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EXHIBIT 10.5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
March 5, 1998 (the "Effective Date"), by and among Packaged Ice, Inc., a Texas
corporation ("Buyer"), Xxxx X. Xxxxxx and Xxxxx X. Xxxxxxxx, two individuals
who, together, own all of the outstanding capital stock of Party Time Ice, Co.,
Inc., a Louisiana corporation (individually "Seller" and collectively the
"Sellers").
PRELIMINARY STATEMENTS
Sellers own all of the outstanding shares of capital stock of Party
Time Ice Co., Inc., a Louisiana corporation (hereinafter the "Company"), such
shares hereinafter referred to as the "Stock".
The Company is engaged in the manufacture and sale of packaged ice
products (such business being herein referred to as the "Business").
Sellers are desirous of selling to Buyer, and Buyer is desirous of
purchasing from Sellers, all of the Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties hereafter set forth, the
parties hereby agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"Accrued Expenses" shall mean all expenses accrued by the Company in
the normal course of business, however, accrued Taxes (as defined herein) and
accrued payroll expenses shall not be included in the calculation.
"Assets" shall mean all of Company's properties and assets, real,
personal, tangible and intangible. The Assets shall include, but shall not be
limited to, those items specifically described in Exhibit A attached hereto,
but shall not include the Excluded Assets.
"Capital Leases" shall mean those leases covering immovable property
and certain capital equipment used in the Business which are used in the direct
manufacturing, distribution and sale of packaged ice products. The property
comprising the Capital Leases is described in Exhibit B attached hereto.
"Closing" shall have the meaning set forth in Section 7.1 of this
Agreement.
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"Closing Date" shall have the meaning set forth in Section 7.1 of this
Agreement.
"Code" shall have the meaning set forth in Section 11.1 of this
Agreement.
"Company Plans" shall have the meaning set forth in Section 3.17 of
this Agreement.
"Contracts" shall have the meaning set forth in Section 3.14 of this
Agreement.
"Damages" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Encumbrance" shall mean any mortgage, lien, encumbrance, security
interest, charge, pledge, conditional sale agreement, adverse claim, deed of
trust, or restriction on transfer of any nature whatsoever other than those
held by Buyer or granted by the Company at Buyer's request.
"Environmental Action" shall have the meaning set forth in Section
3.10 of this Agreement.
"Escrow Agreement" shall have the meaning set forth in Section 2.2(b)
of this Agreement.
"Escrow Agent" shall mean Bank One, National Association, located in
Baton Rouge, Louisiana.
"Escrow Amount" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"Excluded Assets" shall mean those assets of the Company that will be
distributed to the Sellers prior to Closing and shall not belong to the Company
on the Closing Date. The Excluded Assets will be described in Exhibit C
attached hereto.
"Financial Statements" shall have the meaning set forth in Section
3.3 of this Agreement.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Indemnified Party" shall have the meaning set forth in Section 9.3 of
this Agreement.
"Indemnifying Party" shall have the meaning set forth in Section 9.3
of this Agreement.
"Intangible Assets" shall mean all patents, trademarks, trademark
licenses, trade names, brand names, slogans, copyrights, reprint rights,
franchises, licenses, authorizations, inventions, processes, know-how,
formulas, trade secrets and other intangible assets (together with all pending
applications, continuations-in-part and extensions for any of the above).
"Investment Letter" shall have the meaning set forth in Section 5.10
of this Agreement.
"Leases" shall have the meaning set forth in Section 3.12 of this
Agreement.
"Liabilities" shall have the meaning set forth in Section 2.2(a) of
this Agreement.
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"Materials" shall have the meaning set forth in Section 3.10 of this
Agreement.
"Noncompetition Agreement" shall have the meaning set forth in Section
5.9 of this Agreement.
"Owned Real Property" shall mean all of that immovable property that
is owned by the Company and is more fully described in Schedule 3.12(e).
"PI Stock" shall have the meaning set forth in Section 2.2.
"Personal Property" shall have the meaning set forth in Section 3.13
of this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.2 of
this Agreement.
"Real Property" shall have the meaning as set forth in Section 3.12
of this Agreement.
"Sellers' Disclosure Memorandum" shall mean that schedule attached
hereto and incorporated herein by reference that lists and describes all
requested disclosures by Sellers concerning the Assets and the Business which
are the subject of this Agreement.
