AGREEMENT AND PLAN OF MERGER
dated as of August 22, 2003
among
GW MERGERCO, INC.,
GLACIER WATER SERVICES, INC.,
and
WATER ISLAND, INC.
AGREEMENT AND PLAN OF MERGER (together with the Schedules and Exhibits
hereto, the "Agreement"), dated as of August 22, 2003, among GW Mergerco, Inc.,
an Indiana corporation ("GW"), Glacier Water Services, Inc., a Delaware
corporation ("Parent"), and Water Island, Inc., an Indiana corporation (the
"Company").
The Board of Directors of each of the Company and GW believes that it is in
the best interests of each company and their respective shareholders that the
Company and GW combine into a single company through the statutory merger of GW
with and into the Company (the "Merger") and, in furtherance thereof, along with
the sole shareholder of GW, have approved the Merger.
Pursuant to the Merger, among other things, the outstanding shares of
Company Common Stock shall be converted into the right to receive cash as
determined herein.
The Company, Parent and GW desire to make certain representations and
warranties and other agreements in connection with the Merger.
Certain capitalized terms used herein are defined in Exhibit A.
Additionally, Exhibit A references the sections in which other capitalized terms
are defined throughout this Agreement.
In consideration of the premises and the mutual representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined in Section 1.2)
and on the terms and subject to conditions of this Agreement, GW shall be merged
with and into the Company, the separate corporate existence of GW shall cease
and the Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
Section 1.2. Effective Time. On October 6, 2003, or such later date
mutually satisfactory to the Company and GW which is no later than the fifth
Business Day after the satisfaction or waiver of the conditions set forth in
Article V, the parties hereto shall cause the Merger to be consummated by
executing the Plan of Merger attached hereto as Exhibit D and by filing Articles
of Merger, with such Plan of Merger attached thereto, with the Secretary of
State of the State of Indiana, in such form as required by, and executed in
accordance with the relevant provisions of, Indiana Law (the time of such filing
with the Secretary of the State of Indiana being the "Effective Time"). The
closing of the transactions contemplated hereby (the "Closing") shall take place
at 10:00 a.m. at the offices of Xxxxx Xxxxxxxx Investment Management, Inc., 0000
Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 on the date of the
Effective Time (the "Closing Date").
Section 1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided under Indiana Law. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of the Company and GW shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and GW shall become the debts, liabilities and duties of the Surviving
Corporation.
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Section 1.4. Articles of Incorporation; By-laws.
-----------------------------------
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time the Articles of Incorporation of GW as in
effect, immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended
as provided by Law and such Articles of Incorporation.
(b) The by-laws of GW, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation
until thereafter amended.
Section 1.5. Directors and Officers.
----------------------
The directors of GW immediately prior to the Effective Time shall
be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and by-laws of
the Surviving Corporation, and the officers of GW immediately prior to
the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
Section 1.6. Effect of the Merger on the Capital Stock of the Company.
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At the Effective Time, (a) each share of Company Common Stock
other than Dissenting Shares will be converted into the right to
receive, upon surrender of the certificates representing shares of
Company Common Stock by the holders thereof in the manner provided in
Section 1.11, cash payable by Parent and/or the Surviving Corporation
to the holders thereof at the times and in the amounts determined
pursuant to Sections 1.8, 1.9 and 1.10 hereof, and (b) each Dissenting
Share shall be converted into the right to receive the "fair value"
thereof as determined under the applicable provisions of the Indiana
Business Corporation Law, I.C. 23-1-44.
Section 1.7. Effect of the Merger on the Capital Stock of GW.
------------------------------------------------
Each share of common stock of GW issued and outstanding
immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and non-assessable share of common stock of
the Surviving Corporation. Each stock certificate of GW evidencing
ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
Section 1.8. Merger Consideration.
---------------------
(a) Prior to any adjustments thereto in accordance with the
remainder of this Section 1.8, the amount of cash to be paid by Parent
and/or the Surviving Corporation to the record holders of issued and
outstanding shares of Company Common Stock for each of their shares
held as of the Closing, excluding Dissenting Shares, upon surrender of
the certificates for such shares, is the per-share amount determined
by dividing $5,284,861 by the number of issued and outstanding shares
of Company Common Stock as of the Closing (the "Preliminary Closing
Merger Consideration"). The Preliminary Closing Merger Consideration
shall be adjusted upward or downward as provided in the remainder of
this Section 1.8, and the resulting amount after such adjustments is
the amount that Parent and/or the Surviving Corporation will pay to
such holders of shares of Company Common Stock (excluding Dissenting
Shares) upon surrender of their certificates for such shares at or
after the Closing (the "Final Closing Merger Consideration").
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(b) At least five Business Days prior to the Closing Date, the
Company shall deliver to Parent its good faith written estimate of the
Closing Working Capital, which Parent shall have the right to approve
in the good faith exercise of its judgment (the "Estimated Closing
Working Capital"). The Company shall make available to Parent all work
papers and other books and records utilized in preparing the Estimated
Closing Working Capital and shall make available to Parent the
appropriate personnel involved in the preparation of such estimate.
The Preliminary Closing Merger Consideration (i) shall be decreased by
the amount, if any, by which the Estimated Closing Working Capital is
less than $500,000 (the "Estimated Deficiency"), or (ii) shall be
increased by the amount, if any, by which the Estimated Closing
Working Capital is greater than $500,000 (the "Estimated Excess"),
(iii) in either case (an Estimated Deficiency or an Estimated Excess)
divided by the number of issued and outstanding shares of Company
Common Stock as of the Closing in order to arrive at the per-share
adjustment amount to the Preliminary Closing Merger Consideration.
(c) If as of the Closing the sum of (i) the Company's bank
indebtedness plus (ii) the Company's remaining principal obligations
to D.J. Leasing, Inc. to acquire ownership of the vending machines
leased under its equipment lease with such corporation (including in
such principal obligations the $400,000 option purchase price and the
"principal" portion of the remaining monthly lease payments, but
excluding an assumed interest component included in said monthly
payments at an interest rate of seven percent (7%) per annum)
(together, the "Company Debt") exceeds Four Million Four Hundred
Thousand Dollars ($4,400,000) (the excess, if any, of the Company Debt
over $4,400,000 is the "Excess Company Debt"), then the Preliminary
Closing Merger Consideration shall be reduced by an amount calculated
by dividing the Excess Company Debt by the number of issued and
outstanding shares of Company Common Stock as of the Closing to arrive
at the per-share adjustment to be made.
Section 1.9. Final Working Capital Adjustment.
---------------------------------
(a) As promptly as practicable, but in no event later than 15
days, after the Closing Date, the Shareholder Committee shall notify
Parent in writing of its determination of Closing Working Capital (the
"Company's Closing Schedule"), which determination shall set forth in
reasonable detail the Shareholder Committee's calculation of Closing
Working Capital. The Company's Closing Schedule shall also set forth,
and explain in reasonable detail any differences between the Company's
calculation of Closing Working Capital and the Estimated Closing
Working Capital. A copy of all work papers and other books and records
utilized in the preparation of the Company's Closing Schedule shall be
made available to Parent at such time. Parent will notify the
Shareholder Committee in writing (the "Working Capital Dispute
Notice") within 45 days after receiving the Company's Closing Schedule
if Parent disagrees with the Shareholder Committee's calculation of
the Closing Working Capital as set forth in the Company's Closing
Schedule, which notice shall set forth in reasonable detail the basis
for such disagreement, the amounts involved and Parent's calculation
of the Closing Working Capital. If no Working Capital Dispute Notice
is received by the Shareholder Committee within such 45-day period,
the Shareholder Committee's calculation of Closing Working Capital as
set forth in the Company's Closing Schedule shall be final and binding
upon the parties hereto. The Shareholder Committee and Parent will
give each other and their representatives reasonable access during
normal business hours to the personnel, books and records of the
Surviving Corporation to assist the Shareholder Committee in the
preparation of the Company's Closing Schedule and to assist Parent in
the preparation of the Working Capital Dispute Notice.
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(b) Upon receipt by the Shareholder Committee of the Working
Capital Dispute Notice, the Shareholder Committee and Parent shall
negotiate in good faith to resolve any disagreement with respect to
Closing Working Capital set forth in the Working Capital Dispute
Notice. To the extent Parent and the Shareholder Committee are unable
to agree with respect to Closing Working Capital within 10 days after
receipt by the Shareholder Committee of the Working Capital Dispute
Notice, Parent and the Shareholder Committee shall promptly select a
mutually acceptable nationally recognized accounting firm with no
material relationship to any of the parties hereto and submit their
dispute to such accounting firm for a binding resolution. Closing
Working Capital as agreed upon by the Shareholder Committee and
Parent, as deemed agreed upon pursuant to the next-to-last sentence of
Section 1.9(a) or as determined by such accounting firm, in accordance
herewith, shall be termed the "Final Closing Working Capital". The
fees and expenses of such accounting firm shall be paid by the party
hereto whose determination of Closing Working Capital as initially
submitted to such accounting firm is further away from the Final
Closing Working Capital. If the responsible party in accordance with
the foregoing sentence is the Shareholder Committee, such fees and
expenses shall be deducted from the First Deferred Consideration or
the Second Deferred Consideration, depending on the date of
determination of such fees and expenses.
(c) If the Final Closing Working Capital is greater than the
Estimated Closing Working Capital, the First Deferred Payment to be
paid pursuant to Section 1.10(a) hereof shall be increased by an
amount equal to such difference (the "Working Capital Excess"). If the
Final Closing Working Capital is less than the Estimated Closing
Working Capital, the First Deferred Payment to be paid pursuant to
Section 1.10(a) hereof shall be reduced by an amount equal to such
difference (the "Working Capital Deficiency").
Section 1.10. Deferred Payments.
------------------
(a) On the first anniversary of the Closing Date, Parent and/or
the Surviving Corporation shall pay to the holders of record as of the
Closing Date of issued and outstanding shares of Company Common Stock
(excluding Dissenting Shares), but only so long as any holder shall
have surrendered such holder's stock certificate thereof, and any
amounts unpaid because any such certificates shall have not been so
surrendered shall be paid subsequently upon surrender of such
certificates, for each share of Company Common Stock then held by such
holders (excluding Dissenting Shares), an amount equal to the First
Deferred Payment (hereinafter defined) divided by the number of shares
of Company Common Stock issued and outstanding as of the Closing. The
"First Deferred Payment" will be the amount, if any, by which the sum
of (i) $300,000 plus (ii) the Working Capital Excess (if any)
determined pursuant to Section 1.9, plus (iii) the excess accrual for
Taxes to be added pursuant to Section 4.14 (if any), exceeds the sum
of (x) the Working Capital Deficiency (if any) determined pursuant to
Section 1.9, plus (y) any amounts required to be deducted in
accordance with Sections 1.9(b), 4.13 and 4.14 hereof, plus (z) any
Losses (as defined in Section 6.2(a) hereof) for which the
Shareholders are obligated to indemnify the Surviving Corporation or
Parent in accordance with Section 6.2(a) hereof.
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(b) On the second anniversary of the Closing Date, Parent and/or
the Surviving Corporation shall pay to the holders of record as of the
Closing Date of issued and outstanding shares of Company Common Stock
(excluding Dissenting Shares), but only so long as any holder shall
have surrendered such holder's stock certificate thereof, and any
amounts unpaid because any such certificates shall have not been so
surrendered shall be paid subsequently upon surrender of such
certificates, for each share of Company Common Stock then held by such
holders (excluding Dissenting Shares), an amount equal to the Second
Deferred Payment (hereinafter defined) divided by the number of shares
of Company Common Stock issued and outstanding as of the Closing. The
"Second Deferred Payment" will be the amount, if any, by which the sum
of (i) $300,000, plus (ii) any Working Capital Excess determined
pursuant to Section 1.9 not added to the First Deferred Payment, plus
(iii) any excess accrual for Taxes to be added pursuant to Section
4.14 to the extent not added to the First Deferred Payment, exceeds
the sum of (x) any Working Capital Deficiency determined pursuant to
Section 1.9 to the extent not deducted in arriving at the amount of
the First Deferred Payment, plus (y) any amounts required to be
deducted in accordance with Sections 1.9(b), 4.13 and 4.14 hereof to
the extent not deducted in arriving at the amount of the First
Deferred Payment, plus (z) any Losses (as defined in Section 6.2(a)
hereof) for which the Shareholders are obligated to indemnify the
Surviving Corporation or Parent in accordance with Section 6.2(a)
hereof to the extent not deducted in arriving at the amount of the
First Deferred Payment.
(c) On each of the first and second anniversaries of the Closing
Date, Parent and/or the Surviving Corporation shall pay interest on
the sums paid to each of the former holders of Company Common Stock to
whom payments are made under Sections 1.10(a) and 1.10(b) at the
Applicable Rate, compounded annually, accruing from the Closing Date
to the date of payment. The "Applicable Rate" is the annual rate of
interest equal to the prevailing national "prime rate" of large U.S.
commercial banks (i) as of the Closing Date during the first year
following the Closing Date, and (ii) as of the first anniversary of
the Closing Date during the second year following the Closing Date.
Section 1.11. Payment and Surrender of Certificates.
