shareholders' knowledge, there are no pending
or threatened condemnation or similar proceedings or assessments affecting the
Real Property, lawsuits by adjoining landowners or others, nor is there any
belief by the Company or Shareholders that any such lawsuit is contemplated by
any person, nor is any condemnation or assessment contemplated by any
governmental entity. The Real Property does not encroach on any other
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parcels of real property. The improvements to the Real Property do not violate
any zoning, easement, setback or other restrictive covenants applicable to the
Real Property. Except as set forth in the title commitments provided to the
Real Property, since November 18, 1996, there have been no materially adverse
actions that have or will affect the title to the Real Property or the use of
the Real Property as contemplated by Buyer hereunder. The title commitments to
the Real Property that were provided to Buyer prior to the Closing are
materially true and correct as of the Closing Date.
(d) At the time of Closing the Real Property will not in
whole or in part be subject to any lease, other than the Leases described
above.
(e) The Company has not entered, and will not enter, into
any written contracts, agreements, or listings, or be a party to any oral
understandings or agreements affecting the Real Property or the Leases.
(f) To the Shareholders' knowledge, the Company has
complied with all applicable laws, ordinances, regulations, statutes and rules
relating to the Real Property or any part thereof.
(g) Except as disclosed in Section 3.12 of the
Shareholders' Disclosure Memorandum, and to the Shareholders' knowledge, there
has been no storage, production, transportation, disposal, treatment or release
of any Hazardous Materials on or about the Real Property, and the Company has
complied with all applicable local, state or federal environmental laws and
regulations. There are no xxxxx, underground storage tanks, cesspools, covered
surface impoundments or other sources of environmental pollutants or
contaminants on the Real Property.
Prior to the Company's acquisition of the Real Property, to
the Shareholders' knowledge, there was no storage, production, transportation,
disposal, treatment or release of any Hazardous Materials on or about the Real
Property. To the Shareholders' knowledge, there have been no Hazardous
Materials on or in the neighboring properties which, through soil or
groundwater migration, could have moved to the Real Property.
(h) The Company shall not and the Shareholders shall
cause the Company to not change or make alterations to the Real Property
between the date of this Agreement and the Closing. Such prohibited changes
shall include, but shall not be limited to, removal or relocation of site
improvements, buildings and landscaping.
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(i) The zoning of each parcel of the Real Property
permits the improvements located thereon and the continuation of business
presently being conducted thereon. The Real Property is served by utilities
and services necessary for the normal and continued operation of the business
presently conducted thereon. None of the real property constituting the Real
Property is subject to any zoning or historical preservation rulings or
ordinances that will prohibit the Company from continuing its intended use as a
manufacturing and/or distribution facility for bottled water products.
(j) The Real Property and the real property owned by the
Anniston Ice & Coal Company, Inc., includes all of the real property utilized
by the Company in the Business. At the Closing, the Real Property shall be
free and clear of all liens of other Encumbrances and will enable Buyer to
continue conducting the same Business on the Real Property as was conducted
prior to the Closing Date.
3.13 PERSONAL PROPERTY.
(a) To the Shareholders' knowledge, Section 3.13 of
Shareholders' Disclosure Memorandum is a complete and accurate schedule as of
February 28, 1998 describing, and specifying the location of, all inventory,
motor vehicles, machinery, fixtures, equipment, furniture, supplies, tools,
intangible assets and all other tangible or intangible personal property owned
by, in the possession of, or used by the Company (hereinafter the "Personal
Property"). The Personal Property shall not include any of the Excluded Assets
which are more fully described in Schedule 3.13(a) which is attached hereto and
incorporated herein by reference.
(b) Each lease, license, rental agreement, contract of
sale or other agreement applicable to any Personal Property is listed in
Section 3.13 of Shareholders' Disclosure Memorandum and is in full force and
effect; neither Shareholders nor any other party thereto is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. The Company has received no notice that
any party to any such lease, license, rental agreement, contract of sale or
other agreement intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. No
Personal Property is subject to any lease, license, contract of sale or other
agreement that is adverse to the Business, properties or financial condition of
the Company.
(c) The inventory of the Company as reflected by the
Financial Statements and as described in Section 3.13 of Shareholders'
Disclosure Memorandum consisted and consists of items substantially all of
which were and will be of the usual quality and quantity necessary for the
normal conduct of the Company and reasonably expected to be usable or salable
within a reasonable period of time in the ordinary course of business of the
Company, except items of inventory which have been written down to realizable
market value or written off completely, and damaged or broken items in an
amount which does not affect the value of the inventory as reflected on the
Financial Statements. With respect to inventory in the hands of suppliers for
which the Company is committed as of the date hereof, such inventory is
reasonably expected to be usable in the ordinary course of business of the
Shareholders as presently being conducted.
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3.14 CONTRACTS. Section 3.14 of Shareholders' Disclosure
Memorandum contains a complete and accurate list of all presently effective
contracts, leases and other agreements ("Contracts") to which the Company is a
party and which affect or are applicable to the Assets or the Company, true and
complete copies (or summaries in the case of oral contracts) of each of which
have been delivered to Buyer by Shareholders, including, without limitation,
any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other
instrument relating to the borrowing of money, or the guaranty of any such
obligation for the borrowing of money;
(c) joint venture or other agreement with any person,
firm, corporation or unincorporated association doing business either within or
outside the United States relating to sharing of present or future commissions,
fees or other income or profits;
(d) service agreement, lease, license, rental agreement,
contract of sale or other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract;
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts and/or
rebates);
(j) collective bargaining, employment or consulting
agreement;
(k) supply agreement or requirements contract; and
(l) construction contract, contract to purchase capital
equipment, or otherwise make capital expenditures.
