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EXHIBIT 10.47
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as
of the 27th day of October 1997, by and among Packaged Ice, Inc., a Texas
corporation ("Parent"), Golden Eagle Ice-Texas, Inc., a Texas corporation wholly
owned by Parent ("Newco"), Golden Eagle Ice Company., an Arkansas corporation
(the "Company") and ▇▇▇▇▇ ▇. ▇▇▇▇ (the "Shareholder"). This Agreement shall
become effective immediately following the closing of Shareholder's settlements
with respect to the Estate of ▇▇▇▇ ▇▇▇▇.
PRELIMINARY STATEMENTS
The respective Boards of Directors of Parent, Newco and the Company
have each approved the merger of the Company with and into Newco (the "Merger"),
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto covenant and agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and the plural forms of any of the
terms herein defined.
"Acquisition Price" shall have the meaning set forth in Section 2.7(d)
of this Agreement.
"Assets" shall mean all of Company's properties and assets, which shall
include cash, tangible and intangible to include but not limited to those items
described in Exhibit A unless otherwise limited by Shareholder's Disclosure
Memorandum.
"Business" shall mean all of the operations of Company including, but
not limited to, the sale and production of ice.
"Capital Leases" shall mean those leases covering certain capital
equipment used in the Business which are used in the direct manufacturing,
distribution and sale of packaged ice products which equipment will be free and
clear of the Capital Leases, liens, claims and Encumbrances at the Closing.
Except as set forth in the Shareholder's Disclosure Memorandum, at Closing, the
title to the assets that are the subject of the Capital Leases described in
Exhibit B will vest in the Company.
"Closing Date" shall mean the date on which this Agreement is
consummated.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
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"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, or adverse claim or
restriction or transfer of any nature whatsoever other that those held by Parent
or Newco or granted by the Company at Parent's instance and request under the
authority granted Parent.
"Escrow Agreement" shall have the meaning set forth in Section 5.11 of
this Agreement.
"Escrow Agent" shall mean Metropolitan National Bank, Little Rock,
Arkansas.
"Financial Statements" shall have the meaning set forth in Section 3.3
of this Agreement.
"Financing Statements" shall have the meaning as set forth in Section
5.12 of this Agreement.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how, formulas,
trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Investment Letter" shall have the meaning set forth in Section 5.10 of
this Agreement.
"Liabilities" shall have the meaning set forth in Section 2.11 of this
Agreement.
"Merger" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Noncompetition Agreement" shall have the meaning set forth in Section
5.9 of this Agreement.
"Owned Real Property" shall have the meaning set forth in Section 5.12
of this Agreement.
"Personal Property" shall have the meaning set forth in Section 3.13 of
this Agreement.
"Real Property" shall have the meaning set forth in Section 3.12 of
this Agreement.
"Shareholder's Disclosure Memorandum" shall mean that schedule attached
hereto and incorporated herein by reference that lists and describes all
disclosures by Shareholder and Company concerning the Assets and the Business
which are the subject of this Agreement.
"Shares" shall mean all of the capital stock of Company outstanding on
the Closing Date.
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"Surviving Corporation" shall have the meaning set forth in Section 2.1
of this Agreement.
"Taxes" shall have the meaning set forth in Section 11.1 hereof.
II. THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions hereof,
and in accordance with the corporation laws of Texas and Arkansas, the Company
shall be merged (the "Merger") with and into Newco and Newco shall be the
surviving corporation ("Surviving Corporation") and as such shall continue to be
governed by the laws of the State of Texas. For federal income tax purposes, it
is intended that the Merger shall qualify as a reorganization pursuant to
Section 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code ("IRC").
2.2 CONTINUING CORPORATE EXISTENCE. Except as may otherwise be set
forth herein, the corporate existence and identity of Newco, with all its
purposes, powers, franchises, privileges, rights and immunities, and shall
continue unaffected and unimpaired by the Merger. The corporate existence and
identity of the Company, with all its purposes, powers, franchises, privileges,
rights and immunities, at the Effective Date shall be merged with and into that
of Newco, and Newco shall be vested fully therewith and the separate corporate
existence and identity of the Company shall cease except to the extent continued
by statute.
2.3 EFFECTIVE DATE. The Merger shall become effective upon the
occurrence of the issuance of the certificate of merger (the "Effective Date")
by the Secretary of State of the State of Texas upon filing on the Closing Date
of the articles of merger (with the plan of merger attached thereto) (the
"Articles of Merger") with the Secretary of the State of Texas pursuant to
Article 5.04 of the Texas Business Corporation Act ("TBCA"), and the applicable
laws of the State of Arkansas. Notwithstanding the above, it is the express
intent of the parties that this merger shall be deemed effective as of 5:01 PM
October 27, 1997.
2.4 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation
and Bylaws of Newco as in effect on the Effective Date shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation following the Merger.
2.5 DIRECTORS. The members of the Board of Directors of Newco at the
Effective Date shall be the directors of the Surviving Corporation immediately
following the Merger.
2.6 OFFICERS. The officers of Newco at the Effective Date shall be the
directors of the Surviving Corporation immediately following the Merger.
2.7 CONVERSION OF SHARES.
(a) Each share of the Company's $.01 par value common stock
("Share") which is issued and outstanding immediately prior to the
Effective Date shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted
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automatically into the right to receive the Share Price (as hereinafter
defined) which shall be payable, without interest thereon, upon the
surrender of the certificates formerly representing such Share, in
accordance with Section 2.7(g).
(b) Each Share shall, by virtue of the Merger and without any
action on the part of the holder, be canceled and retired and cease to
exist.
(c) The "Share Price" for each Share will be (x)/(y) where (x)
is the Acquisition Price (as defined in Section 2.8(d)) and (y) is the
total number of outstanding Shares.
(d) The acquisition price ("Acquisition Price") shall be
$2,192,188, which shall consist of $992,188 in cash, less adjustments
as set forth herein, (the "Cash Amount") and 120,000 shares of Parent's
common stock, par value $0.01 per share ("Parent's Stock") valued at
$10 per share (the 120,000 shares of Parent Stock being the "Stock
Amount").
(e) Each share of the Company's common stock held in the
treasury of the Company immediately prior to the Effective Date shall,
by virtue of the Merger and without any action on the part of the
holder thereof, be canceled and retired and cease to exist.
(f) All of the Parent's Stock, when delivered pursuant to the
provisions of this Agreement, shall be validly issued, fully paid and
nonassessable.
(g) At Closing, Parent will pay to Shareholder and other
holders of Shares, the total sum of the Acquisition Price. 32,000
shares will be placed in escrow with the Escrow Agent for a period of 5
months in accordance with the Escrow Agreement. At Closing the holders
of certificates representing Shares shall thereupon cease to have any
rights with respect to such Shares and shall surrender certificates
representing the Shares to Parent whereupon such holders shall receive
the Share Price for each Share surrendered.
(h) The stock transfer books of the Company shall be closed as
of the close of business on the Effective Date, and no transfer of
record of any of the Shares shall take place thereafter.
(i) No fractional shares of Parent Stock and no certificates
or scrip therefor shall be issued.
2.8 FILING OF ARTICLES OF MERGER. Upon the terms and subject to the
conditions hereof, as soon as practicable following the satisfaction or waiver
of the conditions set forth in Article VII hereof, the Company and the Parent
shall execute and file Articles of Merger in the manner required by the TBCA and
the applicable laws of the State of Arkansas, and the parties hereto shall take
all such other and further actions as may be required by law to make the Merger
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effective. Prior to the filings referred to in this Section, the foregoing will
be confirmed at the Closing.