-------------------------------------
(a) Immediately after the Effective Time, Parent will or will
cause the Surviving Corporation to mail a letter of transmittal (with
instructions for its use) in the form attached hereto as Exhibit B to
each record holder of outstanding Company Common Stock (other than
Dissenting Shares) as of the Closing for each holder to use in
surrendering the certificates which represented his, her or its shares
of Company Common Stock (other than Dissenting Shares) against payment
of the Final Closing Merger Consideration and all other sums payable
at or after the Closing pursuant to the terms hereof. Except as
provided in Section 1.10(c), no interest will accrue or be paid to the
holder of any outstanding shares of Company Common Stock.
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(b) Upon surrender of the certificates representing shares of
Company Common Stock (the "Certificates") other than Dissenting Shares
to Parent, the Certificates so surrendered shall forthwith be canceled
and payment of the Final Closing Merger Consideration will be made by
Parent and/or the Surviving Corporation to the holders thereof. Until
so surrendered, each outstanding Certificate shall be deemed, from and
after the Effective Time, to represent solely the right to receive
upon such surrender payment of the Final Closing Merger Consideration
and, subsequent thereto, payment of the First Deferred Payment and the
Second Deferred Payment, in each case in whatever amount is owed
hereunder.
(c) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed satisfactory to
Parent and complying with any other reasonable requirements imposed by
Parent, Parent will cause to be paid in exchange for such lost, stolen
or destroyed Certificate the Final Closing Merger Consideration. When
authorizing such payment of cash, Parent may, in its discretion and as
a condition precedent to the delivery thereof, require the owner of
such lost, stolen or destroyed Certificate to give Parent a bond in
such sum as Parent may direct as indemnity against any claim that may
be made against Parent with respect to the Certificate alleged to have
been lost, stolen or destroyed.
Section 1.12. No Further Ownership Rights in Company Common Stock.
---------------------------------------------------
All payments of the Final Closing Merger Consideration made upon
surrender of shares of Company Common Stock in accordance with the
terms hereof shall be deemed to have been made in full satisfaction of
all rights pertaining to such shares of Company Common Stock, and
there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
Section 1.13. Shareholder Committee.
----------------------
There is hereby created and established a committee of three (3)
shareholders of the Company (the "Shareholder Committee"), the members
of which shall be Xx Xxxxxxx, Xxxx Xxxxxxxx and Xxx Xxxxx, which
Shareholder Committee shall have the power and authority to act for
all purposes under this Agreement on behalf of all of the former
shareholders of the Company who did not exercise dissenter's rights
under Indiana law with respect to the Merger. Each shareholder of the
Company who accepts the consideration payable under this Agreement in
exchange for his, her or its shares of Company Common Stock shall be
deemed to have irrevocably appointed the Shareholder Committee, and
each of the members thereof, as his, her or its attorney-in-fact and
agent to act for such shareholder within the scope of the authority
given to the Shareholder Committee as described in Exhibit F attached
hereto and made a part hereof.
ARTICLE II
Representations and Warranties of THE COMPANY
The Company hereby represents and warrants to and for the benefit of GW
and Parent as follows:
Section 2.1. Authorization; Incorporation; Capital Stock; etc.
-------------------------------------------------
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(a) The Company has full requisite power and authority (corporate
or otherwise) to execute, deliver and perform this Agreement and the
other instruments and documents contemplated hereby to be executed and
delivered by it, to perform its obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby and thereby.
Except for obtaining the approval of its shareholders, the Company has
taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the other instruments and documents
contemplated hereby to be executed and delivered by it. The execution,
delivery and performance by the Company of this Agreement and the
other instruments and documents contemplated hereby to be executed and
delivered by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i)
violate or conflict with or result in the breach of any provision of
the Articles of Incorporation or by-laws of the Company, (ii) except
as set forth on Schedule 2.1(a) hereto, (whether after the giving of
notice or lapse of time or both) violate or conflict with any
provision of, or result in the modification, cancellation, termination
or acceleration of, any obligation under, or result in the imposition
or creation of any Encumbrances upon the Company or its assets
pursuant to any agreement or contract by which the Company or any of
its assets is bound, with such exceptions as do not individually or in
the aggregate have a Material Adverse Effect, or (iii) violate or
conflict with any Legal Requirement applicable to the Company or its
assets to which the Company is subject, or by which any of its assets
may be bound or affected, with such exceptions as do not individually
or in the aggregate have a Material Adverse Effect. This Agreement has
been, and the other instruments and documents contemplated hereby to
be executed and delivered by the Company at the Closing will, at the
Closing, have been, duly executed and delivered by the Company and
constitute (or will constitute at the Closing, as applicable) legal,
valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws relating to or affecting the
rights and remedies of creditors generally and to general principles
of equity (regardless of whether in equity or at law).
(b) The Company (i) is a corporation duly incorporated, validly
existing and in good standing under the Laws of the State of Indiana,
(ii) has all requisite corporate power and authority to own and
operate its assets and conduct its business as they are now being
operated and conducted, and (iii) is in good standing and is duly
qualified to transact business in each jurisdiction in which the
ownership or use of its assets or the conduct of its business requires
it to be so qualified, with such exceptions as do not individually or
in the aggregate have a Material Adverse Effect. The Company has
previously delivered or made available to GW true and correct copies
of its Articles of Incorporation and by-laws and all amendments
thereto. Except as set forth in Schedule 2.1 hereto, the Company has
no Subsidiaries or any investments in, or joint venture arrangements
with, any other Person.
(c) The authorized capital stock of the Company consists of
10,000,000 shares of common stock, no par value, of which 3,378,312
shares are issued and outstanding. All outstanding shares of capital
stock of the Company have been duly authorized and validly issued and
are fully paid and are owned by the Company's shareholders. The
Company has issued warrants that are outstanding to purchase 391,365
shares of Company Common Stock at an exercise price of $.01 per share,
and the Company has granted options that are outstanding to purchase a
total of 11,169 shares of Company Common Stock at an exercise price of
$.01 per share. Additionally, the Company is contractually obligated
to issue 98,000 shares of Company Common Stock to employees and to the
seller in connection with a prior acquisition transaction without
payment to the Company, in any such instance, of additional cash
consideration. The Company has provided a complete and accurate list
of its shareholders, optionholders and warrantholders, and the numbers
of shares, options and warrants held by each, to Parent. Except as set
forth in this Section 2.1(c), there are no outstanding (i) shares of
capital stock, other securities or phantom or other equity interests
of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or other securities of the
Company, or (iii) options or other rights to acquire from the Company
any capital stock, other securities or phantom or other equity
interests of the Company (the items in clauses (i), (ii) and (iii)
being referred to collectively as the "Company Securities"), and there
are no outstanding obligations of the Company, actual or contingent,
to issue or deliver or to repurchase, redeem or otherwise acquire any
Company Securities.
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Section 2.2. Absence of Litigation.
-----------------------
Except as set forth on Schedule 2.2, there is no Action pending
or, to the Knowledge of the Company, threatened against the Company,
at law or in equity, before or by any court, arbitrator, panel or
other Government Authority. The Company is not currently operating
under or subject to any order, award, stipulation, judgment, writ,
decree, determination or injunction of any arbitrator or Government
Authority. There is not pending against the Company any Action (i)
seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, (ii) seeking to prohibit or limit the
ownership or operation by the Surviving Corporation of any portion of
the assets or business of the Company, or (iii) which otherwise could
reasonably individually or in the aggregate be expected to have a
Material Adverse Effect.
Section 2.3. Compliance with Laws; Permits; Consents.
-----------------------------------------
(a) The Company is in compliance with all applicable Laws, except
for such non-compliance as would not individually or in the aggregate
reasonably be likely to have a Material Adverse Effect.
(b) The Company owns, or has full rights under, all licenses,
permits, consents, franchises, approvals and authorizations of any
Government Authority which are necessary for the conduct of its
business as currently conducted, all of which are listed on Schedule
2.3(b) hereto. Each of the foregoing is in full force and effect, and
the Company is in compliance with all of its obligations with respect
thereto, and no event has occurred which permits, or upon the giving
of notice or lapse of time or otherwise would permit, revocation or
early termination of any of the foregoing, with such exceptions as do
not individually or in the aggregate have a Material Adverse Effect.
(c) Except as set forth on Schedule 2.3(c) hereto, and excluding
any such actions or requirements becoming applicable to the Company as
a result of the Merger and that would not have been applicable to the
Company but for the Merger, no filing, consent, waiver, approval or
authorization of any Government Authority or of any third party is
required to be made or obtained on the part of the Company in
connection with the execution, delivery and performance by the Company
of this Agreement or the consummation by the Company of the
transactions contemplated hereby, including a liquidation and
dissolution of the Surviving Corporation subsequent to the Merger.
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Section 2.4. Assets; Title.
--------------
(a) Schedule 2.4(a) hereto contains descriptions of all vending
machine equipment owned by the Company (including serial numbers) and
all other items of tangible personal property of every kind or
description owned by the Company having a current net book value in
excess of $5,000.
(b) Schedule 2.4(b) hereto contains a description of all real
property owned or leased by the Company and a description of the
principal terms of all such leases.
(c) Schedule 2.4(c) hereto contains a description of all personal
property leased by the Company (including serial numbers of all leased
vending machine equipment) and a description of the principal terms of
all such leases.
(d) The Company has good and marketable title to, or valid and
existing leases or licenses for, all of its assets free and clear of
all Encumbrances, except for (i) liens for Taxes, assessments and
other governmental charges which are not due and payable or which may
thereafter be paid without penalty, (ii) the title and other interests
of lessor under a capital or operating lease or of a licensor under a
license or royalty agreement, (iii) Encumbrances arising by or through
GW or Parent, (iv) Encumbrances listed on Schedule 2.4(d) hereto and
(v) such minor imperfections in title as do not detract in any
material respect from the value or utility of the subject property in
the operation of its business (collectively, "Permitted
Encumbrances"). Except as disclosed on Schedule 2.4(d), the Company
has not signed any financing statement under the UCC or any security
agreement authorizing any secured party thereunder to file any such
financing statement with respect to any of its assets. The Company's
tangible assets are in good operating condition and repair, reasonable
wear and tear excepted.
Section 2.5. Intellectual Property.
----------------------
(a) Schedule 2.5(a) hereto contains a true, accurate and complete
list of all patents, trademarks, trade names and trade dress, whether
or not registered, and trade secrets, service marks and copyrights,
and corresponding registrations and applications for registrations
thereof, worldwide, which are now owned, used or held for use by the
Company. The Company has sole and exclusive beneficial and record
ownership and legal title of the Intellectual Property set forth on
Schedule 2.5(a) as being owned by the Company, free and clear of
Encumbrances (including any rights or claims of present or former
employees, consultants, officers and directors of the Company or any
other Persons), except Permitted Encumbrances, and of any obligations
to pay royalties or other remuneration to any Person. Schedule 2.5(a)
hereto further sets forth a true, accurate and complete list of all
Outstanding IP Licenses, identifying the other parties thereto and the
subject matter and date thereof, any royalty or other payment
obligations, the term thereof, and any exclusivity obligations. No
Outstanding IP License requires any payment of any nature, cash or
non-cash, or approval from, any past or present officer, director,
shareholder or Affiliate of the Company.
(b) Except as set forth in Schedule 2.5(b) hereto, or as do not
individually or in the aggregate have a Material Adverse Effect, (i)
the Company has sufficient title, ownership or IP Licenses of
Intellectual Property (whether or not listed in Schedule 2.5(b) hereto
or 2.5(a)) necessary for its business as now conducted without any
conflict with or infringement of the rights of others, and (ii) such
rights will not be adversely affected by the execution and delivery of
this Agreement or the consummation of the transactions contemplated
hereby.
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(c) Except as set forth in Schedule 2.5(c) hereto, or as do not
individually or in the aggregate have a Material Adverse Effect, (i)
the Company has not been or is not now interfering with, infringing
upon, misappropriating, or otherwise in conflict with or violating any
Intellectual Property Rights of other Persons, (ii) the Company has
not received any communications alleging that it has infringed,
misappropriated or violated or, by conducting its business, would
infringe, misappropriate or violate any of the Intellectual Property
Rights of any other Person and (iii) to the Knowledge of the Company
there is no basis for the making of any such allegation.
(d) There is not pending, nor to the Knowledge of the Company,
has there been threatened, any Action to contest, oppose, cancel or
otherwise challenge the validity, ownership or enforceability of any
of the Intellectual Property of the Company.
(e) To the Knowledge of the Company, except as set forth in
Schedule 2.5(e), no Person is infringing any of the Intellectual
Property of the Company, with such exceptions as do not individually
or in the aggregate have a Material Adverse Effect.
(f) To the Knowledge of the Company, none of the employees of the
Company is obligated under any contract (including IP Licenses,
Licenses, covenants or commitments of any nature) or other agreement
or arrangement (oral or written), or subject to any judgment, decree
or order of any Government Authority, that would interfere with the
use of the best efforts of such employee to promote the interests of
the Company or that would conflict with the business of the Company as
currently conducted. To the Knowledge of the Company, no consultant of
the Company is obligated under any contract (including IP Licenses,
Licenses, covenants or commitments of any nature) or other agreement
or arrangement (oral or written), or subject to any judgment, decree
or order of any Government Authority, that would interfere with such
consultant's performance of its contractual obligations or other
currently contemplated duties to the Company. Neither the execution
nor delivery of this Agreement or the consummation of the transactions
contemplated hereby, nor the carrying on of the Business by the
employees of and the consultants to the Company's, nor the conduct of
its business, will, to the Knowledge of the Company, conflict with or
result in a breach of the terms, conditions or provisions of, or
constitute a default under, any Law, contract, covenant or instrument
to or under which any of such employees or consultants is now subject
to or obligated. To the Knowledge of the Company, it will not be
necessary to utilize any inventions of the Company's employees or
consultants (or Persons the Company currently intends to hire or
retain as consultants) made prior to their employment or engagement by
the Company.