Except as disclosed in Section 3.14 of Shareholders' Disclosure
Memorandum, each of the Contracts is in full force and effect and has not been
amended or modified and neither the Company, nor any other party thereto, is in
default thereunder, nor is there any event which with notice or lapse of time,
or both, would constitute a default thereunder. The Company has received no
notice that any party intends to cancel, terminate or refuse to renew any such
Contract or to exercise or decline to exercise any option or other right
thereunder. There are no
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contracts to which the Company is a party that cannot be terminated by the
Company without a penalty being assessed against the Company.
3.15 LABOR MATTERS. To the Shareholders' knowledge, there are no
controversies pending or threatened between the Company and any employees of
the Company. The Company has complied with all laws relating to the employment
of labor, including any provisions thereof relating to wages, hours, collective
bargaining, immigration, safety and the payment of withholding and social
security and similar taxes, and the Company has no liability for any arrears of
wages or taxes or penalties for failure to comply with any of the foregoing.
None of the Company's employees is a member of a labor union, and neither the
Company nor any of the Shareholders is aware of any effort (past or current) by
any labor union to organize the Company's employees.
3.16 ABSENCE OF SENSITIVE PAYMENTS. The Company has not made or
maintained (i) any contributions, payments or gifts of its funds or property to
any official, employee or agent of any vendor, customer or supplier, or of any
governmental entity, where either the payment or the purpose of such
contribution, payment or gift was or is illegal under the laws of the United
States or any state thereof, or any other jurisdiction (foreign or domestic);
or (ii) any contribution, or reimbursement of any political gift or
contribution made by any other person, to candidates for public office, whether
federal, state, local or foreign, where such contributions by the Company or
Shareholders were or would be a violation of applicable law.
3.17 EMPLOYEE BENEFITS. To the knowledge of Shareholders' all
employee benefit plans including, but not limited to health benefit plans,
(whether or not covered by ERISA), deferred compensation or executive
compensation plans for employees, directors or independent contractors, and all
other employee or independent contractor arrangements or programs that are
maintained or contributed to by the Company (collectively, the "Company Plans")
have been administered and operated in all material respects in compliance with
their terms, ERISA, if applicable, the Code and other applicable law. All
Company Plans that are intended to be qualified under Section 401(a) of the
Code are so qualified and a current favorable IRS determination letter exists
for each such plan and covers the amendments required by the Tax Reform Act of
1986. All funded Company Plans are fully funded according to their terms and
applicable law. No prohibited transaction or breach of fiduciary duty under
ERISA has been committed by any fiduciary, disqualified person or party in
interest of any Company Plan. To the knowledge of Shareholders' the Company
has no liability, contingent or otherwise, under Title IV of ERISA or any other
applicable law. All Company Plans are set forth in Section 3.17 of
Shareholders Disclosure Memorandum which is attached hereto and incorporated
herein by reference. All Company Plans will be terminated as of the Closing
Date and the liability of all such Company Plans, including, but not limited to
any obligations to fund such plans, is and will remain the sole liability of
the Shareholders.
3.18 CAPITAL IMPROVEMENTS. Section 3.18 of Shareholders'
Disclosure Memorandum describes all of the capital improvements or purchases or
other capital expenditures (as determined in accordance with GAAP) which the
Company has committed to or contracted for
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which have not been completed prior to the date hereof and the cost and expense
reasonably estimated to complete such work and purchases.
3.19 NO UNDISCLOSED LIABILITIES. To the knowledge of Shareholders,
except for the obligations and liabilities arising under the contracts
disclosed in Section 3.14 of the Shareholders' Disclosure Memorandum, the
Company has no liabilities or obligations of the type required to be reflected
as liabilities on a balance sheet prepared in accordance with GAAP, except for
liabilities or obligations reflected or reserved against in the Financial
Statements and current liabilities incurred in the ordinary course of business
since the respective dates thereof.
3.20 ACCOUNTS RECEIVABLE. Except as otherwise indicated in
Section 3.20 of the Shareholder's Disclosure Memorandum, all accounts
receivable of the Company have arisen out of bona fide transactions in the
ordinary course of business, and each such account receivable constitutes a
valid and binding obligation of the obligor, maker, co-maker, guarantor,
endorser or debtor thereof or thereunder and is collectible in full within 60
days.
3.21 COMPLETE AND ACCURATE DISCLOSURE. No representation or
warranty made to Buyer in this Agreement or in connection with this transaction
contains or will contain an untrue statement of a fact, or omits or will omit
to state a fact necessary to make such representation or warranty not
misleading or necessary to enable Buyer to make a fully informed decision with
respect to its purchase of the Stock. All documents and information which have
been or will be delivered to Buyer or its representatives by or on behalf of
the Company are and will be true, correct and complete copies of the documents
they purport to represent.
3.22 LOANS FROM ANNISTON ICE & COAL COMPANY, INC. Shareholders
warrant and represent that the funds loaned to the Company from Anniston Ice &
Coal Company, Inc. were originally borrowed from Regions Bank by Anniston Ice &
Coal Company, Inc. and subsequently loaned by Anniston Ice & Coal Company, Inc.
to the Company for the benefit of the Company. Since Anniston Ice & Coal
Company, Inc. is being merged into Buyer contemporaneously with the closing of
this Agreement, Buyer will pay all amounts owed to Anniston Ice & Coal Company
directly to Regions Bank instead of paying said amounts to Anniston Ice & Coal
Company.