"Shareholder and Voting Agreements" shall mean the Voting Agreement
dated December 2, 1997, by an among the Buyer, Culligan Water Technologies,
Inc., and certain shareholders of the Buyer, the Voting Agreement, dated July
17, 1997, by and among the Buyer, SV Capital Partners, L.P. and certain
shareholders of Buyer, each of Amendment No.1, Amendment No.3 and the Amended
and Restated Voting Agreement, dated September 20, 1995 as amended, by and
among the Buyer and certain shareholders of Buyer, and each of Amendment No.1,
Amendment No.2 and the Amended and Restated Shareholders Agreement, dated
September 20, 1995, as amended, by and among the Buyer and certain shareholders
of Buyer.
"Stock" shall mean all of the capital stock of the Company outstanding
on the Closing Date.
"Tax or Taxes" shall have the meaning as set forth in Section 11.1
hereof.
"Trade Accounts Payable" shall mean all accounts payable accrued by
the Company that relate directly to the manufacture, storage, distribution and
sale of packaged ice products.
II. PURCHASE AND SALE
2.1. STOCK PURCHASE. At the Closing, subject to the terms, covenants
and conditions contained herein, Sellers shall sell to Buyer, and Buyer shall
purchase from Sellers, all of the Stock.
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2.2 PURCHASE PRICE.
The purchase price for all of the Stock shall be Ten Million
Six Hundred Sixty One Thousand Dollars ($10,661,000) (the "Purchase Price"),
less the adjustments set forth hereinbelow. Five Hundred Thousand Dollars
($500,000) of the Purchase Price shall be payable in the form of 38,460 shares
of the $.01 par value common stock of Packaged Ice, Inc. ("PI Stock"), valued
at $13.00052 per share (the "Stock Portion"). Ten Million One Hundred Sixty
One Thousand Dollars ($10,161,000) less adjustments (the "Cash Portion"), of
the Purchase Price will be payable in the form of cash. The Cash Portion of
the Purchase Price shall be payable on the Effective Date and contemporaneously
with the execution of this Agreement as follows:
(a) The Cash Portion of the Purchase Price shall first be
used to pay and discharge all of the Company's debts, obligations and other
liabilities including, without limitation, all current liabilities (save and
except all Trade Accounts Payable and all Accrued Expenses), all long term
liabilities, all interest bearing debt and Encumbrances (excluding all Capital
Leases) (collectively, the "Liabilities") which are estimated by the Buyer and
the Company to exist as of the Closing Date.
(b) Five Hundred Thousand Dollars ($500,000) of the Cash
Portion of the Purchase Price shall be placed in an interest bearing escrow
(the "Escrow Amount") with the Escrow Agent and shall be payable pursuant to
the escrow agreement in the form attached hereto as Exhibit D (the "Escrow
Agreement").
(c) The Cash Portion of the Purchase Price remaining
after the estimated Liabilities have been paid and discharged and the Escrow
Amount has been placed in escrow, shall be paid directly to the Sellers on a
pro rata basis based on their ownership of the Stock in exchange for all of the
Stock owned by the Sellers. The intent and effect of this Section 2.2(c) is to
convey all of the outstanding Stock of the Company to Buyer with there being no
Liabilities (except Trade Accounts Payables and Accrued Expenses) or
Encumbrances immediately after Closing. Sellers hereby agree all Liabilities
which are not discharged at Closing shall be assumed by the Sellers through an
Undertaking Agreement in the form attached hereto as Exhibit E.
The Stock Portion of the Purchase Price shall be distributed at
Closing as follows:
(a) 19,230 shares of PI Stock shall be delivered to Xxxx
X. Xxxxxx; and
(b) 19,230 shares of PI Stock shall be delivered to Xxxxx
X. Xxxxxxxx.
2.3 ADJUSTMENT TO PURCHASE PRICE AT CLOSING. The Purchase Price
will be adjusted at Closing as follows:
(a) if, as of the Closing Date, the Company's current
assets, including cash, accounts receivable and inventory, are less
than the sum of its Trade Accounts Payable
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and Accrued Expenses, the Cash Portion of the Purchase Price shall be
reduced by an amount equal to the sum of its Trade Accounts Payable
and Accrued Expenses minus current assets, including cash, accounts
receivable and inventory; and
(b) if, as of the Closing Date, the Company's current
assets, including cash, accounts receivable and inventory, exceed the
sum of its Trade Accounts Payable and Accrued Expenses, the Cash
Portion of the Purchase Price shall be increased by the amount equal
to the current assets, including cash, accounts receivable and
inventory, minus Trade Accounts Payable and Accrued Expenses.