2.9 RIGHTS AND LIABILITIES OF THE SURVIVING CORPORATION. As of the
Effective Date, the Surviving Corporation shall have the following rights and
obligations, pursuant to Article 5.06 of the TBCA:
(a) All rights, title and interests to all real estate and
other property owned by the Company and Newco shall be allocated to and
vested in the Surviving Corporation without reservation or impairment,
without further act or deed, and without any transfer or assignment
having occurred, but subject to any existing liens or other
encumbrances thereon.
(b) All liabilities and obligations of the Company and Newco
shall be allocated to the Surviving Corporation, and the Surviving
Corporation shall be the primary obligor therefor and, except as
otherwise provided by law or contract, no other party to the merger,
other than the Surviving Corporation, shall be liable thereon.
(c) A proceeding pending by or against the Company may be
continued as if the Merger did not occur, or the Surviving Corporation
to which the liability, obligation, asset or right associated with such
proceeding is allocated to and vested in may be substituted in the
proceeding.
(d) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the
duties and liabilities of a corporation organized under the laws of the
State of Texas.
2.10 PRORATION. The parties shall prorate at the Closing the current
year's ad valorem taxes and prepaid expenses, based on the latest available
statements from taxing authorities, whether for the current tax year or the
preceding tax year. The Shareholder's pro rata share of such taxes shall be the
portion attributable to the period through the day preceding the Effective Date,
prorated by days. The prorated amounts shall be adjustments to the cash portion
of the Acquisition Price and shall be payable in the manner set forth below:
(a) If a prorated amount is payable by Parent and determinable
at the Closing, it shall be added to the amount payable by Parent at
the Closing.
(b) If a prorated amount is payable by Parent and not
determinable at the Closing, it shall be billed by Shareholder when
determinable and promptly paid by Parent to Shareholder.
(c) If a prorated amount is payable by Shareholder and
determinable at the Closing, it shall be deducted from the amount
otherwise payable by Parent at the Closing.
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(d) If a prorated amount is payable by Shareholder and not
determinable at the Closing, it shall be billed by Parent when
determinable and promptly paid by Shareholder to Parent.
property.
III. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND SHAREHOLDER
The Company and the Shareholder represent and warrant to Parent and
Newco as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arkansas and is in
good standing and is duly qualified to do business in any foreign jurisdiction
in which it is currently conducting business operations. The Company has full
corporate power and authority to own or use the properties and assets that it
purports to own or use, and to perform all of its obligations hereunder. All
outstanding shares of stock of the Company are validly issued, fully paid,
nonassessable and owned, both beneficially and of record, solely by Shareholder.
Other than this Agreement, there is no subscription, option, warrant, call,
right, agreement or commitment relating to the issuance, sale, delivery,
repurchase or transfer by Shareholder or the Company (including any right of
conversion or exchange under any outstanding security or other instrument) of
any of its capital stock or other securities. Shareholder is not a party to and
are not aware of any voting trusts, proxies or any other agreements or
understandings with respect to the voting of her Shares.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. This Agreement
has been duly executed and delivered by the Company and Shareholder and
constitutes the legal, valid and binding obligation of the Company and
Shareholder, enforceable against them in accordance with its terms. Upon the
execution and delivery by Shareholder of the Escrow Agreement, the
Noncompetition Agreement and any other ancillary document required hereunder
(collectively, the "Shareholder's Closing Documents"), the Shareholder's Closing
Documents will constitute the legal, valid, and binding obligations of
Shareholder, enforceable against Shareholder in accordance with their respective
terms. The Company and the Shareholder have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and the
Shareholder's Closing Documents and to perform their respective obligations
under this Agreement and the Shareholder's Closing Documents. The Shareholder
and the Company have held a shareholders meeting (or have executed a consent)
and all resolutions required by law to approve the Merger have been duly adopted
in accordance with Arkansas law. Except as set forth on Section 3.2 of
Shareholder's Disclosure Memorandum, the execution, delivery and performance of
this Agreement by the Company and Shareholder and the consummation of the
transactions contemplated hereby will not require the consent, approval or
authorization of any person or governmental authority, and will not, with or
without the giving of notice, the passage of time, or both, violate, conflict
with, result in a default, breach or loss of rights under, or result in the
creation of any lien, claim or encumbrance pursuant to, any lien, encumbrance,
instrument, agreement, or understanding, or any law, regulation, rule, order,
judgment or decree, to which Shareholder or the Company are a party or by which
they are bound or affected.
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3.3 FINANCIAL STATEMENTS. The Company has previously caused to be
furnished to Parent:
(a) a balance sheet of the Company as at December 31, 1996,
(including the notes thereto, if any, the "Balance Sheet"), and the
related statements of income, changes in shareholders' equity, and cash
flow for the fiscal year then ended;
(b) the unaudited balance sheet of the Company's as of August
31, 1997 and the related unaudited statement of income and statement of
cash flow for the eight-month period then ended (all such balance
sheets and related statements referenced to in this Section 3.3 are
collectively referred to herein as the "Financial Statements").
The Financial Statements taken as a whole present fairly the results of
operations, changes in Shareholder's equity, and cash flow of the Company as the
respective dates of and for the periods referred to in such Financial Statements
in accordance with generally accepted accounting principles consistently
applied.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by the Company in the Shareholder's
Disclosure Memorandum and except for liabilities arising in the ordinary course
of business and consistent with past practice since the date of the Company's
Balance Sheet, the Company has operated the Business in the ordinary course and
has incurred no material liabilities which would be required to be reflected, in
accordance with the consistent methods of accounting used by the Company, on a
balance sheet as of the date hereof or disclosed in the notes thereto. Since
August 31, 1997 there has not been any material adverse change in the business,
operations, properties, prospects, assets or condition of the Business, and to
the best knowledge of the Company and Shareholder, no event has occurred, nor
does a circumstance currently exist, that may result in such a material adverse
change.
3.4 SHAREHOLDER DEBT. Except for an amount equal to $228,868.18,
Shareholder warrants that there are no Encumbrances or other liabilities held by
Shareholder whatsoever against the Company or the Assets. Any and all debts owed
to Shareholder by the Company have been discharged as a contribution to capital
of the Company by Shareholder.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. All items comprising
the Assets have been continuously used by the Company in connection with the
Business and are now in serviceable condition and are sufficient for the
continued conduct of the Company's business after the Closing, in substantially
the same manner as conducted prior to the Closing, unless expressly disclosed to
the contrary by the Company in Section 3.5 of Shareholder's Disclosure
Memorandum.
3.6 TITLE TO PERSONAL PROPERTY. Except as set forth in Section 3.6 of
Shareholder's Disclosure Memorandum, the Company has good, legal and marketable
title to all of the personal
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property comprising the Assets, free and clear of Encumbrances and at the
Closing, the Company will have good, legal and marketable title to all of those
assets described in Exhibits A and B.
3.7 LITIGATION. Except as set forth on Section 3.7 of Shareholder's
Disclosure Memorandum, there is no pending claim, action, suit, proceeding or
investigation (judicial, governmental or otherwise), nor any order, decree or
judgment in effect, or, to the knowledge of the Company or Shareholder,
threatened, against or relating to Shareholder, the Company, the Assets, or the
transactions contemplated by this Agreement.
3.8 COMPLIANCE WITH LAWS. Shareholder and the Company have complied
with all laws, rules, regulations, ordinances, orders, judgments and decrees
relating to the Company, the Shares and the Assets.