3.23 INTERCOMPANY AND AFFILIATE DEBT. As of the Closing, there is
no intercompany or affiliate debt as it relates to the Company and any other
entity that is affiliated with the Company, or owned or controlled by any of
the same individuals comprising the Shareholders hereunder.
3.24 BOTTLING LABELS. To the knowledge of Shareholders, the labels
used by the Company in its water bottling operations are accurately labeled in
all material respects, do not contain in misrepresentations or other misleading
information, and do not violate any laws or violate or infringe on the rights
of any third party.
3.25 WATER CONTRACT. The contract by and among Xxxxxx X.
Xxxxxxxxxx and the Water Works & Sewer Board of Anniston is in full force and
effect, is fully assignable by Xxxxxx
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X. Xxxxxxxxxx to either the Company or Buyer or Buyer's parent company, and
such assignment will enable Buyer or Buyer's parent company to continue water
bottling operations to the same extent as enjoyed by the Company and Xxxxxx X.
Xxxxxxxxxx on the date hereof.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Buyer is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas.
4.2 POWER AND AUTHORITY. Buyer has the requisite corporate power
and authority, and has been duly authorized, to enter into this Agreement and
to perform all of its obligations hereunder. Buyer represents and warrants to
Shareholders that this Agreement has been duly executed and delivered by Buyer,
and constitutes a valid and binding obligation in accordance with its terms.
4.3 EFFECT OF THIS AGREEMENT. The execution, delivery and
performance by Buyer of this Agreement, and each Ancillary Document to which
Buyer is or will be a party, the consummation by Buyer of the transactions
contemplated hereby and thereby, and the compliance by Buyer with the
provisions hereof or thereof, will not, with or without the giving of notice or
the passage of time, (a) violate any law, ordinance, rule or regulation
applicable to Buyer, (b) violate any judgment, writ, injunction, order or
decree of any court, arbitrator or governmental authority applicable to Buyer,
or (c) result in the breach of or conflict with any term, covenant, condition
or provision of the articles of incorporation or by-laws of Buyer.
4.4 APPROVALS, CONSENTS, ETC.. No consent, authorization or
approval of, or waiver or exemption by, or filing or registration with, any
governmental agency or any other person is required to be obtained or made in
connection with the execution, delivery or performance by Buyer of this
Agreement or any Ancillary Document, or the consummation by Buyer of the
transactions contemplated hereby or thereby.
V. COVENANTS OF SHAREHOLDERS
Shareholders hereby, jointly and severally, covenant and agree as
follows:
5.1 CONDUCT OF BUSINESS. From the date hereof through the Closing
Date, Shareholders shall, and shall cause the Company to, use all reasonable
efforts to (i) preserve substantially the relationships with the Company's
employees, suppliers, customers and others doing business with it, (ii) perform
its obligations under all contracts, leases and permits in all material
respects, (iii) comply with all applicable laws, (iv) confer with Buyer
regarding operational matters of a material nature, (v) report periodically to
Buyer regarding the status of the business and the results of operations of the
Company, and (vi) conduct Company's business in the ordinary course and
consistent with past practices. Without limiting the foregoing, except as
otherwise required or permitted by this Agreement or listed in Section 5.1 of
Shareholder's Disclosure Memorandum from the date hereof through the Closing
Date, the Shareholders shall not, without Buyer's prior written consent, permit
the Company to:
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(a) amend its articles of incorporation or bylaws;
(b) (i) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the Company's
capital stock, (ii) redeem, purchase or otherwise acquire directly or
indirectly any shares of the capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities; (iii) authorize for issuance, issue, sell, pledge,
deliver or agree to commit to issue, sell, pledge or deliver (whether through
the issuance or granting of any options, warrants, calls, subscriptions, stock
appreciation rights or other rights or other agreements) or otherwise encumber
any shares of capital stock of any class of the Company or any securities
convertible into or exchangeable for shares of capital stock of any class of
the Company; or (iv) split, combine or reclassify the outstanding capital stock
of the Company or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of the capital stock of the Company;
(c) acquire or agree to acquire (including, without
limitation, by merger, consolidation or acquisition of stock or assets) any
business, corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof;
(d) sell, lease, license, transfer, mortgage or subject
to any Encumbrance or otherwise dispose of any assets of the Company other than
sales of inventory in the ordinary course of business and consistent with past
practice;
(e) except as disclosed in Section 5.1(e) of
Shareholder's Disclosure Memorandum, make or agree to make any new capital
expenditure or expenditures;
(f) except as required to comply with applicable law or
with contracts existing on the date hereof, (i) adopt, enter into, terminate or
amend in any material respect any employment contract, collective bargaining
agreement or employee benefit plan, (ii) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any director, officer
or employee, (iii) pay any benefit not provided for under any employee benefit
plan, (iv) increase in any manner the severance or termination pay of any
officer or employee, (v) grant any awards under any employee benefit plan
(including the grant of stock options, stock appreciation rights, stock-based
or stock-related awards, performance units or restricted stock or the removal
of existing restrictions in any employee benefit plans or agreements or awards
made thereunder), or (vi) take any action to fund or in any other way secure
the payment of compensation or benefits under any employee, contract or
employee benefit plan;
(g) amend, terminate or enter into any material contract;
(h) (i) incur or assume any debt, other than trade and
accounts payable incurred in the ordinary course of business in amounts
consistent with past practice, (ii) issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company; (iii)
enter into any arrangement to maintain any financial condition of another
person;
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(iv) guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person;
or (v) make any loans, advances or capital contributions to, or investments in,
any other person;
(i) make any material change in accounting methods,
principles or practices unless required by GAAP;
(j) compromise or settle any material claim or action;
(k) take, or agree to commit to take, any action that
would or is reasonably likely to result in any of the conditions set forth in
Article VIII not being satisfied, or would make any representation or warranty
of Shareholders contained herein inaccurate in any respect at, or as of any
time prior to, the Closing, or that would impair the ability of Shareholders to
consummate the transactions contemplated hereby in accordance with the terms
hereof or delay such consummation;
(l) make or rescind any Tax election or settle or
compromise any Tax liability or refund or change in any material respect any of
the methods of reporting income or deductions for federal income tax purposes;
(m) permit any material insurance policy naming the
Company as a beneficiary or a loss payable payee to be canceled or terminated,
except in the ordinary course of business and consistent with past practice;
(n) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company;
(o) enter into any related party contract; or
(p) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or authorize, recommend, propose or
announce an intention to do any of the foregoing.