2.4 POST-CLOSING ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price
shall be subject to the following adjustments:
(a) On or before thirty-one (31) days after the Closing
Date, Sellers shall, at their sole cost and expense, pursuant to
Section 5.13 hereof, deliver to Buyer a copy of the compiled balance
sheet of the Company as of the Closing Date prepared by Xxxx Xxxxx,
CPA, (the "Closing Date Balance Sheet") certified by Sellers to the
best of their knowledge and belief to be true and correct. The
Closing Date Balance Sheet shall (i) fairly present the financial
position of the Company as at the close of business on the Closing
Date in accordance with GAAP, and (ii) include a detailed schedule of
Liabilities. The Closing Date Balance Sheet shall be used to
calculate any post closing adjustments to the Purchase Price as of the
Closing Date and the amount of any Liabilities to be paid by Sellers,
all in accordance with the terms and conditions set forth in this
Agreement.
(b) To the extent the Sellers received at Closing an
amount of cash in excess of what they are entitled to hereunder,
Sellers shall pay to Buyer such amount within thirty (30) days after
such determination. To the extent Sellers are entitled to a greater
amount of cash than they received at Closing, then Buyer and/or the
Company shall pay such amount to Sellers within thirty (30) days
after such determination. It is understood and agreed between the
parties that any such determinations hereunder shall be computed, and
notice given to the applicable party, within sixty (60) days of the
Closing Date.
2.5 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. Sellers' pro rata share of such taxes shall be the
portion attributable to the period through the day preceding the Closing Date,
prorated by days. Prorated amounts shall be payable in the manner set forth
below:
(a) If a prorated amount is payable by Buyer and
determinable at the Closing, it shall be added to the amount payable
by Buyer at the Closing.
(b) If a prorated amount is payable by Buyer and not
determinable at the Closing, it shall be billed by Sellers when
determinable and promptly paid by Buyer to Sellers.
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(c) If a prorated amount is payable by Sellers and
determinable at the Closing, it shall be deducted from the amount
otherwise payable by Buyer at the Closing.
(d) If a prorated amount is payable by Sellers and not
determinable at the Closing, it shall be billed by Buyer when
determinable and promptly paid by Sellers to Buyer.
2.6 EMPLOYMENT AGREEMENT. At the Closing, Buyer shall enter into
an employment agreement with Xxxxx X. Xxxxxxxx in the form of Exhibit F
attached hereto.
III. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Louisiana
and has all requisite power and authority to own, lease and operate the
Business as presently conducted and to enter into this Agreement and to perform
its obligations hereunder and is duly qualified to do business in any foreign
jurisdiction in which it is currently conducting business operations. All
shares of Stock owned by Sellers are validly issued, fully paid and
nonassessable. Other than this Agreement, there is no subscription, option,
warrant, call, right, agreement or commitment relating to the issuance, sale,
delivery, repurchase or transfer by Sellers 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. Sellers own and have good and
marketable title to the Stock, free and clear of all Encumbrances. The Stock
represents all of the issued and outstanding capital stock of the Company.
Upon the sale of the Stock to Buyer at Closing, Sellers will transfer to Buyer
the entire legal and beneficial interest in all Stock, free and clear of any
Encumbrances. There are no voting trusts, proxies or any other agreements or
understandings with respect to the voting of the Stock.
3.2 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT. This
Agreement has been duly executed and delivered by Sellers and constitutes the
valid and binding obligation of Sellers, enforceable against them in accordance
with its terms. Except as set forth on Section 3.2 of Sellers' Disclosure
Memorandum, the execution, delivery and performance of this Agreement by
Sellers and the consummation of the transactions contemplated hereby will not
require the consent, approval or authorization of any third party or
governmental authority, and will not, with or without the giving of notice, the
passage of time, or both, violate, conflict with, result in a default, breach
or loss of rights under, or result in the creation of any Encumbrance pursuant
to, any lien, encumbrance, instrument, agreement, or understanding, or any law,
regulation, rule, order, judgment or decree, to which Sellers are a party or by
which they are bound or affected.
3.3 FINANCIAL STATEMENTS. Sellers have previously caused to be
furnished to Buyer the Company's audited balance sheets as of December 31, 1996
and December 31, 1997, and the related audited statements of income and
statements of cash flow for the fiscal years then ended (such balance sheets
and related statements are collectively referred to herein as the "Financial
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Statements"). The Financial Statements taken as a whole present fairly the
financial position of the Business as of December 31, 1996, and December 31,
1997, respectively, and the results of operations for such periods, all in
accordance with GAAP.