(g) Schedule 2.5(g) hereto sets forth a complete list of all
Domain Names now used by the Company. All such Domain Names are
currently registered and in good standing, and the Company is shown on
the records of the registrar thereof as the sole owner thereof. The
Company has not received notice or communication stating that any
Person is challenging the right of the Company to use any such Domain
Name.
10
(h) All Software which has been used and which is now being used
by the Company has and is being used in compliance with all applicable
IP License requirements, with such exceptions as do not individually
or in the aggregate have a Material Adverse Effect.
Section 2.6. Customers and Suppliers.
------------------------
(a) Schedule 2.6(a) hereto sets forth a list of each customer of
the Company which accounted for more than 1% of the net sales of the
Company, in any of the Company's fiscal years ended June 30, 2001,
2002 or 2003. Except for recognition that significant consolidation is
generally occurring in the grocery industry (the Company's primary
customer base), and that the acquisition of customers of the Company
by acquirors who do business with a competitor of the Company could
result in a loss of business for the Company, the Company has no
actual (but not constructive) Knowledge that any particular such
acquisition will occur or that any of such customers intends to cease
dealing with the Company or to alter in any material respect the
extent of such dealing or the terms thereof.
(b) Schedule 2.6(b) lists the top 10 suppliers and vendors of
goods and services to the Company during the period from January 1,
2002 to June 30, 2003 (based on invoice price) and the value of goods
supplied in such period (based on invoice price). The Company has no
Knowledge that any of such suppliers or vendors will not continue to
supply the current level and type of goods currently being provided to
the Company on similar terms and conditions except for price or other
adjustments made in the ordinary course of business.
Section 2.7. Labor; Employee Benefits.
-------------------------
(a) Schedule 2.7(a) hereto sets forth a complete and correct list
of the name, job title, base salary or wage rate and bonus entitlement
of each of the current Employees of the Company and whether or not
each such Employee is actively at work and, if not, the reason that
such Employee is not actively at work. Each Employee is legally
permitted to work in the United States.
(b) Schedule 2.7(b) hereto sets forth a complete and correct list
of (i) each "employee benefit plan" within the meaning of Section 3(3)
of ERISA, (ii) each other employee benefit plan, arrangement or
policy, including without limitation, any stock option, stock
purchase, stock award, deferred compensation, profit sharing,
incentive compensation, bonus, health, life insurance, cafeteria,
flexible spending, dependent care, fringe benefit, vacation pay,
holiday pay, disability, sick pay, workers compensation, unemployment,
severance pay, employee loan, educational assistance plan, policy or
arrangement, and (iii) any employment, indemnification, consulting or
severance agreement, whether or not written, which, in the case of
clauses (i), (ii) or (iii), is sponsored or maintained by the Company
or any of its Affiliates, or to which the Company or any of its
Affiliates contributes or is required to contribute on behalf of
current or former Employees, directors or consultants of the Company
or their beneficiaries or dependents ("Benefit Plans").
(c) Prior to the date of this Agreement, the Company has
delivered to GW complete and correct copies of (i) with respect to
each Benefit Plan, (A) the plan document, including any amendments (or
a written description of any unwritten plan) and (B) any summary plan
description; and (ii) any employee handbook, administrative or
personnel manual applicable to Employees.
11
(d) There is currently no audit or investigation by any
Government Authority or any claim (other than routine claims for
benefits in the ordinary course), action, suit or proceeding against
or involving any Benefit Plan.
(e) Each Benefit Plan that is a "group health plan" (as such term
is defined in Section 5000(b)(1) of the Code) complies in all material
respects with the applicable requirements of Section 4980B(f) of the
Code or any other similar Legal Requirements providing for
continuation coverage.
(f) No event has occurred and no condition exists with respect to
any Benefit Plan, any employee benefit plan maintained by an ERISA
Affiliate of the Company or any employee benefit plan previously
maintained by the Company or any of its ERISA Affiliates which could
subject GW, or any of its officers, directors, employees, agents or
Affiliates, directly or indirectly to any tax, penalty, fine or other
liability.
(g) All contributions and premium payments required to have been
paid under or with respect to any Benefit Plan have been timely paid.
(h) No Employees are represented by a union or other labor
organization or association, and to the Knowledge of the Company and
the Principal Shareholders, no such organizing efforts are now being
conducted with respect to the Employees. The Company has not, at any
time during the preceding three years, had a strike, work stoppage or
work slowdown, nor, to the Knowledge of the Company, is any such
action threatened. The Company is not involved in or, to the Knowledge
of the Company, threatened with, any labor dispute, arbitration,
lawsuit or administrative proceeding relating to labor matters
involving the Employees.
Section 2.8. No Brokerage.
-------------
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with this
Agreement, the other documents contemplated by this transaction or the
transactions contemplated hereby or thereby based upon any agreements,
written or oral, made by or on behalf of the Company or any of its
principal shareholders.
Section 2.9. Environmental Matters.
----------------------
Except for such exceptions as would not individually or in the
aggregate have a Material Adverse Effect, (a) the Company has complied
with and is currently in compliance with the provisions of all
applicable Environmental Laws; (b) the Company has not released any
Hazardous Materials into the environment at, on or from any real
property owned, used or leased by the Company in violation of any
Environmental Laws; and (c) there are no acts or omissions by the
Company that are reasonably likely to give rise to Losses under
Environmental Laws.
Section 2.10. Financial Statements.
---------------------
(a) Attached hereto as Schedule 2.10(a) are true and complete
copies of (i) audited consolidated balance sheets of the Company as of
June 30, 2001, June 30, 2002 and June 30, 2003 and the related audited
consolidated statements of income and cash flows for the Company for
the years then ended, together with an opinion thereon by the
Company's independent, certified public accountants.
12
(b) The Financial Statements (which, for purposes of this Section
2.10, shall include the financial statements referred to in Section
4.6 hereof) have been prepared in accordance with the books and
records of the Company. Except as set forth on Schedule 2.10(b)
hereto, the Financial Statements have been prepared in accordance with
GAAP, applied consistently with prior periods, and present fairly in
all material respects, in accordance with GAAP, the financial position
and results of operations of the Company as of the dates and for the
periods indicated.
Section 2.11. Absence of Certain Changes.
----------------------------
Except as set forth on Schedule 2.11 hereto, and except for the
taking of actions specifically permitted or contemplated by this
Agreement (including, without limitations, actions required to satisfy
conditions precedent set forth in Article V), since June 30, 2003, the
Company has conducted its business only in the ordinary course of
business consistent with past practices and there has been no:
(a) event or occurrence that individually or in the aggregate has
caused or is reasonably likely to cause a Material Adverse Effect;
(b) physical damage, destruction or loss in an amount exceeding
$5,000 in the aggregate affecting any assets of the Company which is
not covered by insurance or remedied within 30 days;
(c) increase in compensation payable or to become payable to any
employee, independent contractor, consultant or director of the
Company, or any bonus payment made or promised to any employee,
independent contractor, consultant or director of the Company, or any
material change in personnel policies, insurance benefits, Benefit
Plans or other compensation arrangements affecting the employees,
independent contractors, consultants or directors of the Company
(other than increases in wages and salaries or bonus payments made in
the ordinary course of business and payment of a bonus to Xxxxx
Xxxxxxx in an amount determined by the Shareholder Committee;
provided, however, that such bonus amount shall not exceed the
Estimated Excess (as defined in Section 1.8(b)) calculated without
regard to such bonus payment);
(d) waiver of any rights by the Company under any Contract which
waiver could have a Material Adverse Effect;
(e) incurrence of indebtedness or mortgage, pledge or subjection
to any Encumbrance (other than Permitted Encumbrances) of any of the
Company's assets;
(f) sale or transfer of the Company's assets (including
Intellectual Property) except, in each case, in the ordinary course of
business and consistent with past practice;
13
(g) change in any method of accounting or accounting practice or
tax calculating or tax reporting methods or practice except as
required by GAAP and applicable Law as in effect from time to time;
(h) entrance into any material transaction other than in the
ordinary course of business and consistent with past practice;
(i) termination of any material agreement with relationship with
any customer or any material change in any terms thereof;
(j) capital expenditure (or commitment therefor) by the Company
in excess of $5,000;
(k) labor union organizing activity, any actual or threatened
employee strikes, work stoppages, slow-downs or other labor disputes
or disturbances or any adverse change in relations with employees;
(l) material tax election or change in tax accounting by the
Company;
(m) declaration or payment of any dividend or other distribution
by the Company in respect of any of its capital stock or the
redemption by the Company of any of its capital stock; or
(n) authorization, approval, agreement or commitment to do any of
the foregoing.
Section 2.12. Taxes.
------
(a) The Company has timely filed all material Returns which are
required to be filed by it, which returns and reports are true,
correct and complete in all material respects, and paid all Taxes that
are shown as due pursuant to such Returns.
(b) There are no material actions or suits now pending, nor, to
the Knowledge of the Company, except as set forth on Schedule 2.12(b),
are there any material actions, suits, proceedings, investigations or
claims pending or proposed against the Company, nor are there any
pending audits by, the IRS or other Government Authority relating to
any Taxes or assessments, or any claims or deficiencies asserted with
respect thereto, that could result in a lien on the Company's assets.
(c) The Company has complied with all applicable Laws, rules and
regulations with respect to payments made to third parties and the
withholding of any payment of withheld Taxes and has timely withheld
from employee wages and other payments and paid over to the proper
taxing authorities all amounts required to be so withheld and paid
over for all periods under all applicable Laws.
(d) The Company is not a foreign person subject to withholding
under Section 1445 of the Code and the regulations promulgated
thereunder, and the Company will provide certification to that effect
to Parent at the Closing if requested by Parent to do so.
14
Section 2.13. Insurance.
-----------
Schedule 2.13 hereto lists all insurance policies owned or held
by the Company. All such policies are in full force and effect, all
premiums with respect thereto have been paid to the extent due, and no
notice of cancellation or termination has been received with respect
to any such policy.
Section 2.14. Contracts.
---------
(a) Schedule 2.14 hereto sets forth a list of all written, and a
description of all oral, contracts, agreements, arrangements and
understandings to which the Company is a party or by which it is
bound. True and complete copies of all written, and accurate summaries
of all oral, Contracts listed on Schedule 2.14 hereto have been
provided to Parent prior to the date of this Agreement. Except as set
forth on Schedule 2.14:
(i) All of the Contracts are valid and binding on and
enforceable against the Company in accordance with their terms
and, to the Knowledge of the Company, on and against the other
parties thereto, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization or
other similar Laws affecting the enforcement of creditors' rights
generally and except to the extent that injunctive or other
equitable relief is within the discretion of a court of competent
jurisdiction;
(ii) Neither the Company nor, to the Knowledge of the
Company, any other party to any Contract, is in breach or default
under any Contract;
(iii) The Company has not waived any right under any
Contract;
(iv) No event has occurred that, with the giving of notice
or the lapse of time or both, would constitute a breach or
default under any Contract; and
(v) There are no unresolved disputes under any of the
Contracts.
(b) There are no contracts, arrangements or agreements to which
the Company is a party or under which the Company or the Company's
assets are in any way bound that in any way excludes or restricts the
Company, or would exclude or restrict the Surviving Corporation or any
of its Affiliates, upon consummation of the transactions contemplated
hereby, from competing in any geographic area.
(c) The Company has not assigned any Contracts or subcontracted
any of its obligations under any Contracts, except the subcontracting
of electrical and plumbing work in connection with vending machine
installations or maintenance, as described on Schedule 2.14 hereto.
Section 2.15. Transactions with Affiliates.
---------------------------
Schedule 2.15 hereto sets forth a complete and accurate (a) list
of all contracts, agreements, leases, arrangements, understandings, or
commitments to which any shareholder of the Company, or any Associates
or Relatives (the "Insiders"), on the one hand, and the Company, on
the other hand, is a party and (b) description of all transactions
which are not the subject of the agreements described in clause (a)
above (the "Insider Transactions") between the Company, on one hand,
and any Insider, on the other hand, that have occurred since June 30,
2000.
15
Section 2.16. OSHA Matters.
--------------
The Company is in compliance with the requirements of the
Occupational Safety and Health Act and the regulations promulgated
thereunder and any similar Laws or regulations of any state or local
jurisdiction ("OSHA"). The Company has not received any citation from
the Occupational Safety and Health Administration or any comparable
administration of any state or local jurisdiction (an
"Administration") or any Administration inspector setting forth any
respect in which the facilities or operations of the Company are not
in compliance with OSHA, or the regulations under such act, which
non-compliance has not been corrected or remedied and any applicable
fines and/or penalties have not been paid in full to the satisfaction
of such Administration or inspector. Schedule 2.16 hereto sets forth a
list of all citations heretofore issued to the Company under OSHA and
correspondence from and to such Administration and any Administration
inspectors during the past five years.
Section 2.17. Undisclosed Liabilities; Adverse Factors.