5.2 INVESTIGATION BY BUYER. Prior to the Closing Date,
Shareholders shall (i) give Buyer and its authorized representatives and
advisors access, at reasonable times and on reasonable notice, to all items of
Personal Property, books and records, personnel, offices, and other facilities
of the Company, (ii) permit Buyer to make such inspections thereof as Buyer may
reasonably require, and (iii) cause its employees, and its advisors to furnish
to Buyer and its authorized representatives and advisors such financial and
operating data and other information with respect to the Business prepared in
the ordinary course of the Business as Buyer or its agent shall from time to
time reasonably request.
5.3 CLOSING CONDITIONS. Shareholders will, to the extent within
their control, use their best efforts to cause the conditions set forth in
Section 8.1 to be satisfied by the Closing Date.
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5.4 CONFIDENTIALITY. From and after the date hereof, Shareholders
will, and will cause the Company and their officers, employees,
representatives, consultants and advisors to, hold in confidence all
confidential information in the possession of Shareholders or the Company, its
affiliates or its financial advisor concerning the Company. Shareholders will
not release or disclose any such information to any person other than Buyer and
its authorized representatives. Notwithstanding the foregoing, the
confidentiality obligations of this Section shall not apply to information:
(a) which Shareholders or the Company are compelled to
disclose by judicial or administrative process, or, in the reasonable opinion
of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available
to the public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to
Shareholders or the Company by a third party who obtained such information
other than as a result of a breach of a confidential relationship.
5.5 PUBLIC ANNOUNCEMENT. Shareholders and Buyer will cooperate in
the public announcement of the transactions contemplated by this Agreement,
and, other than as may be required by applicable law, no such announcement will
be made by either party without the consent of the other party, which consent
shall not be unreasonably withheld.
5.6 NO SHOPPING. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither Shareholders nor the Company shall (and Shareholders and the Company
shall cause their respective affiliates, officers, directors, employees,
representatives and agents not to) directly or indirectly, solicit, initiate or
participate in discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group (other than Buyer
or an affiliate or an associate of Buyer) concerning, or enter into any
agreement providing for, any merger, sale of material assets, sale of stock or
similar transactions involving the Company, the Stock or the Assets.
5.7 FURTHER ASSURANCES. Shareholders will use their best efforts
to implement the provisions of this Agreement, and for such purpose
Shareholders, at the request of Buyer, at or after the Closing Date, will,
without further consideration, promptly execute and deliver, or cause to be
executed and delivered, to Buyer such deeds, assignments, bills of sale,
consents, documents evidencing title and other instruments in addition to those
required by this Agreement, in form and substance satisfactory to Buyer, as
Buyer may reasonably deem necessary or desirable to implement any provision of
this Agreement and to place Buyer in actual possession and operating control of
the Company, the Business and the Assets.
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5.8 INSURANCE. Shareholders shall cause and the Company shall
continue to maintain insurance through the Closing Date with financially sound
and reputable insurers unaffiliated with Shareholders in such amounts and
against such risks as are adequate to fully protect the Assets and the
Business.
5.9 NONCOMPETITION AGREEMENT. At the Closing, Shareholders will
enter into a noncompetition agreement in the form attached hereto as Exhibit
5.9 (the "Noncompetition Agreement").
5.10 TITLE REPORTS. Within ten (10) days after the date hereof,
Shareholders, at Shareholders' sole cost and expense, shall provide a title
report(s) and survey for all real property owned by the Company ("Owned Real
Property") and current reports of searches made of the Uniform Commercial Code
Records of the County and State where each parcel of Owned Real Property is
located (the "UCC Reports") setting forth the state of liens affecting the
title to the personal property and real property to be conveyed hereunder.
Such title report(s) shall serve as the basis for the issuance of a title
insurance policy or policies (the "Title Insurance Policy") in favor of Buyer,
at Shareholders' sole expense, insuring that that the Owned Real Property will
be, at Closing, owned by the Company free from all liens, charges,
encumbrances, exceptions, or reservations of any kind or character other than
those specifically approved by Buyer in writing. The Title Insurance Policy
shall be in the amount of $250,000.
5.11 EMPLOYMENT AGREEMENT. At the Closing, Xxxxxx Xxxxxxxxxx will
enter into the Employment Agreement attached hereto as Exhibit 5.11.
5.12 TERMINATION OF PROFIT SHARING AND PENSION PLANS. Prior to the
Closing, the Company Plans will be terminated by resolution of the board of
directors of the Company and amended as appropriate to effect such termination.
It is understood and agreed that the Company Plans will be terminated and wound
up in accordance with their respective terms and applicable law.
In the event that as of the Closing Date there are additional sums
that have accrued to the Company Plans but such amounts have not been paid,
then Shareholders shall remain jointly and severally liable for such amounts
and shall reimburse the Company for any amounts that the Company is required to
make in this regard.