Except as and to the extent reflected or reserved against in the
Financial Statements or as disclosed by Sellers in Sellers' Disclosure
Memorandum and except for Trade Accounts Payable arising in the ordinary course
of business and consistent with past practice since the date of the Company's
December 31, 1997 Balance Sheet, Sellers have operated the Company in the
ordinary course and have incurred no liabilities which would be required by
GAAP to be reflected on a balance sheet of the Company as of the date hereof or
disclosed in the notes thereto. Since December 31, 1997 there has not been any
material adverse change in the business, operations, properties, prospects,
assets or condition of the Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
3.4 SHAREHOLDER DEBT. There are no Encumbrances held by Sellers
whatsoever against the Company or the Assets.
3.5 BUSINESS OPERATIONS AND CONDITION OF ASSETS. Sellers
acknowledge that Buyer is purchasing the Stock of the Company for the express
purpose of operating a packaged ice manufacturing and distribution business.
All material items comprising the Assets have been continuously used, or used
as may normally be required, by the Company in connection with the Business and
are now in serviceable condition, unless expressly disclosed to the contrary by
Sellers in Section 3.5 of Sellers' Disclosure Memorandum.
3.6 GOOD TITLE. Except as set forth in Section 3.6 of Sellers'
Disclosure Memorandum, the Company has good, legal and marketable title to all
of the Assets, including the Owned Real Property, free and clear of
Encumbrances.
3.7 LITIGATION. Except as set forth on Section 3.7 of Sellers'
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 Sellers, threatened, against or
relating to Sellers, the Company or the Assets, or the transactions
contemplated by this Agreement, and no event has occurred or circumstance
exists that will, or is reasonably likely to, give rise to or serve as a basis
for the commencement of any claim, action, suit or proceeding.
3.8 COMPLIANCE WITH LAWS. Sellers and the Company have complied
with all laws, rules, regulations, ordinances, orders, judgments and decrees
relating to the Company, the Stock and the Assets. The ownership and/or use of
the Assets and the conduct of the Business as it specifically relates to the
Assets does not conflict with the rights of any other person.
3.9 TAXES. Except as set forth in Section 3.9 of Sellers'
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
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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. Except as set forth in Section 3.9 of
Sellers' 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 Sellers' knowledge, threatened against or with respect to the Company;
(v) no claim has been made by a taxing authority in a jurisdiction where the
Company does not file Tax Returns that the Company is subject to Taxes assessed
by such jurisdiction; (vi) there are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the Assets; (vii) the Company will not be
required to include any amount in taxable income or exclude any item of
deduction or loss from taxable income for any taxable period (or a portion
thereof) ending after the Closing Date as a result of any of the following: (A)
a change in method of accounting for a taxable period ending on or prior to the
Closing Date, (B) any "closing agreement," as described in Code Section 7121
(or any corresponding provision of state, local or foreign income Tax law)
entered into on or prior to the Closing Date, (C) any sale reported on the
installment method where such sale occurred on or prior to the Closing Date,
and (D) any prepaid amount received on or prior to the Closing Date; and (viii)
Company has no obligation or liability for the payment of Taxes of any other
person as a result from any expressed obligation to indemnify another person,
or as a result of such Company assuming or succeeding to the Tax liability of
any other person as successor, transferee or otherwise.
3.10 ENVIRONMENTAL. 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, without limitation, relating to occupational safety and health, good
manufacturing practices for food products, wetlands, emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes (collectively, "Materials")
into ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of such Materials, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
(collectively, an "Environmental Action") is pending or threatened to be
commenced against it or the Sellers alleging any failure so to comply, nor is
the Company or the Sellers aware of any circumstances or conditions which may
cause any such Environmental Action to be filed or commenced against the
Sellers or the Company. Without limiting the generality of the preceding
sentence, the Sellers and the Company have 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
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limitations, 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
cancelled 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 Sellers' Disclosure Memorandum lists all claims, which
(including related claims which in the aggregate) exceed $10,000 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 Sellers or any of the Assets. Except as set forth on Section 3.11 of
Sellers' 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 Sellers' Disclosure Memorandum
contains (i) a complete and accurate legal description of each parcel of
immovable 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"). Sellers have delivered to Buyer true
and complete copies of the Leases. The Sellers' Disclosure Memorandum contains
the address of each property, together with a summary description of the
buildings and improvements thereon, the name and address of each landlord where
the Company is a tenant, and of each tenant where the Company is a landlord,
the commencement and expiration dates of each lease, the monthly rent and
additional rent payable under such lease, and the date to which such rent has
been paid, the amount of any deposits, security or otherwise, made under such
lease, and whether the consent of any other party to the lease is required to
consummate the transaction contemplated hereby.