-----------------------------------------
Schedule 2.17 sets forth all of the Company's outstanding debt,
whether secured or unsecured. Except as set forth on Schedule 2.17,
the Company is not a party to any loan agreement or the maker or
obligor under any promissory note or other similar undertaking,
including any guaranty, for the repayment of borrowed money or the
performance of any other obligation. The Company has no material
liabilities of any kind whatsoever, either accrued, absolute,
contingent, determined or determinable or otherwise, except for
liabilities reflected or reserved against in the Financial Statements
and current liabilities incurred in the ordinary course of business
since June 30, 2003 and no existing condition, situation or set of
circumstances has occurred that could reasonably result in such
liabilities. The Company has not received any written claims for
indemnification by any Person against the Company under any Law or
agreement or pursuant to the articles of incorporation or similar
organizational document or bylaws of the Company, and the Company has
no Knowledge of any facts or circumstances that might give rise to the
assertion of any such claims. The Company has no Knowledge of any
event, condition, set of facts or circumstances which is reasonably
likely to have a Material Adverse Effect that it has not disclosed to
Parent.
Section 2.18. Full Disclosure.
---------------
The Company has no Knowledge of any facts pertaining to the
Company or its business, excluding information relating to the general
economy and the Company's industry in general, which could reasonably
be expected to have a Material Adverse Effect and which have not been
disclosed in this Agreement, the Schedules hereto or the Financial
Statements.
ARTICLE III
Representations and Warranties of GW AND PARENT
Each of GW and Parent hereby represents and warrants to and for the
benefit of the Company and its shareholders as follows:
16
Section 3.1 Incorporation; Authorization.
----------------------------
(a) GW is a corporation duly incorporated, validly existing and
in good standing under the Laws of the State of Indiana. GW has all
requisite corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted.
Parent is a corporation duly incorporated, validly existing and in
good standing under the Laws of the State of Delaware.
(b) Each of GW and Parent has full power and authority (corporate
or otherwise) to execute, deliver and perform this Agreement and the
other instruments and documents contemplated hereby to be executed by
GW or Parent (as the case may be) and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and
performance by GW and Parent of this Agreement and the other
instruments and documents contemplated hereby to be executed by GW or
Parent have been duly authorized by all necessary action (corporate or
otherwise) on the part of GW or Parent (as the case may be). This
Agreement has been, and the other instruments and documents
contemplated hereby to be executed by GW or Parent at the Closing
will, at the Closing, have been, duly executed and delivered by GW or
Parent (as the case may be). This Agreement constitutes, and each
other instrument and document contemplated hereby to be executed by GW
or Parent at the Closing will, at the Closing, constitute, a legal,
valid and binding obligation of GW or Parent, enforceable against it
in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other Laws relating to or affecting the rights and
remedies of creditors generally and to general principles of equity
(regardless of whether in equity or at law).
(c) The execution, delivery and performance by GW and Parent of
this Agreement, and the other documents contemplated by this Agreement
to which GW or Parent is a party, and the consummation by GW and
Parent of the transactions contemplated hereby and thereby, do not and
will not (i) violate, conflict with or result in the breach of any
provision of the certificate or articles of incorporation or by-laws
of GW or Parent or (ii) violate or conflict with any Legal Requirement
applicable to GW or Parent or any other restriction of any kind or
character to which GW or Parent is subject, except as would not
individually or in the aggregate have a material adverse effect on the
ability of GW or Parent to perform its obligations under this
Agreement.
Section 3.2. Consents, etc.
--------------
No filing, consent, waiver, approval or authorization of any
Government Authority or of any third party on the part of GW or Parent
is required to be obtained or made by GW or Parent in connection with
the execution, delivery and performance by GW or Parent of this
Agreement or the other documents contemplated by this Agreement to
which GW or Parent is a party or the consummation by GW or Parent of
any of the transactions contemplated hereby or thereby, other than
those filings required by the Securities Exchange Act of 1934
(including any Form 8-K) and such other filings, consents, waivers,
approvals or authorizations as do not individually or in the aggregate
have a material adverse effect on the ability of GW or Parent to
perform its obligations under this Agreement.
17
Section 3.3. Brokers, Finders, etc.
----------------------
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with this
Agreement, the other documents contemplated by this Agreement or the
transactions contemplated hereby and thereby based upon any
agreements, written or oral, made by or on behalf of GW, Parent or any
of their Affiliates or by or on behalf of any director, officer,
employee, agent or GW, Parent or any of their Affiliates.
ARTICLE IV
Covenants
Section 4.1. Conduct of Business.
-------------------
Except (i) as otherwise specifically permitted or contemplated by
this Agreement (including without limitation actions required to
satisfy conditions precedent set forth in Article V) or (ii) with the
prior written consent of Parent, which written consent will not be
unreasonably withheld, conditioned or delayed, from and after the date
of this Agreement and until the Closing Date, the Company agrees that:
(a) the Company shall conduct its business as currently conducted
and only in the ordinary course of business consistent with past
practice;
(b) the Company shall use its reasonable best efforts to preserve
the business organization of the Company intact, to keep available to
the Surviving Corporation the services of the Employees, to preserve
for the Surviving Corporation the goodwill of the suppliers,
distributors, customers and others having business relationships with
the Company and to continue in full force and effect without material
modification any existing policies or binders of insurance currently
maintained by the Company;
(c) the Company shall promptly inform Parent in writing of any
specific event or circumstance of which the Company has Knowledge that
has had or could reasonably likely have, individually or in the
aggregate, taken together with other similar or related events or
circumstances, a Material Adverse Effect;
(d) the Company shall not:
(i) change or modify in any material respect
existing inventory management or credit and collection
policies, procedures and practices with respect to accounts
receivable;
(ii) enter into any Contract or commitment,
materially modify or terminate any Contract, or waive any
right or enter into any other transaction, which is not in the
ordinary course of business or is reasonably likely to have a
Material Adverse Effect;
(iii) incur any indebtedness or mortgage,
pledge or subject to any Encumbrance (other than Permitted
Encumbrances) any of its assets;
(iv) except as set forth on Schedule
4.1(d)(iv), change any compensation or benefits or grant any
material new compensation or benefits payable to or in respect
of any Employee except for regularly scheduled merit increases
in the ordinary course of business consistent with past
practice and a bonus to Xxxxx Xxxxxxx in an amount determined
by the Shareholder Committee; provided, however, such bonus
amount shall not exceed the Estimated Excess (as defined in
Section 1.8(b)) calculated without regard to such bonus
payment;
18
(v) sell, lease or otherwise transfer any
assets necessary in, or otherwise material to the conduct of,
its business;
(vi) change its method of accounting or
keeping its books of account or accounting practices, except
as required by GAAP;
(vii) engage in any practice or take or omit
to take any action which if taken or omitted prior to the date
hereof would constitute or result in a breach of any
representations or warranties contained herein;
(viii) enter into any Contract which
together with all other Contracts entered into after the date
hereof could result in annual revenues or liability in excess
of $5,000 in the aggregate under all such Contracts;
(ix) incur or commit to any capital
expenditure in excess of $5,000; or
(x) enter into, amend or exercise an
extension or renewal option for any lease of real property.
Section 4.2. Further Assurances.
-------------------
Each party hereto covenants from the date of this Agreement to the Closing
Date (and subject to the other terms of this Agreement):
(a) to cooperate with each other in determining whether filings
are required to be made with or consents required to be obtained from
any Government Authority in any jurisdiction in connection with the
consummation of the transactions contemplated by this Agreement and in
making or causing to be made any such filings promptly as soon as
practicable and to obtain timely any such consents (each party hereto
shall furnish to the other and to the other's counsel all such
information as may be reasonably required in order to effectuate the
foregoing action);
(b) to keep the other parties informed in all material respects
of any material communications received by such party from, or given
by such party to, any Government Authority and to consult with the
other parties in advance of any meeting or conference with any
Government Authority;
(c) to use its best efforts and cooperate with the other parties
hereto to obtain all consents required from third Persons whose
consent or approval is required pursuant to any Contract or otherwise
to consummate the transactions contemplated hereby; and
(d) without limiting the specific obligations of any party hereto
under any covenant or agreement hereunder, to use reasonable best
efforts to take all action and do all things necessary in order to
promptly consummate the transactions contemplated hereby, including,
without limitation, satisfaction, but not waiver, of the Closing
conditions set forth in Article V.
19
Section 4.3. Public Announcements.
--------------------
The Company shall not issue, or permit any of its agents or
Affiliates to issue, any press releases or otherwise make, or permit
any of its respective agents or Affiliates to make, any public or
other statements, with respect to this Agreement and the transactions
contemplated hereby without the prior written consent of Parent. The
Company and Parent shall prepare a joint notice of the Merger which
Parent may distribute to the customers of the Company promptly after
the date hereof.
Section 4.4. Release of Guarantors.
---------------------
Parent, GW and the Surviving Corporation shall use reasonable
commercial efforts to obtain the release or cancellation of all
personal guaranties of the Company's obligations by its officers,
directors or shareholders.
Section 4.5. Investigation.
----------------
From the date hereof until the Closing, the Company shall give GW
and Parent and their representatives (including their accountants,
consultants, counsel, employees and authorized agents), upon
reasonable notice and during normal business hours, full access to the
properties, contracts, employees, books, records and affairs of the
Company, and shall cause its officers, directors, employees, agents,
representatives, accountants and counsel to furnish to Parent all
documents, records and information (and copies thereof), as Parent may
reasonably request. No investigation or receipt of information by
Parent pursuant to, or in connection with, this Agreement, shall
diminish or obviate any of the representations, warranties, covenants
or agreements of the Company under this Agreement or the conditions to
the obligations of GW and Parent under this Agreement.
Section 4.6 Financial Statements.
--------------------
The Company shall deliver to GW and Parent as promptly as
practicable an audited balance sheet of the Company as of June 30,
2003 and the related statements of income and cash flow for the year
then ended, together with an unqualified opinion thereon by the
Company's independent certified public accountants.
Section 4.7. Interim Financial Reports.
--------------------------
Within 30 days after the end of each month prior to the Closing
Date, the Company shall furnish Parent with a copy of the monthly
financial reports for the Company for each such month. In addition,
the Company shall furnish Parent, upon request, with copies of regular
management reports, if any, concerning the operation of the business
of the Company within 10 days after such reports are prepared. The
Company shall take all necessary or appropriate steps prior to the
Closing to facilitate and permit the preparation of a balance sheet of
the Company as of the day immediately prior to the Closing and an
income statement for the period then ended.
Section 4.8. Confidentiality.
---------------
The parties hereto shall continue to observe the terms of, and
perform their obligations under, that certain letter agreement between
Parent and the Company dated March 20, 2002 (the "Confidentiality
Agreement"). Notwithstanding anything herein to the contrary, any
party to this Agreement (and any employee, representative, or other
agent of any party to this Agreement) may disclose to any and all
persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated by this Agreement and all
materials of any kind (including opinions or other tax analysis) that
are provided to it relating to such tax treatment and tax structure.
20
Section 4.9. Negotiations.
------------
From the date hereof until the termination of this Agreement in
accordance with its terms, the Company agrees that the Company and its
principal shareholders will negotiate exclusively and in good faith
with GW and Parent with respect to any transaction involving the sale,
transfer or other disposition (by merger or otherwise) of the Company
or its assets; and none of the Company, its Affiliates, or any of
their respective officers, directors, employees, lenders, investment
banking firms, advisors or other agents, or any Person acting on their
behalf, will solicit any inquiries or proposals by, or engage in any
discussions or negotiations with, or furnish any nonpublic information
to or enter into any agreement with any Person other than GW and
Parent concerning the sale or other disposition of the Company or its
assets or the merger, consolidation, sale of securities or other
similar transaction involving the Company.
Section 4.10. Options and Warrants.
--------------------
The Company shall, at or prior to the Closing, cause each option,
warrant or other right or obligations to acquire shares of Company
Common Stock, or any other Company Securities, to be exercised or
canceled.
Section 4.11. Meeting of Company Shareholders.
-------------------------------
The Company shall cause a meeting of its shareholders (the
"Shareholder Meeting") to be duly called and held as soon as
reasonably practicable, with written notice thereof to be given and a
summary of this Agreement and any other relevant disclosure
information to be provided in accordance with applicable Law, for the
purpose of voting on the approval and adoption of this Agreement.
Notwithstanding the foregoing, the Company may take such actions as
are required by applicable Law to obtain the written consent (in lieu
of the Shareholder Meeting) of the shareholders of the Company to the
approval of this Agreement. In connection with the Shareholder Meeting
or the solicitation of written consents in lieu thereof, the Company
will use its best efforts to obtain approval of this Agreement and
will otherwise comply with all legal requirements applicable to the
Shareholder Meeting or the solicitation of written consents in lieu
thereof. GW and Parent shall have the right to review and approve all
written solicitation materials, which approval shall not be
unreasonably withheld or delayed, and supply for inclusion therein
such information concerning GW and Parent as they may reasonably
require. The written materials submitted to the Company's shareholders
will contain the affirmative recommendation of the board of directors
of the Company in favor of the adoption of this Agreement; provided,
however, that no director or officer of the Company shall be required
to violate any fiduciary duty or other requirement imposed by law in
connection therewith.
Section 4.12. Not a Reorganization.
----------------------
No party shall take any action to treat the Merger as a
reorganization under Section 368 of the Code.