Shareholders hereby covenant that they will take all necessary actions
to file the appropriate requests with the Internal Revenue Service to obtain a
favorable determination letters with respect to the termination of the Company
Plans and will bear all costs associated with such favorable determination.
VI. COVENANTS OF BUYER
6.1 CLOSING CONDITIONS. Buyer will, to the extent within its
control, use its best efforts to cause the conditions set forth in Section 8.2
to be satisfied by the Closing Date.
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6.2 ANCILLARY AGREEMENTS. At the Closing, Buyer will enter into
the Noncompetition Agreement, the Escrow Agreement and all other ancillary
documents required hereunder.
6.3 BUYER'S FINANCIALS. Buyer hereby covenants that its financial
information provided to Shareholders pursuant to this Agreement are true and
correct.
VII. CLOSING
7.1 TIME AND PLACE. The consummation of the sale and purchase of
the Stock and the execution of the Noncompetition Agreement, the Escrow
Agreement and all other ancillary documents required hereunder (the "Closing")
shall take place at a mutually agreeable time and place on or before March 24,
1998. The date of the Closing shall herein be referred to as the "Closing
Date."
7.2 SHAREHOLDERS' OBLIGATIONS AT CLOSING. At the Closing,
Shareholders shall execute, acknowledge (where appropriate) and deliver, or
cause to be delivered, to Buyer in form reasonably satisfactory to Buyer:
(a) Stock certificates representing the Stock, duly
endorsed for transfer or accompanied by stock powers duly executed in blank,
and any other documents that are necessary to transfer to Buyer good and
marketable title to the Stock;
(b) All written approvals, consents and certificates
required to be executed by the Shareholders in order to effectively transfer
the Stock to Buyer.
(c) The opinion of counsel referred to in Section 8.1(f).
(d) Letters of resignation of the officers and directors
of the Company.
(e) All other documents and certificates required to be
delivered to Buyer pursuant to this Agreement, including without limitation,
the Noncompetition Agreement and the Escrow Agreement and the Undertaking
Agreement.
(f) Deliver to Buyer the Title insurance Policy to the
Owned Real Property.
7.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer will:
(a) pay the cash portion of the Purchase Price in
accordance with Section 2.2;
(b) deliver $337,800 to the Escrow Agent;
(c) deliver to Shareholders executed counterparts of the
Noncompetition Agreement and the Escrow Agreement and all other ancillary
documents required hereunder.
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VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to complete the transactions contemplated at the Closing shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of
Shareholders to be performed or complied with on or before the Closing Date
shall have been duly performed or complied with in all respects and
Shareholders shall deliver to Buyer a certificate signed by an officer of
Shareholders to such effect.
(b) Representations and Warranties True; No Adverse
Change. The representations and warranties of Shareholders contained herein
shall be true and correct on the Closing Date with the same force and effect as
though such representations and warranties had been made on the Closing Date,
and since the date hereof there shall have occurred no adverse change in the
Business, and Shareholders shall deliver to Buyer a certificate signed by an
officer of Shareholders to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Buyer from consummating the
transactions contemplated hereby.
(d) Third Party Creditors. All third party creditors of
the Business will be paid in full, and all Encumbrances against the Stock and
Assets, including all Owned Real Property, will be paid or discharged.
(e) Capital Leases. All Capital Leases shall be paid in
full and the personal property subject thereto shall be conveyed to the
Company free and clear of Encumbrances.
(a) Opinion of Counsel for Shareholders Buyer shall have
received the opinion of Spain & Xxxxxx, L.L.C. dated as of the Closing Date, in
form and substance satisfactory to Buyer and Buyer's counsel, subject to
reasonable qualifications and exceptions, as set forth on Exhibit 8.1(f).
(a) Due Diligence Inspection. Buyer's obligation to
consummate this Agreement is expressly conditioned on Buyer's satisfaction of
its due diligence investigation of the Company and Shareholders.
(h) Ancillary Agreements. Shareholders have executed the
Noncompetition Agreement, the Employment Agreement, the Escrow Agreement and
all other ancillary documents required hereunder.
(i) Merger of Anniston Ice & Coal Company, Inc. The
contemplated merger of Anniston Ice & Coal Company, Inc. whereby Anniston Ice &
Coal Company, Inc. will merge into Buyer and Buyer will remain as the surviving
entity will have occurred contemporaneously with the execution of this
Agreement.
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(j) Water Works and Sewer Board Contract. The
Shareholders shall have delivered a contract by and among the Company and the
Anniston Water Works and Sewer Board permitting the Company to continue to
purchase water from the Water Works and Sewer Board in a form that is
acceptable to Buyer.
8.2 CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS. The obligation of
Shareholders to complete the transactions contemplated at the Closing shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Performance. Each agreement and obligation of Buyer
to be performed or complied with on or before the Closing Date shall have been
duly performed or complied with in all material respects and Buyer shall
deliver to Shareholders a certificate signed by an officer of Buyer to such
effect.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Buyer contained herein
shall be true and correct on the Closing Date with the same force and effect as
though such representations and covenants had been made on the Closing Date,
and Buyer shall deliver to Shareholders a certificate signed by an officer of
Buyer to such effect.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Shareholders from
consummating the transactions contemplated hereby.