3.9 TAXES.
(a) Except as set forth in Section 3.9 of Shareholder's
Disclosure Memorandum, the Company has, within the time and manner
prescribed by law, filed all material returns, declarations, reports
and statements required to be filed by it (together, "Returns") in
respect of any Taxes and each such Return has been prepared in
compliance in all material respects with all applicable laws and
regulations and is true and correct in all material respects, and the
Company has, within the time and in the manner prescribed by applicable
law, paid all Taxes that are shown to be due and payable with respect
to the periods covered thereby.
(b) The Company is an "S corporation" under the IRC, and has
been such since its corporate inception, or such other date as set
forth in Section 3.9 of Shareholder's Disclosure Memorandum, a valid,
binding, timely filed election to be taxed pursuant to Subchapter S of
the Code, and is not liable for any federal income taxes as a
"C-corporation" under the Code.
(c) Except as set forth in Section 3.9 of Shareholder's
Disclosure Memorandum (i) the Company has not requested or been granted
an extension of the time for filing any Return which has not yet been
filed; (ii) the Company has not consented to extend to a date later
than the date hereof the time in which any Tax may be assessed or
collected by any taxing authority; (iii) no deficiency or proposed
adjustment which has not been settled or otherwise resolved for any
amount of Tax has been proposed, asserted or assessed by any taxing
authority against the Company; (iv) there is no action, suit, taxing
authority proceeding, or audit now in progress, pending or, to the
Company's or Shareholder's knowledge, threatened against or with
respect to the Company; (v) no claim has been made by a taxing
authority in a jurisdiction where the Company does not file Tax Returns
that the Company is subject to Taxes assessed by such jurisdiction;
(vi) there are no liens for Taxes (other than for current Taxes not yet
due and payable) upon the Assets; (vii) the Company will not be
required to include any amount in taxable income or exclude any item of
deduction or loss from taxable income for any taxable period (or a
portion thereof) ending after the Closing Date as a result of any of
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following: (A) a change in method of accounting for a taxable period
ending on or prior to the Closing Date, (B) any "closing agreement," as
described in Code Section 7121 (or any corresponding provision of
state, local or foreign income Tax law) entered into on or prior to the
Closing Date, (C) any sale reported on the installment method where
such sale occurred on or prior to the Closing Date, and (D) any prepaid
amount received on or prior to the Closing Date; and (viii) the Company
does not have any obligation or liability for the payment of Taxes of
any other person as a result from any expressed obligation to indemnify
another person, or as a result of such Company assuming or succeeding
to the Tax liability of any other person as successor, transferee or
otherwise.
(d) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate and are at least
equal to that Company's liability for Taxes. There exists no proposed
tax assessment against the company except as disclosed in the Closing
Balance Sheet or in Section 3.9 of the Shareholder's Disclosure
Memorandum. No consent to the application of Section 341(f)(2) of the
IRC has been filed with respect to any property or assets held,
acquired, or to be acquired by the Company. All Taxes that the Company
is or was required to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
governmental body or other Person. The Shareholder is not subject to
withholding under Section 1445 of the IRC with respect to any
transaction contemplated hereby. The Company has not been a member of
any affiliated group (as defined in IRC Section 1504(a) or
consolidated, combined or unitary group for purposes of any other
Taxes. None of the material property used by the Company is subject to
a lease, other than a "true" lease for federal income tax purposes.
(e) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There
is no tax sharing agreement that will require any payment by the
Company after the date of this Agreement. The Company has had a valid
election to be taxed as an S corporation in effect since its inception
and through the date of the Merger.
(f) There is no plan or intention by the Shareholder, and to
the knowledge of the Company, there is no plan or intention on the part
of the Shareholder to sell, exchange, or otherwise dispose of a number
of shares of Parent Stock to be received by them hereunder that would
reduce the Shareholder's ownership of Parent Stock to a number of
shares having a value, as of the Effective Date, of less than fifty
percent (50%) of the value of all of the formerly outstanding Shares as
of the Effective Date. For the purposes of this representation, the
Shares exchanged for cash or other property, surrendered by dissenters
or exchanged for cash in lieu of fractional shares of Parent Stock will
be treated as outstanding Shares on the Effective Date. The Shares and
shares of Parent Stock held by Shareholder and otherwise sold,
redeemed, or disposed of prior or subsequent to the Effective Date will
be considered in making this representation.
(g) To Shareholder's knowledge, Newco will acquire at least
ninety percent (90%) of the fair market value of the net assets and at
least seventy percent (70%) of the
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fair market value of the gross assets held by the Company immediately
prior to the Merger. For the purposes of this representation, amounts
paid by the company to dissenters, amounts paid by the Company to
Shareholder who receive cash or other property, the Company's assets
used to pay its reorganization expenses, and all redemptions and
distributions (except for regular normal dividends) made by the Company
immediately preceding the transfer, will be included as assets of the
Company held immediately prior to the Merger.
(h) To Shareholder's knowledge, the liabilities of the Company
assumed by Newco and the liabilities to which the transferred assets of
the Company are subject were incurred by the Company in the ordinary
course of its business.
(i) Parent, Newco, the Company and the Shareholder will pay
their respective expenses, if any, incurred in connection with the
Merger.
(j) To Shareholder's knowledge, there is no intercompany
indebtedness existing between Parent and the Company or between Newco
and the Company that was issued, acquired, or will be settled at a
discount.
(k) To Shareholder's knowledge, the Company is not under the
jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the IRC.
(l) To Shareholder's knowledge, the fair market value of the
assets of the Company transferred to Newco will equal or exceed the sum
of the liabilities assumed by Newco, plus the amount of liabilities, if
any, to which the transferred assets are subject.
(m) To Shareholder's knowledge, the Company is not an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of
the IRC.
3.10 ENVIRONMENTAL. To the best of Shareholder's knowledge, the Company
has complied in all material respects with all laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) which have jurisdiction over the Company concerning pollution
or protection of the environment, public health and safety, or employee health
and safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Without limiting the generality of the
preceding sentence, the Company has obtained and been in material compliance
with all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied, in all material
respects, with all other limitations,
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restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in such laws.
3.11 INSURANCE. The Company has continuously maintained insurance
covering the Assets and operations of the Company, including without limitation
fire, liability, workers' compensation, title and other forms of insurance
owned, held by or applicable to the Business. Such insurance policies provide
types and amounts of insurance customarily obtained by businesses similar to the
Business. The Company has not been refused any insurance with respect to its
assets or operations, and its coverage has not been limited, terminated or
canceled by any insurance carrier to which it has applied for any such insurance
or with which it has carried insurance, during the last three (3) years. Section
3.11 of Shareholder's Disclosure Memorandum lists all claims, which (including
related claims which in the aggregate) exceed $25,000 which have been made by
the Company in the last three years under any workers' compensation, general
liability, property or other insurance policy applicable to Company's or any of
the Assets. Except as set forth on Section 3.11 of Shareholder's Disclosure
Memorandum, there are no pending or threatened claims under any insurance
policy. Such claim information includes the following information with respect
to each accident, loss, or other event: (a) the identity of the claimant; (b)
the nature of the claim; (c) the date of the occurrence; (d) the status as of
the report date and (e) the amounts paid or expected to be paid or recovered.
3.12 REAL PROPERTY.
(a) Section 3.12 of Shareholder's Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel
of real property owned by, leased to or used by the Company (the "Real
Property") and (ii) a complete and accurate list of all current leases,
lease amendments, subleases, assignments, licenses and other agreements
to which the Real Property is subject (the "Leases"). The Company has
delivered to Parent true and complete copies of the Leases.