(b) Except as disclosed in Section 3.12 of Sellers'
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) Sellers
have 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 monthly rental under the Leases
has been paid more than one month in advance.
(c) 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
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Property is served by utilities and services necessary for the normal and
continued operation of the business presently conducted thereon.
(d) At Closing, the Owned Real Property and the Company's
interest in the leases will be free and clear of all Encumbrances or other
restrictions which would materially affect the use for which it is held by the
Company. Sellers have not received notice that any of the Real Property is
subject to any governmental decree or order to be sold, or is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor has any such condemnation, expropriation or
taking been proposed.
(e) The Company is the owner of the Owned Real Property
described in Schedule 3.12(e) attached hereto.
3.13 PERSONAL PROPERTY.
(a) Exhibit A is an accurate schedule as of December 31,
1997 describing, and specifying the general location of all material inventory,
motor vehicles, machinery, fixtures, equipment, furniture, supplies, tools, and
intangible assets in the possession of, or used by the Company other than the
Excluded Assets (the "Personal Property").
(b) Each material lease, license, rental agreement,
contract of sale or other agreement applicable to any Personal Property is
listed in Section 3.13 of Sellers' Disclosure Memorandum and is in full force
and effect; neither Sellers nor any other party thereto is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. The Company has received no notice that
any party to any such lease, license, rental agreement, contract of sale or
other agreement intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. No
Personal Property is subject to any lease, license, contract of sale or other
agreement that is adverse to the business, properties or financial condition of
the Company.
3.14 CONTRACTS. Section 3.14 of Sellers' Disclosure Memorandum
contains a complete and accurate list of all presently effective contracts,
leases and other material agreements to which the Company is a party and are
not cancelable on notice of thirty days or less (hereinafter "Contracts").
Section 3.14 of Sellers' Disclosure Memorandum shall also describe true and
complete copies (or summaries in the case of oral contracts) of each Contract
which has been delivered to Buyer by Sellers, 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;
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(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 binding against the Company;
(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);
(j) employment contracts.
Except as disclosed in Section 3.14 of Sellers' Disclosure Memorandum,
each of the Contracts is in full force and effect and has not been amended or
modified and neither the Company, nor any other party thereto, is in default
thereunder, nor is there any event which with notice or lapse of time, or both,
would constitute a default thereunder. The Company has received no notice that
any party intends to cancel, terminate or refuse to renew any such Contract or
to exercise or decline to exercise any option or other right thereunder.
3.15 LABOR MATTERS. There are no controversies pending or
threatened between the Company and any employees of the Company. The Company
has complied with all laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining,
immigration, safety and the payment of withholding and social security and
similar taxes, and the Company has no liability for any arrears of wages or
taxes or penalties for failure to comply with any of the foregoing.
3.16 ABSENCE OF SENSITIVE PAYMENTS. Neither the Company nor
Sellers have made or maintained (i) any contributions, payments or gifts of its
or their funds or property to any governmental official, employee or agent
where either the payment or the purpose of such contribution, payment or gift
was or is illegal under the laws of the United States or any state thereof, or
any other jurisdiction (foreign or domestic); or (ii) any contribution, or
reimbursement of any political gift or contribution made by any other person,
to candidates for public office, whether federal, state, local or foreign,
where such contributions by the Company or Sellers were or would be a violation
of applicable law.
3.17 EMPLOYEE BENEFITS. All employee benefit plans (whether or not
covered by ERISA), deferred compensation or executive compensation plans for
employees, directors or
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independent contractors, and all other employee or independent contractor
arrangements or programs that are maintained or contributed to by the Company
(collectively, the "Company Plans") have been administered and operated in all
material respects in compliance with their terms, ERISA, if applicable, the
Code and other applicable law. All Company Plans that are intended to be
qualified under Section 401(a) of the Code are so qualified and a current
favorable IRS determination letter exists for each such plan and covers the
amendments required by the Tax Reform Act of 1986. All funded Company Plans
are fully funded according to their terms and applicable law. To the knowledge
of the Sellers no prohibited transaction or breach of fiduciary duty under
ERISA has been committed by any fiduciary, disqualified person or party in
interest of any Company Plan. The Company has no liability, contingent or
otherwise, under Title IV of ERISA. All Company Plans are listed on Schedule
3.17. Copies of all documents comprising Company Plans, all funding vehicles
and ancillary documents for such plans, all Forms 5500 (or other annual
reports) for the past two plan years for applicable Company Plans, all
administrative forms for Company Plans, and all IRS determination letters have
been made available to Buyer.