IX. INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER BY SHAREHOLDERS. Shareholders agree
to indemnify, defend and hold harmless Buyer and Buyer's employees, agents,
heirs, legal representatives, and assigns from and against any and all claims,
suits, losses, expenses (legal, accounting, investigation and otherwise),
damages and liabilities, including, without limitation, tax liabilities
(hereinafter, collectively "Damages"), arising out of or relating to (i) any
liability or obligation of the Company assumed by Shareholders at the Closing
Date hereunder pursuant to the Undertaking Agreement, (ii) any claim or cause
of action arising with respect to the conduct of, or conditions existing with
respect to, the Company prior to the Closing, whether or not disclosed to
Buyer, (iii) any inaccuracy of any representation or warranty set forth in this
Agreement or the breach of any covenant made by Shareholders in or pursuant to
this Agreement, or (iv) the improper or illegal use, storage or disposal of any
Hazardous Materials by the Company prior to the Closing Date, or any
Environmental Action pending, threatened or accrued as of the Closing Date
(whether known or unknown, disclosed or undisclosed.) The obligation of the
Shareholders to indemnify Buyer shall continue for a period of seven years
after the date hereof notwithstanding Buyer's knowledge of the inaccuracy of
any representation or warranty of the Shareholders set forth in this Agreement
or in any document or certificate furnished or required to be furnished
pursuant to this Agreement.
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9.2 INDEMNIFICATION OF THE COMPANY AND SHAREHOLDERS BY BUYER.
Buyer agrees to indemnify, defend and hold harmless the Shareholders from and
against (i) any and all Damages arising out of or relating to any material
inaccuracy or any material misrepresentation made herein by Buyer, (ii) the
material breach of any warranty of Buyer set forth in this Agreement, (iii) the
breach of any covenant made by Buyer in or pursuant to this Agreement or (iv)
any claim arising relating to the Company, the Assets or the Business arising
after the Closing Date.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying
Party") in writing by registered or certified mail promptly after the
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any
Indemnified Party unless such failure to notify the Indemnifying Party
prejudices the rights of the Indemnifying Party. In addition to all other
remedies provided hereunder or by law, Buyer shall specifically have the right
to make a claim against the Escrow Amount for any of Buyer's Damages.
9.4 RIGHT TO DEFEND. If the facts giving rise to any such claim
for indemnification involve any actual or threatened claim or demand by any
third party against the Indemnified Party, the Indemnifying Party shall be
entitled (without prejudice to the right of the Indemnified Party to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing) to assume the defense of such claim or demand in
the name of the Indemnified Party at the Indemnifying Party's expense and
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, if it gives written notice to the
Indemnified Party within forty-five (45) days after receipt of the Notice of
Claim that the Indemnifying Party intends to assume the defense of such claim
and acknowledges its liability to indemnify the Indemnified Party for any
losses resulting from such claim; provided, however, that if the Indemnifying
Party does not elect to assume the defense of any claim, then (a) the
Indemnifying Party shall have the right to participate in the defense of such
claim or demand at its expense through counsel of its own choosing, provided
the Indemnified Party shall control the defense of such claim, (b) the
Indemnified Party may settle any such claim without the consent of the
Indemnifying Party, however, the Indemnifying Party may not settle any such
claim without the prior written consent of the Indemnified Party; and (c)
Section 9.5 hereof shall be inapplicable. Whether or not the Indemnifying
Party does choose to so defend such claim, the parties hereto shall cooperate
in the defense thereof and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be requested in connection therewith. To the extent
Shareholders are the Indemnified Parties for any actual or threatened claim or
demand by any third party, Shareholders shall have the right to control the
prosecution of any counterclaim or right related to such a claim or demand,
provided that Shareholders agree to reasonably cooperate with Buyer with
respect to the prosecution of such counterclaim or right.
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9.5 SETTLEMENT. Except as provided in Section 9.4, (i) the
Indemnified Party shall make no settlement of any claim that would give rise to
liability on the part of the Indemnifying Party under an indemnity contained in
this Article IX without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld and (ii) the Indemnifying Party can
settle without the consent of the Indemnified Party only if the settlement
involves only the payment of money for which the Indemnifying Party will be
fully liable. No other settlement of any claim may be made without the consent
of both the Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
9.6 EFFECT OF TERMINATION. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained
in this Article will continue to be enforceable following termination of this
Agreement.
X. TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of
Shareholders and Buyer;
(b) Misrepresentation or Breach. By Shareholders if
there has been a material misrepresentation or a material breach of a warranty
or covenant herein or in any agreement required to be delivered pursuant hereto
on the part of Buyer hereto;
(c) Misrepresentation or Breach. By Buyer if there has
been a misrepresentation or a breach of a warranty or covenant herein or in
any agreement required to be delivered pursuant hereto on the part of
Shareholders hereto;
(d) Failure of Condition to Buyer's Obligations. By
Buyer, if all of the conditions set forth in Section 8.1 have not been
satisfied;
(e) Failure of Condition to Shareholders' Obligations.
By Shareholders, if all of the conditions set forth in Section 8.2 have not
been satisfied;
(f) Court Order. By Shareholders or Buyer if
consummation of the transactions contemplated hereby shall violate any
nonappealable final order, decree or judgment of any court or governmental body
having competent jurisdiction; or
(g) Adverse Change. By Buyer if any event has occurred
after the date hereof which is, or will result in an adverse change in the
prospects, business or condition of the Company.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1(a), all further obligations of Shareholders and Buyer
under this Agreement shall terminate without further liability of Shareholders
or Buyer. If Shareholders fail to consummate the
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transactions contemplated on its part to occur on the scheduled Closing Date,
in circumstances whereby all conditions of the Closing set forth in Section 8.2
have been satisfied in all material respects or waived, Buyer's sole remedy
shall be to (i) to require Shareholders to consummate and specifically perform
the transactions contemplated hereby, in accordance with the terms of this
Agreement, and to obtain from Shareholders any attorney fees incurred in
connection with procuring such specific performance or (ii) terminate this
Agreement and obtain reimbursement of its out-of-pocket expenses incurred
directly in connection with the negotiation, preparation and performance of
this Agreement. If Buyer fails to consummate the transactions contemplated on
its part to occur on the Closing Date, in circumstances whereby all conditions
of the Closing set forth in Section 8.1 have been satisfied in all respects or
waived, Shareholders' sole remedy shall be to (i) to require Buyer to
consummate and specifically perform the transactions contemplated hereby, in
accordance with the terms of this Agreement, and to obtain from Buyer any
attorney fees incurred in connection with procuring such specific performance
or (ii) terminate this Agreement and obtain reimbursement of its out-of-pocket
expenses incurred directly in connection with the negotiation, preparation and
performance of this Agreement.