(b) Except as disclosed in Section 3.12 of Shareholder's
Disclosure Memorandum (i) each of the Leases is in full force and
effect and has not been amended or modified; (ii) neither the Company,
nor any other party thereto, is in default thereunder, nor is there any
event which with notice or lapse of time, or both, would constitute a
default thereunder; (iii) the Company has received no notice that any
party to any Lease intends to cancel, terminate or refuse to renew the
same or to exercise or decline to exercise any option or other right
thereunder; and (iv) no rental under the Leases has been paid more than
one month in advance.
(c) Except as disclosed in Section 3.12 of Shareholder's
Disclosure Memorandum, to the best knowledge of the Company and
Shareholder (i) there are no tanks on or below the surface of the Real
Property, (ii) there is no hazardous or toxic waste, substance or
material or other contaminant or pollutant (as determined under
federal, state or local law) present on or below the surface of the
Real Property including, without limitation, in the soil, subsoil,
groundwater or surface water, which constitutes a violation of any law,
ordinance, rule or regulation of any governmental entity having
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jurisdiction thereof or subjects or could subject Parent or Newco to
any liability to third parties, and (iii) the Real Property has never
been used by the Company or by any previous owners or operators to
generate, manufacture, refine, produce, store, handle, transfer,
process or transport any hazardous or toxic waste, substance or
material or other contaminant or pollutant.
(d) The zoning of each parcel of the Real Property permits the
improvements located thereon and the continuation of business presently
being conducted thereon. The Real Property is served by utilities and
services necessary for the normal and continued operation of the
business presently conducted thereon.
3.13 PERSONAL PROPERTY.
(a) Section 3.13 of Shareholder's Disclosure Memorandum is a
complete and accurate schedule as of August 31, 1997 describing, and
specifying the location of, all inventory, motor vehicles, machinery,
fixtures, equipment, furniture, supplies, tools, Intangible Assets, and
all other tangible or intangible personal property (the "Personal
Property") owned by, in the possession of, or used by the Company.
(b) Each lease, license, rental agreement, contract of sale or
other agreement applicable to any Personal Property is listed in
Section 3.14 of Shareholder's Disclosure Memorandum and is in full
force and effect; neither the Company nor any other party thereto is in
default thereunder, nor is there any event which with notice or lapse
of time, or both, would constitute a default thereunder. The Company
has received no notice that any party to any such lease, license,
rental agreement, contract of sale or other agreement intends to
cancel, terminate or refuse to renew the same or to exercise or decline
to exercise any option or other right thereunder. No Personal Property
is subject to any lease, license, contract of sale or other agreement
that is materially adverse to the business, properties or financial
condition of the Company.
(c) The inventory of the Company as reflected by the Financial
Statements and as described in Section 3.13 of Shareholder's Disclosure
Memorandum consisted and consists of items substantially all of which
were and will be of the usual quality and quantity necessary for the
normal conduct of the Company and reasonably expected to be usable or
salable within a reasonable period of time in the ordinary course of
business of the Company, except items of inventory which have been
written down to realizable market value or written off completely, and
damaged or broken items in an amount which does not materially affect
the value of the inventory as reflected on the Financial Statements.
With respect to inventory in the hands of suppliers for which the
Company is committed as of the date hereof, such inventory is
reasonably expected to be usable in the ordinary course of business of
the Company as presently being conducted.
3.14 CONTRACTS. Section 3.14 of Shareholder's Disclosure Memorandum
contains a complete and accurate list of all presently effective contracts,
leases and other agreements ("Contracts") to which the Company is a party and
which affect or are applicable to the Assets or
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the Company, true and complete copies (or summaries in the case of oral
contracts) of each of which have been delivered to Parent by the Company,
including, without limitation, any:
(a) mortgage, security agreement, financing statement or
conditional sales agreement or any similar instrument or agreement;
(b) agreement, commitment, note, indenture or other instrument
relating to the borrowing of money, or the guaranty of any such
obligation for the borrowing of money;
(c) joint venture or other agreement with any person, firm,
corporation or unincorporated association doing business either within
or outside the United States relating to sharing of present or future
commissions, fees or other income or profits;
(d) lease, license, rental agreement, contract of sale or
other agreement applicable to the Personal Property;
(e) franchise agreement;
(f) warranty;
(g) noncompetition agreement;
(h) broker or distributorship contract; or
(i) advertising, marketing and promotional agreement
(including, but not limited to, any agreements providing for discounts
and/or rebates).
Except as disclosed in Section 3.14 of Shareholder's Disclosure
Memorandum, each of the Contracts is in full force and effect and has not been
amended or modified and neither the Company, nor any other party thereto, is in
material default thereunder, nor is there any event which with notice or lapse
of time, or both, would constitute a default thereunder. The Company has
received no notice that any party intends to cancel, terminate or refuse to
renew any such Contract or to exercise or decline to exercise any option or
other right thereunder.
3.15 LABOR MATTERS. There are no controversies pending or, to the best
knowledge of the Company or Shareholder, threatened between the Company and any
employees of the Company. The Company has materially complied with all laws
relating to the employment of labor, including any provisions thereof relating
to wages, hours, collective bargaining, immigration, safety and the payment of
withholding and social security and similar taxes, and the Company has no
liability for any arrears of wages or taxes or penalties for failure to comply
with any of the foregoing.
3.16 ABSENCE OF SENSITIVE PAYMENTS. To the best knowledge of the
Company, the Company has not made or maintained (i) any contributions, payments
or gifts of its funds or property to any governmental official, employee or
agent where either the payment or the
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purpose of such contribution, payment or gift was or is illegal under the laws
of the United States or any state thereof, or any other jurisdiction (foreign or
domestic); or (ii) any contribution, or reimbursement of any political gift or
contribution made by any other person, to candidates for public office, whether
federal, state, local or foreign, where such contributions by the Company or
Shareholder were or would be a violation of applicable law.
3.17 EMPLOYEE BENEFITS. The Company is not a party to and does not
participate in or have any liability or contingent liability with respect to any
"employee welfare benefit plan" or "employee pension benefit plan" as those
terms are respectively defined in sections 3(1) and 3(2) of ERISA.
3.18 CAPITAL IMPROVEMENTS. Section 3.18 of Shareholder's Disclosure
Memorandum describes all of the capital improvements or purchases or other
capital expenditures (as determined in accordance with GAAP) which the Company
has committed to or contracted for which have not been completed prior to the
date hereof and the cost and expense reasonably estimated to complete such work
and purchases.
3.19 NO UNDISCLOSED LIABILITIES. Except as set forth in Exhibit 3.19
and obligations and liabilities arising under the contracts disclosed in Section
3.14 of the Shareholder's Disclosure Memorandum, the Company has no liabilities
or obligations of the type required to be reflected as liabilities on a balance
sheet prepared in accordance with Generally Accepted Accounting Principles
(GAAP).
If after the Closing Date of this Agreement, Parent and/or Newco
determines that there are any additional debts other than those described in
Exhibit 3.19 then Parent and/or Newco shall be entitled to make a corresponding
downward adjustment to the Acquisition Price. Parent shall then have the right
to make a claim against the Shareholder for such amounts and the limitation
provisions of Section 9.1(a) and (b) shall not apply.
It is understood and agreed by the parties hereto that as of October
24, 1997 there are no current liabilities or other liabilities of the Company
whatsoever other than those that are set forth in Exhibit 3.19. Any liabilities
that accrued on or prior to October 24, 1997 and that are not disclosed on
Exhibit 3.19 shall be assumed by the Shareholder.