Section 4.13. Personnel.
----------
The Surviving Corporation and Parent shall consider in good faith
the continued employment after the Closing of the personnel of the
Company. If the employment of any such personnel is terminated within
90 days after the Closing, an amount equal to any severance liability
therefor relating to periods prior to the Closing shall, to the extent
such liability is not included as a current liability for purposes of
determining Closing Working Capital hereunder, be deducted from the
First Deferred Payment or the Second Deferred Payment, at the option
of Parent; provided, however, the aggregate amount of severance
liability potentially deductible from the First Deferred Payment and
Second Deferred Payment under this Section is limited to Twenty
Thousand Dollars ($20,000).
21
Section 4.14. Tax Returns.
-------------
The Surviving Corporation shall prepare and file all Returns for
the Company which have not been filed by the Closing Date and which
become due thereafter, including a Return for the short year ending on
the Closing Date. The Company's outside accounting firm, Xxxx Sapper &
Xxxxxx, shall be used to prepare such Returns if that firm's fees for
those services are commercially reasonable. The Shareholders (as
hereafter defined) shall indemnify the Surviving Corporation and
Parent for any Taxes shown thereon to be due to the extent not
reflected as liabilities in the calculation of Closing Working
Capital, which amount may be deducted from the First Deferred Payment
or the Second Deferred Payment, at the option of Parent. If the amount
of Taxes included as liabilities in the calculation of Closing Working
Capital exceeds the amount of Taxes shown to be due on such Returns,
the excess amount shall be added to the amounts payable by the Parent
and/or the Surviving Corporation as the First Deferred Payment or, if
it has already been made, the Second Deferred Payment.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1. Conditions Precedent to Obligations of GW and Parent.
------------------------------------------------------
The obligations of GW and Parent to consummate and effect this
Agreement and the transactions contemplated hereby (including the
Merger) are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions (any one or more of which
may be waived in writing in whole or in part by GW and Parent in their
sole discretion):
(a) Representations, Warranties and Covenants.
----------------------------------------
Each of the representations and warranties of the Company
contained in this Agreement or in any certificate, document or
instrument delivered in connection herewith shall be true and correct
in all material respects on and as of the date of this Agreement and
at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing,
except for representations and warranties that speak as of a specific
date or time other than the Closing (which need only be true and
correct in all material respects as of such date or time) and except
for representations or warranties that are rendered inaccurate solely
by reason of the taking or occurrence of actions or events
specifically permitted or contemplated by this Agreement (including,
without limitation, actions required to satisfy conditions precedent
set forth in Article V); provided, however, that if any portion of any
such representation or warranty is already qualified by materiality,
for purposes of determining whether this condition has been satisfied
with respect to such portion of such representation or warranty, such
portion of such representation or warranty as so qualified shall be
true and correct in all respects. The Company shall have performed and
complied in all material respects with all covenants and agreements
required by this Agreement to be performed or complied with by it at
or prior to the Closing. The Company shall xxxxxxx XX and Parent with
a certificate dated the Closing Date and signed by a senior executive
officer of the Company to the effect that the conditions set forth in
this Section 5.1(a) have been satisfied.
22
(b) Required Consents.
----------------
The Company shall have obtained, each in form and substance
reasonably satisfactory to GW and Parent in their sole and absolute
discretion, all statutory and regulatory consents and approvals which
are required under any applicable Laws in order to consummate the
transactions contemplated hereby and to permit GW to conduct the
business of the Company as conducted as of the date of this Agreement
and all other necessary consents and approvals of third Persons to the
transactions contemplated hereby.
(c) Injunction; Litigation; Legislation.
-----------------------------------
(i) None of the parties hereto shall be subject to any order or
injunction restraining or prohibiting the consummation of the
transactions contemplated hereby, (ii) no action or proceeding shall
have been instituted before any court or Government Authority to
restrain or prohibit, or to obtain substantial damages in respect of,
the consummation of the transactions contemplated hereby, (iii) none
of the parties hereto shall have received written notice from any
Government Authority of (A) its intention to institute any action or
proceeding to restrain, enjoin or nullify this Agreement or the
transactions contemplated hereby, or to commence any investigation
(other than a routine letter of inquiry, including a routine civil
investigative demand) into the consummation of the transactions
contemplated hereby or (B) the actual commencement of such
investigation, (iv) there shall not be any pending or threatened
litigation, suit, action or proceeding by any Person which would
reasonably be expected to limit or materially adversely affect the
Surviving Corporation's ability to conduct the business of the Company
as conducted as of the date of this Agreement and (v) no statute, rule
or regulation shall have been promulgated or enacted by any Government
Authority, which would prevent or make illegal the consummation of the
transactions contemplated hereby.
(d) Documents.
----------
The Company shall have delivered all the certificates,
instruments, contracts and other documents specified to be delivered
by each such person hereunder.
(e) Customer Consents.
--------------------
Without limiting the generality of Section 6.1(b), each customer
of the Company whose contract or arrangement with the Company
restricts or prohibits the assignment thereof or a change of control
of the Company shall have confirmed its consent to the Merger and to
any deemed assignment, by reason of any subsequent liquidation and
dissolution of the Surviving Corporation, of any and all contracts and
arrangements between such customer and the Company, and the assumption
thereof by the Surviving Corporation and/or its parent (with the
understanding that the Surviving Corporation and/or its parent may use
the trade name "Glacier Water").
(f) Evidence of Insurance.
----------------------
The Company shall have delivered to Parent evidence of the
insurance policies set forth in Schedule 2.13 hereto.
(g) Amendment of Real Property Lease.
-------------------------------
The Lease dated as of October 1, 2000 between the Company and
Gilliatte Family Realty, LLC shall have been amended to reflect
consent to the Merger and to any deemed assignment, by reason of any
subsequent liquidation and dissolution of the Surviving Corporation,
and to provide that the Surviving Corporation and/or its parent may
terminate such lease at any time upon 60 days' notice without any cost
or liability.
(h) Amendment of Personal Property Lease.
-------------------------------------
The Equipment Lease dated December 26, 1996 between D.J. Leasing,
Inc. and the Company, as heretofore amended, shall have been amended
to provide for monthly lease payments of $26,522.70 through November
26, 2006 and an option to purchase the equipment leased thereunder at
a price of $404,038.40 as of December 26, 2006.
23
(i) Employment Agreements.
-----------------------
The Surviving Corporation and Xxxxx Xxxxxxx shall have entered
into an employment agreement on substantially the terms set forth in
Exhibit C hereto.
(j) Shareholder Approval.
---------------------
The shareholders of the Company shall have approved this
Agreement and the Merger in accordance with applicable law.
(k) Options and Warrants.
---------------------
All options, warrants or other rights or obligations to acquire
shares of Company Common Stock, or any other Company Securities, shall
have been exercised or canceled and no rights or obligations to
acquire Company Common Stock, or any other Company Securities, shall
be outstanding.
(l) Agreements Not to Compete.
--------------------------
The following persons shall have entered into agreements not to
compete with the Surviving Corporation in substantially the form set
forth in Exhibit E hereto: Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxx Xxxxxxx,
Xx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxxx and Xxxxx Xxxxx.
(m) Dissenting Shares.
-----------------
No more than 39,000 shares of Company Common Stock shall be
Dissenting Shares.
Section 5.2. Conditions Precedent to Obligations of the Company.
--------------------------------------------------
The obligations of the Company to consummate and effect this
Agreement and the transactions contemplated hereby (including the
Merger) are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions (any one or more of which
may be waived in writing in whole or in part by the Company in its
sole discretion):
(a) Representations, Warranties and Covenants.
----------------------------------------
Each of the representations and warranties of GW and Parent
contained in this Agreement or in any certificate, document or other
instrument delivered in connection herewith shall be true and correct
in all material respects on and as of the date of this Agreement and
at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing,
except for representations and warranties that speak as of a specific
date or time other than the Closing (which need only be true and
correct in all material respects as of such date or time); provided,
however, that if any portion of any such representation or warranty is
already qualified by materiality, for purposes of determining whether
this condition has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or
warranty as so qualified shall be true and correct in all respects. GW
and Parent shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be
performed and complied with by them at or prior to the Closing. GW and
Parent shall furnish the Company and the Principal Shareholders with a
certificate dated the Closing Date and signed by a senior executive
officer of GW and Parent to the effect that the conditions set forth
in this Section 5.2(a) have been satisfied.
24
(b) Injunction; Litigation; Legislation.
------------------------------------
(i) None of the parties hereto shall be subject to any order or
injunction restraining or prohibiting the consummation of the
transactions contemplated hereby, (ii) no action or proceeding shall
have been instituted before any court or Government Authority to
restrain or prohibit, or to obtain substantial damages from the
Company or the Principal Shareholders in respect of, the consummation
of the transactions contemplated hereby, (iii) none of the parties
hereto shall have received written notice from any Government
Authority of (A) its intention to institute any action or proceeding
to restrain, enjoin or nullify this Agreement or the transactions
contemplated hereby, or to commence any investigation (other than a
routine letter of inquiry, including a routine civil investigative
demand) into the consummation of the transactions contemplated hereby
or (B) the actual commencement of such investigation, and (iv) no
statute, rule or regulation shall have been promulgated or enacted by
any Government Authority, which would prevent or make illegal the
consummation of the transactions contemplated hereby.
(c) Documents.
---------
GW and Parent shall have delivered all the certificates,
instruments, contracts and other documents specified to be delivered
by them hereunder.
(d) Employment Agreement.
----------------------
The Surviving Corporation and Xxxxx Xxxxxxx shall have entered
into an employment agreement in substantially the form set forth in
Exhibit C hereto.
(e) Shareholder Approval.
--------------------
The shareholders of the Company shall have approved this
Agreement and the Merger in accordance with applicable law.
ARTICLE VI
Survival; Indemnification; SET-OFF
Section 6.1. Survival.
--------
All of the representations, warranties, covenants and agreements
of the parties contained in this Agreement or in any certificate,
document or other instrument delivered in connection with this
Agreement shall survive (and not be affected in any respect by) the
Closing, but such representations and warranties (except as set forth
in Sections 2.9 and 2.12) shall terminate on, and no claim or Action
with respect thereto may be brought, after the second anniversary of
the Closing Date. Notwithstanding the foregoing, actions for fraud or
intentional misrepresentation may be brought without regard to any
limitations on the survival of any underlying representations or
warranties.
Section 6.2 Indemnification.
----------------
The shareholders of the Company as of the Effective Time (the
"Shareholders") shall indemnify GW and Parent, and GW and Parent shall
indemnify the Shareholder Indemnified Persons, as set forth below:
(a) Subject to Section 6.1 and to this Section 6.2, the
Shareholders hereby agree to indemnify and hold harmless GW and
Parent and their directors, officers, employees, agents and
Affiliates (collectively, the "GW Indemnified Persons") for,
from, and against all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties,
disbursements and expenses (including any reasonable Legal
Expenses) (collectively, "Losses") based upon, arising out of,
asserted against, resulting from, imposed on, or otherwise in
respect of (i) the breach of any representation or warranty of
any of the Company contained in or made pursuant to this
Agreement (notwithstanding anything to the contrary contained in
this Agreement, to determine if there had been an inaccuracy or
breach of a representation or warranty of the Company and the
Losses arising from such inaccuracy or breach, such
representation and warranty shall be read as if it were not
qualified by materiality, including, without limitation,
qualifications indicating accuracy in all material respects, or
accuracy except to the extent the inaccuracy will not have a
Material Adverse Effect), (ii) the breach by the Company of, or
the failure by the Company to perform, any of the covenants or
other agreements contained in this Agreement to be performed by
the Company prior to or at the Closing, (iii) any uninsured
liability arising out of or in connection with the accidents or
incidents referred to on Schedule 2.2, and (iv) any Taxes owed in
connection with the matters disclosed on Schedule 2.12(b) to the
extent not included in the calculation of Final Working Capital.
25
(b) Subject to Section 6.1 and to this Section 6.2, GW and
Parent hereby jointly and severally agree to indemnify and hold
harmless the Shareholders, and the respective officers,
directors, employees, agents and Affiliates of each of them
(collectively, the "Shareholder Indemnified Persons"), for, from
and against any Losses based upon, arising out of, asserted
against, resulting from, imposed on, or otherwise in respect of
(i) the breach of any representation or warranty of GW or Parent
contained in or made pursuant to this Agreement, (ii) the breach
by GW or Parent of, or failure by GW or Parent to perform, any of
its covenants or other agreements contained in this Agreement, or
(iii) any claims asserted against any of them as a guarantor of,
or otherwise with respect to, any indebtedness or obligations of
the Company.
(c) If any GW Indemnified Person, on the one hand, or any
Shareholder Indemnified Person, on the other hand (the
"Indemnified Person"), has a claim or potential claim or receives
notice of any claim, potential claim or the commencement of any
Action which could give rise to an obligation on the part of the
Shareholders, on the one hand, or GW or Parent, on the other
hand, other than a Third Party Indemnification Claim (as defined
below), to provide indemnification (the "Indemnifying Party")
pursuant to this Section 6.2, the Indemnified Person shall
promptly give the Indemnifying Party notice thereof (the
"Indemnification Claim"); provided, however, that the failure to
give such prompt notice shall not prevent any Indemnified Person
from being indemnified hereunder for any Losses, except to the
extent that the failure to so promptly notify the Indemnifying
Party, actually damages the Indemnifying Party.