10.3 RIGHT TO PROCEED. Notwithstanding anything in this Agreement
to the contrary, if any condition specified in Section 8.1 or Section 8.2 has
not been satisfied, Shareholders or Buyer, in addition to any other rights
which may be available to it, shall have the right to waive any such condition
that is for its benefit and to require the other party hereto to proceed with
the Closing.
XX.XXX MATTERS.
11.1. TAX DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Final Determination" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by the
Company or Shareholders, whichever are responsible for payment of such Tax
under applicable law, with respect to any item disallowed or adjusted by a
Taxing Authority, provided that such responsible party determines that no
action should be taken to recoup such payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion thereof)
beginning after the close of business on the Closing Date.
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"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
"Tax" means any net income, alternative or add-on minimum tax, gross
income, gross receipts (including gross receipts tax in respect of any
franchise operation), royalty, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign).
"Tax Indemnification Period", means with respect to any Tax, any
Pre-Closing Tax Period of the Company.
11.2 SECTION 338(H)(10) ELECTION. Shareholders and the Company
will join with Buyer in making an election under Section 338(h)(10) of the Code
and Section 1.338(h)(10)-1 of the Treasury Regulations promulgated under the
Code, and any corresponding election under state, local and foreign tax laws,
with respect to the purchase and sale of the Stock hereunder (a "Section
338(h)(10) Election"). Shareholders will include any income, gain, loss,
education or other tax item resulting from the Section 338(h)(10) Election on
their respective Tax returns to the extent permitted by applicable laws.
Shareholders will also pay any Tax imposed on the Company attributable to the
making of the Section 338(h)(10) Election, including, but not limited to, (i)
any Tax imposed under Code Section 1374, or (ii) any tax imposed under Reg.
Section 1.338(h)(10)-1(e)(5) and Shareholders will indemnify Buyer and the
Company against any liabilities, costs, expenses (including, without
limitation, reasonable expenses of investigation and attorneys fees and
expenses), losses, damages, settlements, assessments or judgments arising out
of any failure to pay any such Taxes. The Company and Shareholders have not
revoked the Company's election to be taxed as an S corporation within the
meaning of Code Section 1361 and 1362. The Company and Shareholders have not
taken or allowed any action that would result in the termination of the
Company's status as a validly electing S corporation within the meaning of Code
Sections 1361 and 1362.
11.3 ALLOCATION OF PURCHASE PRICE. Buyer and Shareholders agree
that the purchase price paid to Shareholders hereunder and the liabilities of
the Company (plus other relevant items) will be allocated to the assets of the
Company for all purposes (including Tax and financial accounting purposes) as
mutually determined by Buyer and Shareholders in accordance with applicable
income tax laws and regulations, which allocation shall be set forth on
Schedule 11.3 to be attached to this Agreement following the final
determination of any adjustment to the purchase price pursuant to this
Agreement. Buyer and Shareholders will file, and will cause the Company to
file, all Tax Returns and information reports in a manner consistent with such
allocations.
11.4 FILING OF SHORT PERIOD RETURNS. Buyer and Shareholders shall
treat and cause the Company to treat the Closing Date as the last day of the
taxable period in which the Company is an
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S corporation, as defined under the Code. All Tax returns of the Company,
which are required and/or permitted by the authorized taxing authorities
(herein collectively referred to as the "S Short Year Returns"), shall be filed
accordingly. In accordance with Section 1362(e)(6)(D) and related regulations
of the Code, the books of the Company shall be closed effective the Closing
Date. Shareholders will cause its accounting firm to prepare, at Shareholders'
expense, the S Short Year Returns.
11.5. COVENANTS.
(a) Without the prior written consent of Buyer,
Shareholders shall not cause the Company to make or change any tax election,
change any annual tax accounting period, adopt or change any method of tax
accounting, file any amended Return, enter into any closing agreement, settle
any Tax claim or assessment, surrender any right to claim a Tax refund, consent
to any extension or waiver of the limitations period applicable to any Tax
claim or assessment or take or omit to take any other action, if any such
action or omission would have the effect of increasing the Tax liability of the
Company or Buyer.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) will be filed when due in
accordance with all applicable laws.
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees incurred in connection
with this Agreement (including any real property transfer Tax and any similar
Tax) shall be accrued by the Company on the Effective Date Balance Sheet and be
paid by the Shareholders when due (including any applicable extensions), and
the Company will, at Shareholders' expense, file all necessary Tax returns and
other documentation with respect to all such Taxes and fees. This subparagraph
shall not apply to any vehicle or other re- titling fees to take place after
the Closing Date. All such vehicle or other re-titling shall be borne by the
Buyer.