3.20 COMPLETE AND ACCURATE DISCLOSURE. No representation or warranty
made to Parent in this Agreement or Shareholder's Disclosure Memorandum contains
or will contain an untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make such representation or warranty not
misleading or necessary to enable Parent to make a fully informed decision with
respect to the Merger of the Company into Newco. All documents and information
which have been or will be delivered to Parent or its representatives by or on
behalf of the Company or Shareholder are and will be true, correct and complete
copies of the documents they purport to represent.
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IV. REPRESENTATIONS AND WARRANTIES OF NEWCO AND PARENT
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Parent and
Newco are corporations duly organized, validly existing, and in good standing
under the laws of the State of Texas. All outstanding shares of stock of Parent
are validly issued, fully paid and nonassessable. In addition, Parent is in
material compliance with all applicable state and federal securities laws and
there have been no material adverse changes in the business operations of Parent
since the last Securities and Exchange Commission filings.
4.2 POWER AND AUTHORITY. Parent and Newco have the requisite corporate
power and authority, and have been duly authorized, to enter into this Agreement
and to perform all of its obligations hereunder. Parent represents and warrants
to the Company and Shareholder that this Agreement has been duly executed and
delivered by Parent and Newco, and constitutes a valid and binding obligation in
accordance with its terms.
4.3 REGISTRATION RIGHTS AGREEMENT. Parent hereby agrees to grant to
Shareholder such registration rights with respect to the Stock Amount as may be
consistent with those afforded to other executive officers of Parent now or in
the future which shall remain effective and until such time that Shareholder may
be allowed to sell such shares without registration in accordance with Rule 144
of the Securities Act of 1933.
V. COVENANTS OF THE COMPANY AND SHAREHOLDER
Shareholder and the Company hereby covenant and agree as follows:
5.1 CONDUCT OF THE BUSINESS PENDING THE CLOSING DATE. The Shareholder
and the Company hereby agree that, from the date hereof to the Closing Date,
they will:
(a) maintain the Assets in good repair, order and condition,
and make such capital expenditures as necessary to maintain the
Business, in accordance with past practices and sound business
judgment;
(b) maintain insurance upon all of its properties and with
respect to the conduct of the Business in such amounts and of such
kinds comparable to that in effect on the date hereof;
(c) not issue or agree to issue any additional shares of
common stock or of any other voting security or any rights to acquire
any such additional common stock or voting security which would cause a
change of control of Shareholder;
(d) use its best efforts to materially comply with all laws
and material contractual obligations applicable to it and to the
conduct of the Business;
(e) not (i) mortgage, pledge or, except in the ordinary course
of business, subject to any lien, charge, security interest or other
encumbrance any of the Assets
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(whether tangible or intangible), (ii) sell, assign, transfer, convey,
lease or otherwise dispose of, or agree to sell, assign, transfer,
convey, lease or otherwise dispose of, any of the Assets outside the
ordinary course of business other than that expressly disclosed in the
Shareholder's Disclosure Memorandum. Notwithstanding anything herein to
the contrary, all accounts receivables that were accrued by the Company
on or prior to October 24, 1997 will be distributed on the Closing Date
to Shareholder. Such accounts receivables that are to be distributed to
Shareholder will be distributed to Shareholder on a weekly basis as
they are received by the Company.
(f) not authorize or consummate any dividends or distributions
of assets to its stockholders, any consolidation or merger, purchase of
all or substantially all of the assets of any entity, or any other
extraordinary corporate transaction other than expressly disclosed in
the Shareholder's Disclosure Memorandum;
(g) conduct its business in its usual and ordinary manner.
5.2 INVESTIGATION BY PARENT AND NEWCO. Prior to the Closing Date, the
Company shall (i) give Parent and its authorized representatives and advisors
access, at reasonable times and on reasonable notice, to all items of Personal
Property, books and records, personnel, offices, and other facilities of the
Company, (ii) permit Parent to make such inspections thereof as Parent may
reasonably require, and (iii) cause its employees, and its advisors to furnish
to Parent and its authorized representatives and advisors such financial and
operating data and other information with respect to the Business prepared in
the ordinary course of the Business as Parent or its agent shall from time to
time reasonably request.
5.3 CLOSING CONDITIONS. The Company will, to the extent within its
control, use its best efforts to cause the conditions set forth in Section 8.1
to be satisfied by the Closing Date.
5.4 CONFIDENTIALITY. From and after the date hereof, Shareholder will,
and will cause the Company and its officers, employees, representatives,
consultants and advisors to hold in confidence all confidential information in
the possession of the Company, its affiliates or its financial advisor
concerning Parent. The Company will not release or disclose any such information
to any person other than Parent and its authorized representatives.
Notwithstanding the foregoing, the confidentiality obligations of this Section
shall not apply to information:
(a) which the Shareholder or the Company is compelled to
disclose by judicial or administrative process, or, in the reasonable
opinion of counsel, by other mandatory requirements of law;
(b) which can be shown to have been generally available to the
public other than as a result of a breach of this Section; or
(c) which can be shown to have been provided to the Company or
Shareholder by a third party who obtained such information other than
as a result of a breach of a confidential relationship.
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5.5 PUBLIC ANNOUNCEMENT. The Company, Shareholder, Newco and Parent
will cooperate in the public announcement of the transactions contemplated by
this Agreement, and, other than as may be required by applicable law, no such
announcement will be made by either party without the consent of the other
party, which consent shall not be unreasonably withheld.
5.6 NO SHOPPING. From and after the date hereof through the Closing or
the termination of this Agreement, whichever is the first to occur, neither the
Company nor Shareholder shall (and the Company and Shareholder shall cause their
respective affiliates, officers, directors, employees, representatives and
agents not to) directly or indirectly, solicit, initiate or participate in
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent or
an affiliate or an associate of Parent) concerning, or enter into any agreement
providing for, any merger, sale of material assets, sale of stock or similar
transactions involving the Company or the Assets.
5.7 FURTHER ASSURANCES. The Shareholder and the Company will use its
best efforts to implement the provisions of this Agreement, and for such purpose
the Shareholder or the Company, at the request of Parent, at or after the
Closing Date, will, without further consideration, promptly execute and deliver,
or cause to be executed and delivered, to Parent such deeds, assignments, bills
of sale, consents, documents evidencing title and other instruments in addition
to those required by this Agreement, in form and substance satisfactory to
Parent, as Parent may reasonably deem necessary or desirable to implement any
provision of this Agreement.
5.8 INSURANCE. The Company shall continue to maintain insurance through
the Closing Date with financially sound and reputable insurers unaffiliated with
the Company or Shareholder in such amounts and against such risks as are
adequate in the judgment of the Shareholder to protect the Assets and the
Business.
5.9 NONCOMPETITION AGREEMENT. At the Closing, Shareholder will enter
into a noncompetition agreement in the form attached hereto as Exhibit 5.9 (the
"Noncompetition Agreement").
5.10 INVESTMENT LETTER. At the Closing, Shareholder shall execute and
deliver to Parent the investment letter in the form attached hereto as Exhibit
5.10 (the "Investment Letter").
5.11 ESCROW AGREEMENT. At the Closing, Shareholder shall execute and
deliver to Parent the escrow agreement in the form attached hereto as Exhibit
5.11 (the "Escrow Agreement").
5.12 TITLE REPORTS. Within ten (10) days after the date hereof,
Shareholder, at Shareholder's sole cost and expense, shall provide a title
report(s) for all real property owned by the Company ("Owned Real Property") and
current reports of searches made of the Uniform Commercial Code Records of the
County and State where each parcel of Owned Real Property is located (the
"Financing Statements") setting forth the state of liens affecting the title to
the
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personal property and real property to be conveyed hereunder. At the Closing,
the Owned Real Property shall be subject to no liens, charges, encumbrances,
exceptions, or reservations of any kind or character other than those
specifically approved by Parent in writing (the "Permitted Exceptions").