3.18 CAPITAL IMPROVEMENTS. Section 3.18 of Sellers' 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 CONSENTS. Except as set forth in the Sellers' Disclosure
Memorandum, no consent or approval of any public body or authority, and no
consents or waivers from other parties to the Leases, material licenses,
franchises, permits, agreements, Contracts or other instruments are required to
be obtained by the Company as a result of the transfer of the Stock
contemplated by this Agreement to (i) avoid the loss of any Assigned Leases,
material license, franchise, permit or other instrument or the creation of any
lien or other claim on any Asset pursuant to the terms of any law, regulation,
order, agreement or other legal requirement binding upon Sellers and/or the
Company relating to the Business or to which any such Asset may be subject, or
(ii) to enable Buyer to continue the operation of the Business substantially as
conducted prior to the Closing. Sellers further covenant that the transfer of
Stock contemplated by this Agreement does not require the consent of any third
party.
3.20 WARRANTIES. Except as described in Section 3.20 of the
Sellers' Disclosure Memorandum, (i) Neither Sellers nor the Company have agreed
to become responsible for consequential damages or made any express warranties
to third parties with respect to any products distributed or sold by the
Company, and (ii) there are no warranties (express or implied) outstanding with
respect to any products other than any such implied by law. A copy of each
standard warranty of the Company with respect to such product is included in
Section 3.20 of the Sellers' Disclosure Memorandum.
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3.21 INVENTORIES.
(a) All inventories shown on the December 31, 1997
balance sheet of the Company consisted of, and all inventories
thereafter acquired will consist of, items of good and merchantable
quality and quantity usable or salable in the ordinary and regular
course of the Company's business except for obsolete items and items
below standard quality, all of which have been written off, or written
down to net realizable value on the December 31, 1997 balance sheet of
the Company. Each inventory or class was priced at the lower of cost
or market on the first-in, first-out basis and, as to the classes of
items inventoried and methods of counting and pricing, such
inventories were determined in a manner consistent with prior years.
Except to the extent, if any, disclosed in Section 3.21 of the
Sellers' Disclosure Memorandum, the Company has neither sold any of
its inventory under agreements with an express right of return, nor
consigned any inventory, and Sellers and the Company have no knowledge
of any pending returns of inventory in any material quantity.
(b) There have been no material changes in the
inventories reflected in the December 31, 1997 balance sheet of the
Company and there will be no further changes in any such inventories
except those changes resulting from write down or write-offs,
purchases in the ordinary and regular course of business, and sale of
merchandise inventory in the ordinary and regular course of business.
3.22 SUPPLIERS AND CUSTOMERS. Except as set forth in Section 3.22
of the Sellers' Disclosure Memorandum and to Sellers' and the Company's actual
knowledge, no customer of the Company has communicated to Sellers or the
Company, in any manner, his or its intention to cease to do business with or
trade with the Company, or materially alter, modify or amend the terms with
which it has conducted business with the Company whether as a result of, or in
contemplation of, the consummation of the transactions contemplated by this
Agreement.
3.23 ACCOUNTS RECEIVABLE. Except as otherwise indicated in
Section 3.23 of the Seller's Disclosure Memorandum, all accounts receivable of
the Company have arisen out of bona fide transactions in the ordinary course of
business, and each such account receivable constitutes a valid and binding
obligation of the obligor, maker, co-maker, guarantor, endorser or debtor
thereof or thereunder and is collectible in full within 60 days.
3.24 COMPLETE AND ACCURATE DISCLOSURE. No representation or
warranty made to Buyer in this Agreement or in connection with this transaction
contains or will contain an untrue statement of a 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 Buyer to make a fully informed
decision with respect to its purchase of the Stock. All documents and
information which have been or will be delivered to Buyer or its
representatives by or on behalf of the Company are and will be true, correct
and complete copies of the documents they purport to represent.
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IV. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 CORPORATE EXISTENCE; GOOD STANDING; CAPITALIZATION. Buyer is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of Texas.
4.2 POWER AND AUTHORITY. Buyer has the requisite corporate power
and authority, and has been duly authorized, to enter into this Agreement and
to perform all of its obligations hereunder. Buyer represents and warrants to
Sellers that this Agreement has been duly executed and delivered by Buyer, and
constitutes a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms. The execution, delivery and performance of this
Agreement by Buyer, and the consummation of the transactions contemplated
hereby, will not require the consent, approval or authorization of any third
party or governmental authority, and does not violate any federal or state
securities laws.