11.6. COOPERATION ON TAX MATTERS.
(a) Buyer and Shareholders shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
preparation and filing of any Tax return, statement, report or form (including
any report required pursuant to Section 6043 of the Code and all Treasury
Regulations promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention and (upon
the other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding. Buyer
and Stockholders shall cause the Company to: (i) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
Pre-Closing Tax Period, and to abide by all record retention requirements of
any Taxing Authority or any record retention agreements entered into with any
Taxing Authority, and (ii) to give Shareholders reasonable written notice prior
to destroying or discarding any such books and records and, if Shareholders so
request, Buyer shall allow Shareholders to take possession of such books and
records.
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(b) Buyer and Shareholders further agree, upon request,
to use all reasonable efforts to obtain any certificate or other document from
any governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
11.7. TAX INDEMNIFICATION. Shareholders hereby jointly and
severally indemnify Buyer against and agree to hold Buyer harmless from any
loss, liability or expense attributable to (i) any Tax with respect to income
(including, to the extent based on income, state franchise Taxes), transfer
Tax, employment or withholding Tax related to employee tips income (actual and
allocated) and related reporting requirements, and gross receipts or royalty
Tax in respect of any franchise operation and any other Tax of the Company
related to the Tax Indemnification Period, (ii) any Tax resulting from a breach
of the provisions of Section 11.5, and (iii) any liabilities, costs, expenses
(including, without limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee or successor (the
sum of (i), (ii), and (iii) being referred to herein as a "Loss").
11.8 PURCHASE PRICE ADJUSTMENT. Any amount paid by Shareholders,
Buyer or the Company under Section 11.7 will be treated as an adjustment to the
relevant purchase price for all Tax purposes unless a Final Determination
causes any such amount not to constitute an adjustment to the relevant purchase
price. In the event of such a Final Determination, Buyer, the Company or
Shareholders, as the case may be, shall pay an amount that reflects the
hypothetical Tax consequences of the receipt or accrual of such payment, using
the maximum statutory rate (or rates, in the case of an item that affects more
than one Tax) applicable to the recipient of such payment for the relevant
year, reflecting for example, the effect of deductions available for interest
paid or accrued and for Taxes such as state and local income Taxes. Any
payment required to be made by Buyer or Shareholders under this Article XI that
is not made when due shall bear interest at the rate per annum determined, from
time to time, under the provision of Section 6621(a)(2) of the Code for each
day until paid.
11.9. SURVIVAL. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
XII. MISCELLANEOUS
12.1 EXPENSES. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing for a period of seven years.
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12.3 INUREMENT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
12.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules
and Exhibits hereto, and the related agreements referred to herein embody the
entire agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
12.5 SEVERABILITY. Any provision of this Agreement which is
invalid, unenforceable or illegal in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity,
unenforceability or illegality without affecting the remaining provisions
hereof and without affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
12.6 INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as
if set forth in full herein.
12.7 CAPTIONS AND HEADINGS; USE OF TERM "PERSON". Captions and
headings used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless
the context otherwise requires, all article, section or subsection
cross-references are to articles, sections and subsections within this
Agreement. As used herein, the term "person" shall mean any corporation,
limited liability company, partnership, venture, proprietorship, trust,
governmental entity, benefit plan or other entity or enterprise.
12.8 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA.
12.9 NOTICES. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, facsimile transmission (with facsimile generated
confirmation), or by United States Mail, postage prepaid, by registered or
certified mail (return receipt requested), to the addressed indicated below and
shall be deemed given when received by the addressee thereof:
to Shareholders: Xxxxxx Xxxxxxxxxx
c/o Xxxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
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Xxxxxx Xxxxxxxxxx
c/o Xxxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
with a copy to: Xxxxx X. Xxxxxx, Xx.
Spain & Xxxxxx, L.L.C.
0000 0xx Xxxxxx X.
Xxxxxxxxxx, Xxxxxxx 00000
to Buyer: Packaged Ice Southeast, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxx, Chief Executive Officer
with a copy to: Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xx., Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxxxxx
or such other address or addresses as may be expressly designated by
either party by notice given in accordance with the foregoing provision.
12.10 AGENTS OR BROKERS. Shareholders and Buyer mutually represent
and agree with each other that no agents or brokers have been utilized in the
solicitation or negotiation of the sale of the Business and no fees,
commissions or expenses of any type shall be due or payable out of the proceeds
of the purchase price by either party to this Agreement.
12.11 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of securities laws, shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in Birmingham, Alabama and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof, and shall not be appealable. Judicial proceedings may be commenced
only to enforce this arbitration agreement or to enforce the results of
arbitration; provided that such prohibition shall not apply in the event that a
court ordered injunction is an appropriate remedy for a breach of this
Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute
the same instrument.
[SBWC STOCK PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS]
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[SBWC STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE SOUTHEAST, INC.
By: /s/ X. X. XXXXX, XX.
----------------------------------------
Print Name: X. X. XXXXX, XX.
-----------------------------
Print Title: President
----------------------------
SHAREHOLDERS:
/s/ XXXXXX XXXXXXXXXX
-------------------------------------------
XXXXXX XXXXXXXXXX
/s/ XXXXXX XXXXXXXXXX
-------------------------------------------
XXXXXX XXXXXXXXXX
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LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets of Southern Bottled Water Company, Inc.
Exhibit B Property Subject to Capital Leases
Exhibit 2.2(b) Escrow Agreement
Exhibit 2.2(d) Undertaking Agreement
Schedule 3.13(a) Excluded Assets
Exhibit 5.9 Noncompetition Agreement
Exhibit 5.11 Employment Agreement
Exhibit 8.1(f) Opinion of Counsel
Schedule 11.3 Allocation of Purchase Price
Shareholders' Disclosure Memorandum