VI. COVENANTS OF PARENT AND NEWCO
6.1 CLOSING CONDITIONS. Parent and Newco will, to the extent within
their control, use reasonable efforts to cause the conditions set forth in
Section 8.2 to be satisfied by the Closing Date.
6.2 ANCILLARY AGREEMENTS. At the Closing, Parent will enter into the
Noncompetition Agreement and the Escrow Agreement.
6.3 CONTINUATION OF EMPLOYMENT. At the Closing, Parent agrees that it
will continue to employee those employees described in Schedule 6.3 (the
"Employees") at the current wages or salaries as described in Schedule 6.3.
Parent agrees that either Parent, or a subsidiary of Parent, will continue to
employ the Employees for a period of one year from the date hereof. Such
employment shall be on an "at will" basis, and either Parent or any Employee may
terminate the relationship at any time provided, however, that should Parent
elect to terminate any Employee within one year from the Date hereof Parent
shall give said Employee no less than three months notice (the "Notice Period").
After Parent has given Employee such notice, Parent may elect
to retain Employee during the aforementioned Notice Period, in which case Parent
shall continue to pay Employee as set forth in Schedule 6.3. If Parent elects
not to retain Employee, then Parent shall pay to Employee an amount equal to
three months salary and benefits from the date such notice is given through out
the Notice Period.
VII. THE CLOSING
7.1 THE CLOSING. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at a mutually agreeable time and
date. The date of the closing shall herein be referred to as the "Closing Date."
Subject to the provisions of Article X, failure to consummate the transaction
set forth in this Agreement on the date and time and place determined by this
Section 7.1 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
7.2 CLOSING OBLIGATIONS. At the Closing, subject to the terms,
covenants and conditions contained herein:
(a) Shareholder will deliver to Parent:
(i) certificates representing the Shares, to be
surrendered to Parent;
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(ii) noncompetition agreement in the form of Exhibit
5.9, executed by Shareholder (the "Noncompetition Agreement");
(iii) a certificate executed by Shareholder
representing and warranting to Parent and Newco that
Shareholder's and the Company's representations and warranties
in this Agreement are accurate in all material respects as of
the Closing Date as if made on the Closing Date (giving full
effect to any supplements to the initial disclosure of the
Shareholder's Disclosure Memorandum which was delivered by
Shareholder to Parent prior to the Closing Date); and
(iv) investment letter executed by Shareholder in the
form attached hereto as Exhibit 5.10, (the "Investment
Letter").
(v) an escrow agreement (the "Escrow Agreement" as
set forth in Exhibit 5.11).
(vi) an opinion of counsel as referred to in Section
8.1(f);
(vii) letters of resignation of the officers and
directors of the Company;
(viii) All other documents and certificates required
to be delivered to Parent pursuant to this Agreement.
(b) Parent will deliver to Shareholder:
(i) the Stock Amount, issued to Shareholder;
(ii) the Cash Amount (less any adjustments, and less
the amount to be placed in escrow) by bank, cashier's or
certified check payable to the order of Shareholder or wire
transfer in immediately available funds to an account
designated by Shareholder, as may be selected by Shareholder;
(iii) the Noncompetition Agreement executed by
Parent;
(iv) a certificate executed by Parent to the effect
that, except as otherwise stated in such certificate, each of
Parent's representations and warranties in this Agreement is
accurate in all respect as of the Closing Date as if made on
the Closing Date ("Parent's Certificate"); and
(c) Parent and Company and Shareholder will enter into the
Articles of Merger, and shall be executed by Company and Parent and
filed with the Secretaries of State of the State of Texas and the State
of Arkansas.
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(d) Parent will place into escrow $320,000 of the Acquisition
Price into escrow in the form of 32,000 shares of the common stock of
Parent
VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF PARENT. The obligations of Parent to
complete the transactions contemplated at the Closing shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of Shareholder
or the Company to be performed or complied with on or before the
Closing Date shall have been duly performed or complied with in all
material respects and Shareholder shall deliver to Parent a certificate
signed by Shareholder and an officer of the Company to such effect.
(b) Representations and Warranties True; No Material Adverse
Change. The representations and warranties of Shareholder and the
Company contained herein shall be true and correct, in all material
respects, on the Closing Date with the same force and effect as though
such representations and warranties had been made on the Closing Date,
and since the date hereof there shall have occurred no material adverse
change in the Business, and Shareholder shall deliver to Parent a
certificate signed by Shareholder and an officer of the Company to such
effect.
(c) No Violation of Statutes, Orders, etc. There shall not be
in effect any decree or judgment enjoining Parent from consummating the
transactions contemplated hereby.
(d) Third Party Creditors. All third party creditors of the
Business will be paid in full, and all Encumbrances against the Stock
or Assets will be paid or discharged.
(e) Capital Leases. All Capital Leases shall be paid in full
and the personal property subject thereto shall be conveyed to the
Company free and clear of Encumbrances.
(f) Opinion of Counsel for Shareholder and the Company.
Shareholder shall have received the opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
& ▇▇▇▇▇▇, P.L.C. dated as of the Closing Date, in form and substance
satisfactory to Parent and Parent's counsel, subject to reasonable
qualifications and exceptions, as set forth on Exhibit 8.1(f).
8.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND SHAREHOLDER. The
obligation of the Company and Shareholder to complete the transactions
contemplated at the Closing shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
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(a) Performance. Each agreement and obligation of Parent to be
performed or complied with on or before the Closing Date shall have
been duly performed or complied with in all material respects and
Parent shall deliver to Shareholder a certificate signed by an officer
of Parent to such effect.
(b) Representations and Warranties True; No Material Adverse
Change. The representations and warranties of Parent contained herein
shall be true and correct on the Closing Date with the same force and
effect as though such representations and covenants had been made on
the Closing Date, and Parent shall deliver to Shareholder a certificate
signed by an officer of Parent to such effect.
(c) No Violation of Statutes, Orders, etc. There shall not be
in effect any decree or judgment enjoining the Company from
consummating the transactions contemplated hereby.
IX. INDEMNIFICATION
9.1 INDEMNIFICATION OF PARENT AND NEWCO BY THE COMPANY AND SHAREHOLDER.
The Company and Shareholder agree to indemnify, defend and hold harmless Parent
and Newco and Parent's and Newco's employees, agents, heirs, legal
representatives, and assigns from and against any and all claims, suits, losses,
expenses (legal, accounting, investigation and otherwise), damages and
liabilities, including, without limitation, tax liabilities (hereinafter,
collectively "Damages"), arising out of or relating to (i) any liability or
obligation of the Company not disclosed by Shareholder or (ii) any inaccuracy of
any representation or warranty set forth in this Agreement or the breach of any
covenant made by the Company in or pursuant to this Agreement.
(a) Notwithstanding anything herein to the contrary, the limit
of Shareholders liability to Parent or Newco under this Agreement shall not
exceed $800,000.
(b) Shareholder shall not be required to pay any amounts
comprising any Damages that arise under this Article IX of this Agreement until
such time that the aggregate amount of such Damages exceeds $50,000. If the
aggregate amount of Damages exceeds $50,000, then, Shareholder shall be
responsible for all such Damages as provided for in this Article IX herein.