4.3 TRANSFER OF STOCK PORTION. The Stock Portion shall be
transferred to the Sellers free and clear of any encumbrances, assessments,
liens, voting requirements or other shareholder agreements, rights of first
refusal or other restrictions or limitations upon transfer, other than the
Shareholder and Voting Agreements.
V. COVENANTS OF SELLERS
Sellers hereby covenant and agree as follows:
5.1 CONDUCT OF BUSINESS. Prior to the Closing Date, Sellers shall
cause the Company to operate the Business in the ordinary course and continue
normal capital expenditures and maintenance prior to the Closing Date, except
(i) as may be permitted by this Agreement or (ii) as necessary to consummate
the transactions contemplated hereby and previously disclosed in writing to and
approved by Buyer.
5.2 INVESTIGATION BY BUYER. Prior to the Closing Date, Sellers
shall (i) give Buyer and its authorized representatives and advisors access, at
reasonable times and on reasonable notice, to all items of Personal Property,
books and records, personnel, offices, and other facilities of the Company,
(ii) permit Buyer to make such inspections thereof as Buyer may reasonably
require, and (iii) cause its employees, and its advisors to furnish to Buyer
and its authorized representatives and advisors such financial and operating
data and other information with respect to the Business prepared in the
ordinary course of the Business as Buyer or its agent shall from time to time
reasonably request.
5.3 CLOSING CONDITIONS. Sellers will, to the extent within their
control, use their best efforts to cause the conditions set forth in Section
8.1 to be satisfied by the Closing Date.
5.4 CONFIDENTIALITY. From and after the date hereof, Sellers
will, and will cause the Company and their officers, employees,
representatives, consultants and advisors to, hold in
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confidence all confidential information in the possession of Sellers or the
Company, its affiliates or its financial advisor concerning the Company.
Sellers will not release or disclose any such information to any person other
than Buyer and its authorized representatives. Notwithstanding the foregoing,
the confidentiality obligations of this Section shall not apply to information:
(a) which Sellers 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 Sellers
or the Company by a third party who obtained such information other
than as a result of a breach of a confidential relationship.
5.5 PUBLIC ANNOUNCEMENT. Sellers and Buyer will cooperate in the
public announcement of the transactions contemplated by this Agreement, and,
other than as may be required by applicable law, no such announcement will be
made by either party without the consent of the other party, which consent
shall not be unreasonably withheld.
5.6 NO SHOPPING. From and after the date hereof through the
Closing or the termination of this Agreement, whichever is the first to occur,
neither Sellers nor the Company shall (and Sellers and the Company shall cause
their respective affiliates, officers, directors, employees, representatives
and agents not to) directly or indirectly, solicit, initiate or participate in
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Buyer or
an affiliate or an associate of Buyer) concerning, or enter into any agreement
providing for, any merger, sale of material assets, sale of stock or similar
transactions involving the Company, the Stock or the Assets.
5.7 FURTHER ASSURANCES. Sellers will use their best efforts to
implement the provisions of this Agreement, and for such purpose Sellers, at
the request of Buyer, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Buyer such deeds, assignments, bills of sale, consents, documents
evidencing title and other instruments in addition to those required by this
Agreement, in form and substance satisfactory to Buyer, as Buyer may reasonably
deem necessary or desirable to implement any provision of this Agreement.
5.8 INSURANCE. Sellers shall cause and the Company shall continue
to maintain insurance through the Closing Date with financially sound and
reputable insurers unaffiliated with Sellers in such amounts and against such
risks as are adequate in the judgment of Sellers to protect the Assets and the
Business.
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5.9 NONCOMPETITION AGREEMENT. At the Closing, Sellers will enter
into a noncompetition agreement in the form attached hereto as Exhibit G (the
"Noncompetition Agreement").
5.10 INVESTMENT LETTER/SHAREHOLDER AND VOTING AGREEMENTS. At the
Closing, each Seller that is receiving PI Stock shall execute and deliver to
Buyer the investment letter in the form attached hereto as Exhibit H (the
"Investment Letter") and counterparts to the Shareholder and Voting Agreements.
5.11 ESCROW AGREEMENT. At the Closing, Sellers shall execute and
deliver to Buyer the Escrow Agreement.