(d) In the event of a claim, a potential claim or the
commencement of any Action by a third party which could give rise
to an obligation to provide indemnification pursuant to this
Article VI, the Indemnified Person will give the Indemnifying
Party prompt written notice thereof (the "Third Party
Indemnification Claim"), but in any event not later than 15
calendar days after receipt of notice of such third party claim;
provided, however, that the failure of the Indemnified Person to
so notify the Indemnifying Party within such 15-day period shall
not prevent any Indemnified Person from being indemnified for any
Losses, except to the extent that the failure to so promptly
notify the Indemnifying Party actually damages the Indemnifying
Party or materially prejudices the Indemnifying Party's ability
to defend against such claim.
26
(e) Any Indemnification Claim or Third Party Indemnification
Claim shall describe the claim in reasonable detail. If the
Indemnifying Party confirms in writing to the Indemnified Person
within 15 days after receipt of the Third Party Indemnification
Claim the Indemnifying Party's responsibility to indemnify and
hold harmless the Indemnifying Party therefor and within such
15-day period demonstrates to the Indemnified Person's reasonable
satisfaction that, as of such time, the Indemnifying Party has
sufficient financial resources in order to indemnify for the full
amount of any potential liability in connection with such claim,
the Indemnifying Party may elect to compromise or defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's
own counsel, which counsel shall be reasonably satisfactory to
the Indemnified Person, any Third Party Indemnification Claim. If
the Indemnifying Party elects to compromise or defend any such
third party claim, such Indemnifying Party shall within 15 days
(or sooner, if the nature of the asserted third party claim so
requires) notify the Indemnified Person of such Indemnifying
Party's intent to do so, and the Indemnified Person shall
cooperate, at the expense of the Indemnifying Party, in the
compromise of, or defense against, any such third party claim;
provided, however, that (i) the Indemnified Person may, if such
Indemnified Person so desires, employ counsel at such Indemnified
Person's own expense to assist in the handling (but not control
the defense) of any such third party claim, (ii) the Indemnifying
Party shall keep the Indemnified Person advised of all material
events with respect to any such third party claim, (iii) the
Indemnifying Party shall obtain the prior written approval of the
Indemnified Person before ceasing to defend against such third
party claim or entering into any settlement, adjustment or
compromise of such third party claim involving injunctive or
similar equitable relief being asserted against any Indemnified
Person or any of its or his Affiliates and (iv) no Indemnifying
Party will, without the prior written consent of each Indemnified
Person, settle or compromise or consent to the entry of any
judgment in any pending or threatened action in respect of which
indemnification may be sought hereunder (whether or not any such
Indemnified Person is a party to such action), unless such
settlement, compromise or consent by its terms obligates the
Indemnifying Party to pay the full amount of the liability in
connection with such third party claim and includes an
unconditional release of all such Indemnified Parties from all
liability arising out of such claim, action, suit or proceeding.
Notwithstanding anything contained herein to the contrary, the
Indemnifying Party shall not be entitled to have sole control
over (and if it, he or she so desires, the Indemnified Person
shall have sole control over) the defense, settlement, adjustment
or compromise of (i) any third party non-monetary claim that
seeks an order, injunction or other equitable relief against any
Indemnified Person or its Affiliates which, if successful, is
reasonably likely to interfere with the business, assets,
liabilities, obligations, prospects, financial condition or
results of operations of the Indemnified Person or any of its
Affiliates and (ii) any matter relating to Taxes of GW or any of
its Affiliates. If the Indemnifying Party elects not to
compromise or defend against the asserted liability, or fails to
notify the Indemnified Person of its, his or her election as
herein provided, the Indemnified Person may, at the Indemnifying
Party's expense, pay, compromise or defend against such asserted
liability. In connection with any defense of a third party claim
(whether by the Indemnifying Parties or the Indemnified Parties),
all of the parties shall, and shall cause their respective
Affiliates to, cooperate in the defense or prosecution thereof
and to in good faith retain and furnish such records, information
and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably
requested by a party hereto in connection therewith.
27
(f) If any Indemnified Person becomes entitled to any
indemnification from an Indemnifying Party pursuant to this
Agreement, such indemnification payment shall be made in cash
upon demand; provided, however, that if a GW Indemnified Person
is the Indemnified Person, the amount owed shall be limited to,
and the only available source of payment shall be the making of a
corresponding reduction of, the amount of First Deferred Payment
and/or Second Deferred Payment that has not yet become payable to
the holders of Company Common Stock pursuant to Section 1.10, and
the Shareholders and the members of the Shareholder Committee,
individually or as a group, shall not have any personal liability
for the payment of any indemnification obligations hereunder.
Section 6.3 Directors and Officers.
-----------------------
The Company, as the Surviving Corporation in the Merger, will
observe any indemnification provisions now existing in the articles of
incorporation or bylaws of the Company for the benefit of any
individual who served as a director or officer of the Company at any
time prior to the Effective Time (including, without limitation, to
the extent indemnifiable under such provisions, indemnification with
respect to matters relating to this Agreement and the Merger).
ARTICLE VII
Miscellaneous
Section 7.1. Counterparts.
-------------
This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall
become effective when one or more counterparts have been signed by a
party and delivered to the other parties. Copies of executed
counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed
counterparts for purposes of this Section 7.1, provided that receipt
of copies of such counterparts is confirmed.
Section 7.2. Governing Law; Arbitration.
--------------------------
This Agreement shall for all purposes be governed by and
interpreted in accordance with the laws of the State of California,
without regard to any of its conflicts of laws provisions, as those
laws are applied to contracts entered into and to be performed
entirely in the State of California. Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "Rules") and, to
the extent that it does not conflict with the Rules, the arbitration
law of the State of California. There shall be one arbitrator named in
accordance with the Rules. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
The arbitration shall be conducted in Los Angeles, California, but
hearings may be held at any place designated by the arbitrator and
approved by each party hereto. The parties acknowledge that the breach
by any party of any of the provisions of Article V of this Agreement
would not be fully compensable by money damages and that the
arbitrator may award injunctive or other equitable relief to deal with
any such breach. The arbitrator shall include in the award payment to
the prevailing party of its attorneys' and expert fees and other
expenses incurred in connection with the arbitration. The prevailing
party shall also be entitled to attorneys fees and costs with respect
to any civil court action or process necessary for an enforcement of
an arbitration decision.
Section 7.3. Entire Agreement; No Third Party Beneficiary.
----------------------------------------------
Except for the Confidentiality Agreement, this Agreement contains
the entire agreement between the parties with respect to the subject
matter hereof and all prior negotiations, writings and understandings
relating to the subject matter of this Agreement are merged in and are
superseded and canceled by, this Agreement. This Agreement is not
intended to confer upon any Person not a party hereto (and their
successors and assigns permitted hereby), other than the Indemnified
Persons under Article VI, any rights or remedies hereunder.
28
Section 7.4. Expenses.
--------
Whether or not the Merger is consummated, all Legal Expenses,
investment banking fees and all other costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
Section 7.5. Notices.
---------
All notices and other communications hereunder shall be in
writing and given by certified or registered mail, overnight delivery
service such as Federal Express, telecopy (or like transmission) or
personal delivery against receipt to the party to whom it is given at
such party's address or telecopier number set forth below or such
other address or telecopier number as such party may hereafter specify
by notice to the other parties hereto given in accordance herewith.
Any such notice or other communication shall be deemed to have been
given as of the date so personally delivered or transmitted by
telecopy or like transmission, on the next business day when sent by
overnight delivery service or five days after the date so mailed.
If to the Company prior to the Effective Time:
Water Island, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Fax: 000-000-0000
Attention: Xxxxx Xxxxxxx, President
with a copy to:
Leagre Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Fax: 000-000-0000
Attention: Xxxxx Xxxxxxx
If to the Company after the Effective Time:
Water Island Shareholder Committee
c/o Xx Xxxxxxx
Xxxxxxx Xxxxxxxxx
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
with a copy to:
29
Leagre Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Fax: 000-000-0000
Attention: Xxxxx Xxxxxxx
If to GW or Parent:
GW Services, Inc. or Glacier Water Services, Inc.,
respectively
0000 Xx Xxxxxx Xxxxx, #000
Xxxxx, XX 00000-0000
Fax: 000-000-0000
Attention: Xxxxx XxXxxxxxx
with copies to:
Xxxxx Xxxxxxxx Investment Management, Inc.
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxxx X. Xxxxxxxxxx
and
Weissmann, Wolff, Bergman, Coleman, Grodin & Evall, LLP
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000-0000
Fax: 000-000-0000
Attention: Xxxxxx X. Xxxx
Section 7.6. Successors and Assigns.
-----------------------
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns; provided, however, that no party hereto may assign his, her
or its rights or delegate his, her or its obligations, in whole or in
part, under this Agreement without the prior written consent of the
other parties hereto. GW may assign any or all of its rights and
obligations under this Agreement to any of its Affiliates. Any
assignment in violation of this Agreement shall be null and void ab
initio.
Section 7.7. Headings.
-----------
The Section, Article and other headings contained in this
Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement.
Section 7.8. Amendments and Waivers.
------------------------
This Agreement may not be modified or amended except by an
instrument or instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought. Any party
hereto may, only by an instrument in writing, waive compliance by any
other parties hereto with any term or provision hereof on the part of
such other party or parties hereto to be performed or complied with.
The waiver by any party hereto of a breach of any term or provision
hereof shall not be construed as a waiver of any subsequent breach.
30
Section 7.9. Interpretation; Absence of Presumption.
--------------------------------------
(a) For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender
shall be held to include the other gender as the context requires,
(ii) the terms "hereof," "herein," and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules and Exhibits
hereto) and not to any particular provision of this Agreement, and
Article, Section, paragraph, Exhibit and Schedule references are to
the Articles, Sections, paragraphs, Exhibits, and Schedules to this
Agreement unless otherwise specified, (iii) the word "including" and
words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires
or unless otherwise specified, (iv) the word "or" shall not be
exclusive, and (v) provisions shall apply, when appropriate, to
successive events and transactions. Items or information may be
disclosed in the Schedules hereto which the Company or the Principal
Shareholders are not required to disclose under the Agreement;
disclosure of such items or information shall not affect (directly or
indirectly) the interpretation of the Agreement or the scope of the
disclosure obligation under the Agreement. In addition, inclusion of
such information herein shall not be construed as an admission that
such information is "material" for any purpose.
(b) With regard to each and every term and condition of this
Agreement and any and all agreements and instruments subject to the
terms hereof, the parties hereto understand and agree that the same
have or has been mutually negotiated, prepared and drafted, and if at
any time the parties hereto desire or are required to interpret or
construe any such term or condition or any agreement or instrument
subject hereto, no consideration shall be given to the issue of which
party hereto actually prepared, drafted or requested any term or
condition of this Agreement or any agreement or instrument subject
hereto.
Section 7.10. Severability.
------------
Any provision hereof which is invalid or unenforceable shall be
ineffective only to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof,
provided, however, that the parties shall attempt in good faith to
reform this Agreement in a manner consistent with the intent of any
such ineffective provision for the purpose of carrying out such
intent.
Section 7.11. Specific Performance.
----------------------
Each of the parties hereto acknowledges that GW and the Parent
would not have an adequate remedy at law for money damages in the
event that any of the covenants or agreements set forth in this
Agreement were not performed by the Company in accordance with its
terms and therefore the Company agrees that GW and the Parent shall be
entitled to specific performance, injunctive and other equitable
relief in addition to any other remedy to which they may be entitled
at law or in equity (without the necessity of proving the inadequacy
as a remedy of money damages).
Section 7.12. Business Days.
--------------
If any date provided for in this Agreement shall fall on a day
which is not a Business Day, the date provided for shall be deemed to
refer to the next Business Day.
31
Section 7.13. Termination.
------------
(a) This Agreement may be terminated at any time prior to the
Closing by (i) the written consent of all of the parties hereto or
(ii) any party hereto, if the Closing has not occurred by the close of
business on November 15, 2003; provided, however, that in the event of
a termination under clause (ii) above, the Company, in the case of a
termination by the Company, or GW or Parent, in the case of a
termination by either such party, is not in material default hereunder
at such time of termination.
(b) In the event of termination of this Agreement pursuant to
this Section 7.13 other than by the written consent of all parties,
written notice thereof shall forthwith be given by the terminating
party to the other parties hereto, and this Agreement shall thereupon
terminate and become void and have no effect, and the transactions
contemplated hereby shall be abandoned without further action by the
parties hereto, except that the provisions of this Section 7.13 and of
Sections 4.8 and 7.4 shall survive the termination of this Agreement;
provided, however, that such termination shall not relieve any party
hereto of any liability for any breach of this Agreement occurring
prior to such termination.
Section 7.14. Legal Expenses.
-------------
In any action or proceeding commenced to enforce this Agreement
or any of the provisions hereof, or to obtain damages or other relief
on account of the breach thereof (including without limitation redress
for the improper reduction or set-off of an indemnification claim or
other amount by GW or Parent against amounts payable under Section
1.10), the prevailing party in any such action or proceeding shall be
entitled, in addition to any award or relief granted, to recover its
Legal Expenses from the non-prevailing party or parties.
32
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the day first above written.
GW:
GW MERGERCO, INC.