9.2 INDEMNIFICATION OF THE COMPANY AND SHAREHOLDER BY PARENT AND NEWCO.
Parent and Newco agree to indemnify, defend and hold harmless the Company and
Shareholder from and against any and all Damages arising out of or relating to
any inaccuracy or any representation or warranty set forth in this Agreement or
the breach of any covenant made by Parent or Newco in or pursuant to this
Agreement.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim arises for
indemnification hereunder, the indemnified party (hereafter the "Indemnified
Party") shall notify the indemnifying party (hereafter the "Indemnifying Party")
in writing by registered or certified mail promptly after
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the Indemnified Party has actual knowledge of the facts constituting the basis
for such claim (the "Notice of Claim"). Such notice shall specify all material
facts known to the Indemnified Party giving rise to such indemnification right,
and to the extent practicable, the amount or an estimate of the amount of the
liability arising therefrom. The failure of any Indemnified Party to promptly
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligation to indemnify in respect to such action and shall not relieve the
Indemnifying Party of any other liability which they may have to any Indemnified
Party unless such failure to notify the Indemnifying Party prejudices the rights
of the Indemnifying Party. In addition to all other remedies provided hereunder
or by law, Parent shall have the right to make a claim against the Escrow Amount
for any of Parent's Damages.
9.4 RIGHT TO DEFEND. If the facts giving rise to any such claim for
indemnification involve any actual or threatened claim or demand by any third
party against the Indemnified Party, the Indemnifying Party shall be entitled
(without prejudice to the right of the Indemnified Party to participate in the
defense of such claim or demand at its expense through counsel of its own
choosing) to assume the defense of such claim or demand in the name of the
Indemnified Party at the Indemnifying Party's expense and through counsel of its
own choosing, which counsel shall be reasonably satisfactory to the Indemnified
Party, if it gives written notice to the Indemnified Party within forty-five
(45) days after receipt of the Notice of Claim that the Indemnifying Party
intends to assume the defense of such claim and acknowledges its liability to
indemnify the Indemnified Party for any losses resulting from such claim;
provided, however, that if the Indemnifying Party does not elect to assume the
defense of any claim, then (a) the Indemnifying Party shall have the right to
participate in the defense of such claim or demand at its expense through
counsel of its own choosing, provided the Indemnified Party shall control the
defense of such claim, (b) the Indemnified Party may settle any such claim
without the consent of the Indemnifying Party, however, the Indemnifying Party
may not settle any such claim without the prior written consent of the
Indemnified Party; and (c) Section 9.5 hereof shall be inapplicable. Whether or
not the Indemnifying Party does choose to so defend such claim, the parties
hereto shall cooperate in the defense thereof and shall furnish such records,
information and testimony and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be requested in connection therewith. To the
extent Parent is the Indemnified Party for any actual or threatened claim or
demand by any third party, Parent shall have the right to control the
prosecution of any counterclaim or right related to such a claim or demand,
provided that Parent agrees to reasonably cooperate with the Company or
Shareholder with respect to the prosecution of such counterclaim or right.
9.5 SETTLEMENT. Except as provided in Section 9.4, (i) the Indemnified
Party shall make no settlement of any claim that would give rise to liability on
the part of the Indemnifying Party under an indemnity contained in this Article
IX without the written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld and (ii) the Indemnifying Party can settle without
the consent of the Indemnified Party only if the settlement involves only the
payment of money for which the Indemnifying Party will be fully liable. No other
settlement of any claim may be made without the consent of both the Indemnified
Party and the Indemnifying Party, which consent shall not be unreasonably
withheld.
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9.6 EFFECT OF TERMINATION. Without limiting any other rights the
parties may have, the parties specifically agree that the covenants contained in
this Article will continue to be enforceable following termination of this
Agreement.
X. TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing Date by any of the
following:
(a) Mutual Consent. By mutual written consent of the
Shareholder, Company and Parent;
(b) Misrepresentation or Breach. By the Company, Shareholder,
or Parent, if there has been a material misrepresentation or a material
breach of a warranty or covenant herein or in any agreement required to
be delivered pursuant hereto on the part of the other party hereto;
(c) Failure of Condition to Parent's Obligations. By Parent,
if all of the conditions set forth in Section 8.1 have not been
satisfied;
(d) Failure of Condition to the Company's and Shareholder's
Obligations. By the Company or Shareholder, if all of the conditions
set forth in Section 8.2 have not been satisfied;
(e) Court Order. By the Company, Shareholder or Parent, if
consummation of the transactions contemplated hereby shall violate any
non-appealable final order, decree or judgment of any court or
governmental body having competent jurisdiction;
(f) Material Adverse Change. By Parent if any event has
occurred after the date hereof which is, or will result in a material
adverse change in the prospects, business or condition of the Assets;
(g) Drop Dead Date. The collective failure of the parties
hereto consummate and close this Agreement by November 15, 1997.
10.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 10.1(a), all further obligations of the Company, Shareholder and Parent
and Newco under this Agreement shall terminate without further liability of the
Company, Shareholder, Parent or Newco. If the Company or Shareholder fail to
consummate the transactions contemplated on their part to occur on the scheduled
Closing Date, in circumstances whereby all conditions of the Closing set forth
in Section 8.2 have been satisfied in all material respects or waived, Parent's
sole remedy shall be to (i) to require Shareholder to consummate and
specifically perform the transactions contemplated hereby, in accordance with
the terms of this Agreement, and to obtain from Shareholder any attorney fees
incurred in connection with procuring such specific
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performance or (ii) terminate this Agreement and reimbursement of its
out-of-pocket expenses incurred directly in connection with the negotiation,
preparation and performance of this Agreement plus $50,000 in liquidated
damages. If Parent fails to consummate the transactions contemplated on its part
to occur on the Closing Date, in circumstances whereby all conditions of the
Closing set forth in Section 8.1 have been satisfied in all material respects or
waived, the Company's and Shareholder's sole remedy shall be to (i) to require
Parent to consummate and specifically perform the transactions contemplated
hereby, in accordance with the terms of this Agreement, and to obtain from
Parent any attorney fees incurred in connection with procuring such specific
performance or (ii) terminate this Agreement and obtain reimbursement of its
out-of-pocket expenses incurred directly in connection with the negotiation,
preparation and performance of this Agreement plus liquidated damages in the
amount of $50,000.
10.3 RIGHT TO PROCEED. Notwithstanding anything in this Agreement to
the contrary, if any condition specified in Section 8.1 or Section 8.2 has not
been satisfied, the Company, Shareholder or Parent, in addition to any other
rights which may be available to it, shall have the right to waive any such
condition that is for its benefit and to require the other party hereto to
proceed with the Closing.
XI. TAX MATTERS.
11.1 TAX DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Final Determination" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations) or (ii) the payment of Tax by the Company
or Shareholder, whichever are responsible for payment of such Tax under
applicable law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that such responsible party determines that no action should
be taken to recoup such payment and the other party agrees.
"Post-Closing Tax Period" means any Tax period (or portion thereof)
beginning after the close of business on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion thereof)
ending on or before the close of business on the Closing Date.
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"Tax" means any net income, alternative or add-on minimum tax, gross
income, gross receipts (including gross receipts tax in respect of any franchise
operation), royalty, sales, use, ad valorem, value added, transfer, franchise,
profits, license, withholding on amounts paid to or by the Company, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other governmental fee,
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign).
"Tax Indemnification Period", means with respect to any Tax, any
Pre-Closing Tax Period of the Company.
11.2 FILING OF SHORT PERIOD RETURNS. Parent and the Shareholder shall
treat and cause the Company to treat the Closing Date as the last day of the
taxable period in which the Company is an S corporation, as defined under the
Code. All Tax returns of the Company, which are required and/or permitted by the
authorized taxing authorities (herein collectively referred to as the "S Short
Year Returns"), shall be filed accordingly. In accordance with Section
1362(e)(6)(D) and related regulations of the Code, the books of the Company
shall be closed effective the Closing Date. The Shareholder will cause its
accounting firm to prepare, at the Shareholder's sole expense, the S Short Year
Returns.