By:/s/ Xxxxx XxXxxxxxx
---------------------------
Xxxxx XxXxxxxxx, Chief Executive Officer
PARENT:
GLACIER WATER SERVICES, INC.
By: /s/ Xxxxx XxXxxxxxx
---------------------------
Xxxxx XxXxxxxxx, Chief Executive Officer
THE COMPANY:
WATER ISLAND, INC.
By: /s/ Xxxxx Xxxxxxx
-----------------
Xxxxx Xxxxxxx, President
33
EXHIBIT D
PLAN OF MERGER
THIS PLAN OF MERGER (this "Plan") is made and entered into as of the _____
day of __________, 2003, among and between GW MERGERCO, INC., an Indiana
corporation ("GW"), GLACIER WATER SERVICES, INC., a Delaware corporation (the
"Parent"), and WATER ISLAND, INC., an Indiana corporation (the "Company").
RECITALS
A. In an Agreement and Plan of Merger, dated as of August 22, 2003 (the "Merger
Agreement"), entered into by the parties, the parties have agreed to the merger
of GW into the Company pursuant to the provisions of, and with the effect
provided in, the Indiana Business Corporation law (the "IBCL").
B. The Merger Agreement and this Plan have been adopted and approved by the
Board of Directors and the shareholders of the Company.
C. The Merger Agreement and this Plan have been adopted and approved by the
Board of Directors of GW and by Parent as the sole shareholder of GW.
AGREEMENTS
NOW, THEREFORE, in consideration of and pursuant to the Merger
Agreement, the parties hereto agree as follows:
Description Of Merger
The Merger. Pursuant to the terms and provision of this Plan and in
accordance with the Merger Agreement and the IBCL, GW shall merge with and into
the Company (the "Merger").
Surviving Corporation. The Company shall be the surviving corporation
in the Merger (the "Surviving Corporation") and its corporate existence shall
continue as the Surviving Corporation from and after the Effective Time (as
defined below).
Merging Corporation. GW shall be the merging corporation under the
Merger and its corporate identity and existence, separate and apart from the
Surviving Corporation, shall cease at the Effective Time.
Effective Time. The Merger shall be effective immediately upon the
filing Articles of Merger, to which this Plan will be attached, with the Indiana
Secretary of State (the "Effective Time").
Effect Of Merger
Surviving Corporation. The Surviving Corporation shall continue to be
named "Water Island, Inc." after the Effective Time. The Articles of
Incorporation and Bylaws of GW in effect immediately prior to the Effective Time
shall be, respectively, the Articles of Incorporation and Bylaws of the
Surviving Corporation from and after the Effective Time and until amended or
repealed.
Effect of the Merger. The Merger shall have all of the effects provided
by the IBCL. The Surviving Corporation shall continue to exist from and after
the Effective Time as a corporation under the IBCL and shall succeed to, possess
and enjoy all the property, rights, privileges, immunities, powers, purposes and
franchises, both of a public and a private nature, and be subject to all the
restrictions, disabilities and duties, of GW and the Company, all in accordance
with the IBCL.
Conversion Of Shares
Company Common Shares. Each share of the common stock, no par value, of
the Company (the "Company Common Shares") issued and outstanding immediately
prior to the Effective Time, other than shares held by shareholders entitled to
dissenters' rights under Chapter 44 of the IBCL, by virtue of the Merger and
without any action on the part of the holder thereof, shall be canceled and
retired and shall be converted into the right to receive the "Merger
Consideration" as set forth in Section 3.2 below.
Merger Consideration. Subject to the more detailed provisions of the
Merger Agreement, each Company Common Share, other than any Dissenting Shares,
shall entitle the holder to receive the following (the "Merger Consideration"):
Pursuant to Section 1.8 of the Merger Agreement, a copy of
which section is included in Exhibit A attached hereto, and as of the
Effective Time, cash in the amount determined by dividing $5,284,861 by
the number of Company Common Shares issued and outstanding immediately
preceding the Effective Time and as adjusted pursuant to Section 1.8 of
the Merger Agreement; and
Any deferred payments and interest as calculated and payable
pursuant to Sections 1.9 and 1.10 of the Merger Agreement, copies of
which sections are included in Exhibit A attached hereto.
Options and Rights. All rights to receive Company Common Shares
pursuant to outstanding options or other rights, which rights have not been
exercised as of the Effective Time, shall be canceled by virtue of the Merger.
GW Shares. Each share of capital stock of GW issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become one share of validly issued, fully paid and nonassessable common stock,
without par value, of the Surviving Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Plan of
Merger as of the day and year first above written.
GW MERGERCO, INC.
By________________________________
GLACIER WATER SERVICES, INC.
By________________________________
WATER ISLAND, INC.
By________________________________
Xxxxx Xxxxxxx, President
EXHIBIT A
SECTIONS 1.8. 1.9 AND 1.10 OF THE
AGREEMENT AND PLAN OF MERGER
Section 1.8. Merger Consideration.
(a) Prior to any adjustments thereto in accordance with the remainder
of this Section 1.8, the amount of cash to be paid by Parent and/or the
Surviving Corporation to the record holders of issued and outstanding shares of
Company Common Stock for each of their shares held as of the Closing, excluding
Dissenting Shares, upon surrender of the certificates for such shares, is the
per-share amount determined by dividing $5,284,861 by the number of issued and
outstanding shares of Company Common Stock as of the Closing (the "Preliminary
Closing Merger Consideration"). The Preliminary Closing Merger Consideration
shall be adjusted upward or downward as provided in the remainder of this
Section 1.8, and the resulting amount after such adjustments is the amount that
Parent and/or the Surviving Corporation will pay to such holders of shares of
Company Common Stock (excluding Dissenting Shares) upon surrender of their
certificates for such shares at or after the Closing (the "Final Closing Merger
Consideration").
(b) At least five Business Days prior to the Closing Date, the Company
shall deliver to Parent its good faith written estimate of the Closing Working
Capital, which Parent shall have the right to approve in the good faith exercise
of its judgment (the "Estimated Closing Working Capital"). The Company shall
make available to Parent all work papers and other books and records utilized in
preparing the Estimated Closing Working Capital and shall make available to
Parent the appropriate personnel involved in the preparation of such estimate.
The Preliminary Closing Merger Consideration (i) shall be decreased by the
amount, if any, by which the Estimated Closing Working Capital is less than
$500,000 (the "Estimated Deficiency"), or (ii) shall be increased by the amount,
if any, by which the Estimated Closing Working Capital is greater than $500,000
(the "Estimated Excess"), (iii) in either case (an Estimated Deficiency or an
Estimated Excess) divided by the number of issued and outstanding shares of
Company Common Stock as of the Closing in order to arrive at the per-share
adjustment amount to the Preliminary Closing Merger Consideration.
(c) If as of the Closing the sum of (i) the Company's bank indebtedness
plus (ii) the Company's remaining principal obligations to D.J. Leasing, Inc. to
acquire ownership of the vending machines leased under its equipment lease with
such corporation (including in such principal obligations the $400,000 option
purchase price and the "principal" portion of the remaining monthly lease
payments, but excluding an assumed interest component included in said monthly
payments at an interest rate of seven percent (7%) per annum) (together, the
"Company Debt") exceeds Four Million Four Hundred Thousand Dollars ($4,400,000)
(the excess, if any, of the Company Debt over $4,400,000 is the "Excess Company
Debt"), then the Preliminary Closing Merger Consideration shall be reduced by an
amount calculated by dividing the Excess Company Debt by the number of issued
and outstanding shares of Company Common Stock as of the Closing to arrive at
the per-share adjustment to be made.
Section 1.9. Final Working Capital Adjustment.
(a) As promptly as practicable, but in no event later than 15 days,
after the Closing Date, the Shareholder Committee shall notify Parent in writing
of its determination of Closing Working Capital (the "Company's Closing
Schedule"), which determination shall set forth in reasonable detail the
Shareholder Committee's calculation of Closing Working Capital. The Company's
Closing Schedule shall also set forth, and explain in reasonable detail any
differences between the Company's calculation of Closing Working Capital and the
Estimated Closing Working Capital. A copy of all work papers and other books and
records utilized in the preparation of the Company's Closing Schedule shall be
made available to Parent at such time. Parent will notify the Shareholder
Committee in writing (the "Working Capital Dispute Notice") within 45 days after
receiving the Company's Closing Schedule if Parent disagrees with the
Shareholder Committee's calculation of the Closing Working Capital as set forth
in the Company's Closing Schedule, which notice shall set forth in reasonable
detail the basis for such disagreement, the amounts involved and Parent's
calculation of the Closing Working Capital. If no Working Capital Dispute Notice
is received by the Shareholder Committee within such 45-day period, the
Shareholder Committee's calculation of Closing Working Capital as set forth in
the Company's Closing Schedule shall be final and binding upon the parties
hereto. The Shareholder Committee and Parent will give each other and their
representatives reasonable access during normal business hours to the personnel,
books and records of the Surviving Corporation to assist the Shareholder
Committee in the preparation of the Company's Closing Schedule and to assist
Parent in the preparation of the Working Capital Dispute Notice.
(b) Upon receipt by the Shareholder Committee of the Working Capital
Dispute Notice, the Shareholder Committee and Parent shall negotiate in good
faith to resolve any disagreement with respect to Closing Working Capital set
forth in the Working Capital Dispute Notice. To the extent Parent and the
Shareholder Committee are unable to agree with respect to Closing Working
Capital within 10 days after receipt by the Shareholder Committee of the Working
Capital Dispute Notice, Parent and the Shareholder Committee shall promptly
select a mutually acceptable nationally recognized accounting firm with no
material relationship to any of the parties hereto and submit their dispute to
such accounting firm for a binding resolution. Closing Working Capital as agreed
upon by the Shareholder Committee and Parent, as deemed agreed upon pursuant to
the next-to-last sentence of Section 1.9(a) or as determined by such accounting
firm, in accordance herewith, shall be termed the "Final Closing Working
Capital". The fees and expenses of such accounting firm shall be paid by the
party hereto whose determination of Closing Working Capital as initially
submitted to such accounting firm is further away from the Final Closing Working
Capital. If the responsible party in accordance with the foregoing sentence is
the Shareholder Committee, such fees and expenses shall be deducted from the
First Deferred Consideration or the Second Deferred Consideration, depending on
the date of determination of such fees and expenses.
(c) If the Final Closing Working Capital is greater than the Estimated
Closing Working Capital, the First Deferred Payment to be paid pursuant to
Section 1.10(a) hereof shall be increased by an amount equal to such difference
(the "Working Capital Excess"). If the Final Closing Working Capital is less
than the Estimated Closing Working Capital, the First Deferred Payment to be
paid pursuant to Section 1.10(a) hereof shall be reduced by an amount equal to
such difference (the "Working Capital Deficiency").
Section 1.10. Deferred Payments.
-----------------
(a) On the first anniversary of the Closing Date, Parent and/or the
Surviving Corporation shall pay to the holders of record as of the Closing Date
of issued and outstanding shares of Company Common Stock (excluding Dissenting
Shares), but only so long as any holder shall have surrendered such holder's
stock certificate thereof, and any amounts unpaid because any such certificates
shall have not been so surrendered shall be paid subsequently upon surrender of
such certificates, for each share of Company Common Stock then held by such
holders (excluding Dissenting Shares), an amount equal to the First Deferred
Payment (hereinafter defined) divided by the number of shares of Company Common
Stock issued and outstanding as of the Closing. The "First Deferred Payment"
will be the amount, if any, by which the sum of (i) $300,000 plus (ii) the
Working Capital Excess (if any) determined pursuant to Section 1.9, plus (iii)
the excess accrual for Taxes to be added pursuant to Section 4.14 (if any),
exceeds the sum of (x) the Working Capital Deficiency (if any) determined
pursuant to Section 1.9, plus (y) any amounts required to be deducted in
accordance with Sections 1.9(b), 4.13 and 4.14 hereof, plus (z) any Losses (as
defined in Section 6.2(a) hereof) for which the Shareholders are obligated to
indemnify the Surviving Corporation or Parent in accordance with Section 6.2(a)
hereof.
(b) On the second anniversary of the Closing Date, Parent and/or the
Surviving Corporation shall pay to the holders of record as of the Closing Date
of issued and outstanding shares of Company Common Stock (excluding Dissenting
Shares), but only so long as any holder shall have surrendered such holder's
stock certificate thereof, and any amounts unpaid because any such certificates
shall have not been so surrendered shall be paid subsequently upon surrender of
such certificates, for each share of Company Common Stock then held by such
holders (excluding Dissenting Shares), an amount equal to the Second Deferred
Payment (hereinafter defined) divided by the number of shares of Company Common
Stock issued and outstanding as of the Closing. The "Second Deferred Payment"
will be the amount, if any, by which the sum of (i) $300,000, plus (ii) any
Working Capital Excess determined pursuant to Section 1.9 not added to the First
Deferred Payment, plus (iii) any excess accrual for Taxes to be added pursuant
to Section 4.14 to the extent not added to the First Deferred Payment, exceeds
the sum of (x) any Working Capital Deficiency determined pursuant to Section 1.9
to the extent not deducted in arriving at the amount of the First Deferred
Payment, plus (y) any amounts required to be deducted in accordance with
Sections 1.9(b), 4.13 and 4.14 hereof to the extent not deducted in arriving at
the amount of the First Deferred Payment, plus (z) any Losses (as defined in
Section 6.2(a) hereof) for which the Shareholders are obligated to indemnify the
Surviving Corporation or Parent in accordance with Section 6.2(a) hereof to the
extent not deducted in arriving at the amount of the First Deferred Payment.
(c) On each of the first and second anniversaries of the Closing Date,
Parent and/or the Surviving Corporation shall pay interest on the
sums paid to each of the former holders of Company Common Stock to
whom payments are made under Sections 1.10(a) and 1.10(b) at the
Applicable Rate, compounded annually, accruing from the Closing
Date to the date of payment. The "Applicable Rate" is the annual
rate of interest equal to the prevailing national "prime rate" of
large U.S. commercial banks (i) as of the Closing Date during the
first year following the Closing Date, and (ii) as of the first
anniversary of the Closing Date during the second year following
the Closing Date.
EXHIBIT E
Principal Terms of Agreement Not To Compete
2. For a period of sixty (60) months immediately after the Effective Date of
this Agreement, except as the Surviving Corporation may otherwise consent in
writing, Shareholder will not, anywhere within the "Restricted Geographic Area"
engage in a "Competing Business." For purposes of this Agreement, the term
"Restricted Geographic Area" means and includes the following: (1) each and
every county in which Water Island, Inc. was doing business immediately prior to
its merger with and into G.W. Mergerco., Inc.; (2) each and every county that is
contiguous to the counties described in subpart (1) of this paragraph; (3) each
and every county in which Glacier Water Services, Inc. is doing business as of
the Effective Date of this Agreement; and (4) each and every county that is
contiguous to the counties described in subpart (3) of this paragraph. For
purposes of this Agreement, the term "Competing Business" means a business that
sells or provides vended water and is competitive with the Surviving Corporation
and/or Glacier Water Services, Inc. For purposes of this paragraph, Shareholder
shall not be in breach of this Agreement by reason of his or her beneficial
ownership of less than one percent (1%) of a Competing Business's voting capital
stock if (x) such Competing Business is publicly traded and (y) Shareholder does
not control or influence the operation or management of such Competing Business.
3. For a period of sixty (60) months immediately after the Effective Date of
this Agreement, except as the Surviving Corporation may otherwise consent in
writing, Shareholder will not provide, sell, market or endeavor to provide, sell
or market any "Competing Products/Services" to any of the "Customers of the
Surviving Corporation," or otherwise solicit or communicate with any of the
"Customers of the Surviving Corporation" for the purpose of selling, offering or
providing any "Competing Products/Services." For purposes of this Agreement, the
term "Competing Products/Services" means vended water products and/or services
that are similar to and competitive with the vended water products and/or
services offered by the Surviving Corporation. For purposes of this Agreement,
the term "Customers of the Surviving Corporation" means any person or entity
with which the Surviving Corporation or Water Island, Inc. has transacted for a
license or other contractual right to operate a water vending machine on the
customer's premises as of the Effective Date of this Agreement or at any time
within the twelve (12) months immediately preceding the Effective Date of this
Agreement.
4. For a period of sixty (60) months immediately after the Effective Date of
this Agreement, except as the Surviving Corporation may otherwise consent in
writing, Shareholder will not urge, induce or seek to induce any of the
Surviving Corporation's independent contractors, subcontractors, consultants,
vendors, suppliers, customers, licensors or business partners to terminate their
relationship with, or representation of, the Surviving Corporation or to cancel,
withdraw, reduce, limit or in any manner modify any of such person's or entity's
business with, or representation of, the Surviving Corporation.
5. For a period of sixty (60) months immediately after the Effective Date of
this Agreement, except as the Surviving Corporation may otherwise consent in
writing, Shareholder will not solicit, recruit, hire, employ, attempt to hire or
employ, or assist anyone in the recruitment, solicitation or hiring of, any
person who is an employee of the Surviving Corporation, or otherwise urge,
induce or seek to induce any person to terminate his/her employment with the
Surviving Corporation.
6. As used in this Agreement, the term "Confidential Information" means any and
all of the Surviving Corporation's and/or Water Island, Inc.'s trade secrets,
confidential and proprietary information and all other information and data of
the Surviving Corporation or Water Island, Inc. that is not generally known to
third persons who could derive economic value from its use or disclosure,
including, but not limited to, information pertaining to customers, marketing
data, pricing data, information about prospective customers or prospective
products and/or services, personnel information, business plans and financial
information. For a period of sixty (60) months immediately after the Effective
Date of this Agreement, except as the Surviving Corporation may otherwise
consent in writing, Shareholder will not use or disclose to others any of the
Confidential Information.
7. The parties acknowledge and agree that the restrictions contained herein are
a reasonable and necessary protection of the immediate interests of the
Surviving Corporation, GW and the Parent, and any violation of these
restrictions would cause substantial injury to the Surviving Corporation, GW and
the Parent and that GW and the Parent would not have entered into the Merger
Agreement without receiving the additional consideration offered by Shareholder
in binding himself/herself to these restrictions. In the event of a breach or a
threatened breach by Shareholder or any affiliated entity of these restrictions,
the Surviving Corporation, GW and/or the Parent shall be entitled to an
injunction restraining Shareholder and any affiliated entity from such breach or
threatened breach; provided, however, that the right to injunctive relief shall
not be construed as prohibiting the Surviving Corporation, GW and/or the Parent
from pursuing any other available legal and/or equitable remedies for such
breach or threatened breach, including, without limitation, the recovery of
money damages.
8. In the event Shareholder violates any of the restrictive covenants set forth
in this Agreement, the duration of such restrictive covenant shall automatically
be extended by the period of time Shareholder was in violation of such
restrictive covenant.
9. Shareholder acknowledges and agrees that the restrictive covenants contained
in this Agreement prohibit Shareholder from engaging in certain activities
directly or indirectly, whether on Shareholder's own behalf or on behalf of any
person or entity, and regardless the capacity in which Shareholder is acting,
including without limitation, as an employee, independent contractor, owner,
partner, officer, agent, consultant or advisor. 10. The covenants and
restrictions set forth in this Agreement are separate and divisible, and to the
extent any clause, portion or section of this Agreement is determined to be
unenforceable or invalid for any reason, such unenforceability or invalidity
shall not affect the enforceability or validity of the remainder of the
Agreement. If any particular covenant, restriction, provision or clause of this
Agreement is determined to be unreasonable or unenforceable for any reason,
including, without limitation, the time period, geographic area and/or scope of
activity covered by any non-competition or non-disclosure covenant, provision or
clause, such covenant, provision or clause shall automatically be deemed
reformed such that the contested covenant, provision or clause will have the
closest effect permitted by applicable law to the original form and shall be
given effect and enforced as so reformed to whatever extent would be reasonable
or enforceable under applicable law. The parties agree that any Court
interpreting any non-competition or non-disclosure provision of this Agreement
shall have the authority, if necessary, to reform any such provision to make it
enforceable under applicable law.
11. The Surviving Corporation shall have the right to assign this Agreement to
any of its legal successors or to any person or entity that acquires
substantially all of the assets of the Surviving Corporation. This Agreement
shall inure to the benefit of, and may be enforced by, any and all successors
and assigns of the Surviving Corporation, including, without limitation, by
asset assignment, stock sale, merger, consolidation or other corporate
reorganization. 12. This Agreement shall be governed and enforced in accordance
with the laws of the State of Indiana, notwithstanding any state's choice-of-law
rules to the contrary. This Agreement is intended, among other things, to
supplement Shareholder's responsibilities and obligations under the Indiana
Uniform Trade Secrets Act, as amended from time to time, and nothing herein is
intended to abrogate any of Shareholder's responsibilities or obligations under
such statute.
Failure to insist upon strict compliance with any of the terms, covenants
or conditions of this Agreement shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
Shareholder Committee Provisions
Terms used in this Exhibit F as capitalized defined terms shall have
the meanings ascribed to them in the Agreement and Plan of Merger to which this
Exhibit is attached.
Authority and Responsibilities of Shareholder Committee. The
Shareholder Committee and its members shall have full power and authority to
take , and the responsibility for taking, the following actions as agent for the
former Water Island shareholders who do not exercise dissenters' rights under
Indiana law with respect to the Merger (the "Merger Shareholders"):
The Shareholder Committee may take any actions and resolve any
issues arising subsequent to the Closing Date and relating to matters
covered by the Agreement, including, without limiting the foregoing,
the following:
any calculations or other actions required to comply with the
provisions of Sections 1.9 and 1.10 of the Agreement,
including, without limiting the foregoing, the following:
determining and calculating Closing Working Capital and
preparing the Company's Closing Schedule;
if the Shareholder Committee receives a
Working Capital Dispute Notice, negotiating with
Parent and GW in good faith to resolve any
disagreement with respect to Closing Working Capital
set forth in the Working Capital Dispute Notice;
if the Shareholder Committee and Parent
and/or GW are unable to resolve the issues set forth
in the Working Capital Dispute Notice within the
timeframe set forth in Section 1.9(b), selecting a
nationally recognized accounting firm to resolve the
dispute in accordance with the provisions of Section
1.9(b) of the Agreement;
determining whether there is a Working
Capital Excess or Working Capital Deficiency pursuant
to Section 1.9 of the Agreement;
calculating the amount of any deferred
payments to be paid to the Merger Shareholders
pursuant to Section 1.10 of the Agreement and
resolving any issues that would affect the amount
payable to the Merger Shareholders pursuant to
Section 1.10 of the Agreement;
determining and calculating the Applicable
Rate of any interest payable pursuant Section 1.10(c)
of the Agreement; and
negotiating with Parent or GW as to any other matters
arising under the Agreement.
any issues relating to indemnification pursuant to
Article VI of the Agreement.
The Shareholder Committee shall make all other determinations
relating to the Merger or the Agreement or affecting the Merger
Shareholders in connection with the Merger or the Agreement.
The Shareholder Committee shall have full power and authority
to take all other actions that it deems, in its sole discretion,
necessary or advisable to carry out the matters contemplated by the
Agreement, including, without limiting the foregoing, the following:
the employment of attorneys, accountants or other
professionals as reasonably required to perform its duties
under the Agreement; and
instituting and/or defending lawsuits or other proceedings or
the undertaking of other appropriate efforts to perform
its duties in carrying out the terms and intent of the
Agreement.
Reimbursement of Expenses; No Duty to Advance Funds.
The Shareholder Committee shall not be entitled to any
compensation for its services as the Shareholder Committee hereunder.
The Shareholder Committee is authorized to obtain
reimbursement for itself and its individual members for out-of-pocket
expenses reasonably incurred in the performance of its duties and
responsibilities to the extent that amounts to cover such
reimbursements are available from amounts that otherwise would be
payable as the First Deferred Payment or the Second Deferred Payment
under Section 1.10 of the Agreement.
Neither the Shareholder Committee nor any of its members shall
have any obligation to personally advance funds in connection with the
performance of any duties under the Agreement.
Action by Shareholder Committee. The Shareholder Committee shall act
collectively by majority action of those individuals then serving (if more than
one person is then serving) or by the sole individual person then serving (if
only one person is serving), and shall take all action in writing. For purposes
of the Agreement, written actions signed by a majority of those persons then
serving (or by the single person serving if only one person is then serving)
shall be conclusive evidence of the valid action of the Shareholder Committee.
In the event only one person remains willing and able to act hereunder as a
member of the Shareholder Committee, said person shall designate an individual
who is included in the Merger Shareholders to act as the Shareholder Committee
in the event such remaining person is unable or unwilling in the future to act
as the Shareholder Committee.
Term of Existence. The authority of the Shareholder Committee hereunder
shall expire on December 31, 2005, except that if any indemnification or other
claims or issues arising under or in connection with the Agreement shall have
come to the attention of the Shareholder Committee on or prior to December 31,
2005, the Shareholder Committee shall be authorized to continue to act with
respect to such matters and its authority shall remain in effect with respect to
such matters, until they are resolved.
Standard of Conduct and Limitation of Liability. The Shareholder
Committee shall make its decisions and takes its actions or inactions based on
the Shareholder Committee's determination, in its sole and absolute discretion,
of what is in the best interest of the Merger Shareholders under all the
circumstances. The members of the Shareholder Committee shall be immune from any
personal liability whatsoever with respect to actions or inactions taken or not
taken on behalf of the Merger Shareholders except for affirmative actions taken
in bad faith and for the intended personal benefit of the individual members of
the Shareholder Committee at the expense of the other Merger Shareholders. In
the event a claim is asserted against the Shareholder Committee or any of the
members thereof in connection with any action or inaction taken or not taken by
them as agent for the Merger Shareholders, they shall be entitled to full and
complete indemnification to the maximum extent permitted under the articles of
incorporation and bylaws of the Company in existence immediately prior to the
Closing to the extent any funds are available for such indemnification from
amounts otherwise payable to the Merger Shareholders under Section 1.10 of the
Agreement.
The following Exhibits have been omitted from this filing:
Exhibit B - Form of Letter of Transmittal
Exhibit C - Form of Employment Agreement
Exhibit E - Principal Terms of Agreement Not to Compete
All Schedules to the Agreement, which are identified in Sections 2.1, 2.2, 2.3,
2.4, 2.6, 2.10, 2.11 2.12, 2.13, 2.14, 2.15, 2.16, 2.17 and 4.1, have been
omitted from this filing.
Omitted Exhibits and Schedules will be furnished supplementally to the
Securities and Exchange Commission upon request.