11.3 COVENANTS.
(a) Without the prior written consent of Parent, Shareholder
shall not cause the Company to make or change any tax election, change
any annual tax accounting period, adopt or change any method of tax
accounting, file any amended Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax
refund, consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment or take or omit to take any
other action, if any such action or omission would have the effect of
increasing the Tax liability of the Company or Parent.
(b) All Returns not required to be filed on or before the date
hereof (including any applicable extensions) will be filed when due in
accordance with all applicable laws.
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees incurred in
connection with this Agreement (including any real property transfer
Tax and any similar Tax) shall be accrued by the Company and be paid by
the Company when due (including any applicable extensions), and the
Company will, at the Shareholder's expense, file all necessary Tax
returns and other documentation with respect to all such Taxes and
fees.
11.4 COOPERATION ON TAX MATTERS.
(a) Parent and Shareholder shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with
the preparation and filing of any Tax return,
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statement, report or form (including any report required pursuant to
Section 6043 of the Code and all Treasury Regulations promulgated
thereunder), any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding.
Parent and Shareholder shall cause the Company to: (i) to retain all
books and records with respect to Tax matters pertinent to the Company
relating to any Pre-Closing Tax Period, and to abide by all record
retention requirements of any Taxing Authority or any record retention
agreements entered into with any Taxing Authority, and (ii) to give
Shareholder reasonable written notice prior to destroying or discarding
any such books and records and, if Shareholder so requests, Parent
shall allow Shareholder to take possession of such books and records.
(b) Parent and Shareholder further agree, upon request, to use
all reasonable efforts to obtain any certificate or other document from
any governmental authority or any other person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated
hereby).
11.5 TAX INDEMNIFICATION. The Company and Shareholder hereby jointly
and severally indemnify Parent against, and agree to hold Parent harmless from,
any loss, liability or expense attributable to (i) any Tax with respect to
income (including, to the extent based on income, state franchise Taxes),
transfer Tax, employment or withholding Tax related to employee tips income
(actual and allocated) and related reporting requirements, and gross receipts or
royalty Tax in respect of any franchise operation and any other Tax of the
Company related to the Tax Indemnification Period, (ii) any Tax resulting from a
breach of the provisions of Section 11.3, and (iii) any liabilities, costs,
expenses (including, without limitation, reasonable expenses of investigation
and attorneys' fees and expenses), losses, damages, assessments, settlements or
judgments arising out of or incident to the imposition, assessment or assertion
of any Tax described in (i) or (ii), including those incurred in the contest in
good faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax, and any liability as transferee or successor (the sum
of (i), (ii), and (iii) being referred to herein as a "Loss"). Parent shall give
Shareholder ten days notice of any claim of Loss, and Shareholder shall have the
opportunity to defend Parent in accordance with Section 9.4 hereof.
11.6 ACQUISITION PRICE ADJUSTMENT. Any amount paid by the Company,
Parent, or Shareholder under Section 11.5 will be treated as an adjustment to
the relevant purchase price for all Tax purposes unless a Final Determination
causes any such amount not to constitute an adjustment to the relevant purchase
price. In the event of such a Final Determination, Parent or Shareholder, as the
case may be, shall pay an amount that reflects the hypothetical Tax consequences
of the receipt or accrual of such payment, using the maximum statutory rate (or
rates, in the case of an item that affects more than one Tax) applicable to the
recipient of such payment for the relevant year, reflecting for example, the
effect of deductions available for interest paid or accrued and for Taxes such
as state and local income Taxes. Any payment required to be made by Parent or
Shareholder under Section 11.5 that is not made when due shall bear interest at
the rate
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per annum determined, from time to time, under the provision of Section
6621(a)(2) of the Code for each day until paid.
11.7 SURVIVAL. The provisions of this Article 11 with respect to income
(including to the extent based on income, state franchise Taxes), transfer
Taxes, employment or withholding Taxes and related reporting requirements, shall
survive for the full period of all applicable statutes of limitations (giving
effect to any waiver, mitigation or extension thereof).
XII. MISCELLANEOUS
12.1 EXPENSES. Legal, accounting and other costs and expenses incurred
in connection with this transaction shall be paid by the party incurring such
expenses.
12.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained in or made in connection with this Agreement shall
survive the Closing for a period of eighteen months.
12.3 INUREMENT; ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and, if properly assigned, assigns. This
Agreement may not be assigned by any party without the written consent of the
other parties hereto.
12.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Schedules and
Exhibits hereto, and the related agreements referred to herein embody the entire
agreement of the parties hereto, and supersede all prior agreements and
understandings, with respect to the subject matter hereof.
12.5 SEVERABILITY. Any provision of this Agreement which is invalid,
unenforceable or illegal in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such invalidity, unenforceability or
illegality without affecting the remaining provisions hereof and without
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
12.6 INCORPORATION OF EXHIBITS AND SCHEDULES. All Exhibits and
Schedules referenced in this Agreement, and any statements contained therein or
in any certificate or instrument delivered pursuant hereto, constitute an
integral part of this Agreement and shall be deemed made in this Agreement as if
set forth in full herein.
12.7 CAPTIONS AND HEADINGS; USE OF TERM "PERSON". Captions and headings
used herein are for convenience only, do not constitute a part of this
Agreement, and shall not be considered in construing this Agreement. Unless the
context otherwise requires, all article, section or subsection cross-references
are to articles, sections and subsections within this Agreement. As used herein,
the term "person" shall mean any corporation, limited liability company,
partnership, venture, proprietorship, trust, benefit plan or other entity or
enterprise.
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12.8 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
12.9 NOTICES. All notices of requests, demands or other communications
required or to be given hereunder shall be delivered by hand, overnight courier,
facsimile transmission, or by United States Mail, postage prepaid, by registered
or certified mail (return receipt requested), to the addressed indicated below
and shall be deemed given when received by the addressee thereof:
to the Company: Golden Eagle Ice Company
Attn: President
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
to the Shareholder: ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.L.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
to Parent: ▇.▇. ▇▇▇▇▇ III, President
Packaged Ice, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, P.C.
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
or such other address or addresses as may be expressly designated by either
party by notice given in accordance with the foregoing provision.
12.10 AGENTS OR BROKERS. The Company, Shareholder and Parent mutually
represent and agree with each other that no agents or brokers have been utilized
in the solicitation or negotiation of the sale of the Business and no fees,
commissions or expenses of any type shall be due or payable out of the proceeds
of the Acquisition Price by either party to this Agreement.
12.11 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, including without limitation any
alleged violations of securities laws, shall be settled by binding arbitration
in accordance with the Commercial
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Arbitration Rules of the American Arbitration Association in Dallas, Texas and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof, and shall not be appealable. Judicial proceedings
may be commenced only to enforce this arbitration agreement or to enforce the
results of arbitration; provided that such prohibition shall not apply in the
event that a court ordered injunction is an appropriate remedy for a breach of
this Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute the
same instrument.
(AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE FOLLOWS)
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[AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE]
Executed on the date first written above.
PARENT:
PACKAGED ICE, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
NEWCO
GOLDEN EAGLE ICE, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
THE COMPANY:
GOLDEN EAGLE ICE COMPANY, INC.,
an Arkansas corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇, PRESIDENT
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, President
SHAREHOLDER:
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▇▇▇▇▇ ▇. ▇▇▇▇