5.12 TERMINATION OF PROFIT SHARING AND PENSION PLANS. Prior to the
Closing, the Company Plans will be terminated by resolution of the board of
directors of the Company and amended as appropriate to effect such termination.
It is understood and agreed that the Company Plans will be terminated and wound
up in accordance with their respective terms and applicable law.
In the event that as of the Closing Date there are additional sums
that have accrued to the Company Plans but such amounts have not been paid,
then Sellers shall remain jointly and severally liable for such amounts and
shall reimburse the Company for any amounts that the Company is required to
make in this regard.
Sellers hereby covenant that they will take all necessary actions to
file the appropriate requests with the Internal Revenue Service to obtain a
favorable determination letters with respect to the termination of the Company
Plans and will bear all costs associated with such favorable determination.
5.13 POST-CLOSING FINANCIAL STATEMENTS. Sellers shall provide to
Buyer, within thirty-one (31) days of the Closing Date, financial statements of
the Company through the Closing Date.
5.14 POST-CLOSING INVENTORY SCHEDULE. Seller shall provide to
Buyer, within ten (10) days after the Closing Date, a schedule of inventory of
the Company as of the Closing Date which includes packaging materials,
supplies, ice inventory and other inventoried goods listed by category and by
location, along with all supporting documentation thereof (including invoices
and other sales records).
VI. COVENANTS OF BUYER
Buyer hereby covenants and agrees as follows:
6.1 CLOSING CONDITIONS. Buyer will, to the extent within its
control, use its best efforts to cause the conditions set forth in Section 8.2
to be satisfied by the Closing Date.
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6.2 ANCILLARY AGREEMENTS. At the Closing, Buyer will enter into
the Noncompetition Agreement and the Escrow Agreement.
6.3 FURTHER ASSURANCES. Buyer will use its best efforts to
implement the provisions of this Agreement and, for such purpose, Buyer, at the
request of Sellers, at or after the Closing Date, will, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, to Sellers such consents, documents and other instruments, in
addition to those required by this Agreement, in form and substance
satisfactory to Sellers, as Sellers may reasonably deem necessary or desirable
to implement any provision of this Agreement.
VII. CLOSING
7.1 TIME AND PLACE. The consummation of the sale and purchase of
the Stock and the execution of the Escrow Agreement and Noncompetition
Agreement (the "Closing") shall take place at a mutually agreeable time and
place on or before March 5, 1998. The date of the Closing shall herein be
referred to as the "Closing Date."
7.2 SELLERS' OBLIGATIONS AT CLOSING. At the Closing, Sellers
shall execute, acknowledge, deliver, or cause to be delivered, where
appropriate, to Buyer in form reasonably satisfactory to Buyer:
(a) stock certificates representing all of the Stock,
duly endorsed for transfer or accompanied by stock powers duly
executed in blank, and any other documents that are necessary to
transfer to Buyer good and marketable title to the Stock;
(b) the written approvals, consents and certificates
referred to in Section 3.2 of Sellers' Disclosure Memorandum.
(c) the opinion of counsel referred to in Section 8.1(f).
(d) letters of resignation of the officers and directors
of the Company.
(e) all other documents and certificates required to be
delivered to Buyer pursuant to this Agreement, including without
limitation, the Noncompetition Agreement, the Escrow Agreement, the
Employment Agreement, the Investment Letter, the Shareholder and
Voting Agreements, and the Undertaking Agreement.
From time to time following Closing, Sellers will execute and
deliver such instruments and take such action as Buyer may reasonably request
in order to more effectively transfer, convey, assign and deliver to Buyer, and
to put Buyer in actual possession and operating control of, the Company and its
Assets.
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7.3 BUYER'S OBLIGATIONS AT CLOSING. At the Closing, Buyer will:
(a) pay any remaining Cash Portion of the Purchase Price
in accordance with Section 2.2 of this Agreement;
(b) deliver the Stock Portion of the Purchase Price in
accordance with Section 2.2 of this Agreement;
(c) deliver to Sellers executed counterparts of the
Noncompetition Agreement, the Undertaking Agreement, the Employment
Agreement, and the Escrow Agreement.
VIII. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to complete the transactions contemplated at the Closing shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) Performance. Each agreement and obligation of
Sellers to be performed or complied with on or before the Closing Date
shall have been duly performed or complied with in all material
respects.
(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Sellers
contained herein shall be true and correct, as expressly stated
herein, on the Closing Date.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Buyer from
consummating the transactions contemplated hereby.
(d) Third Party Creditors. All Liabilities of the
Company will be paid in full, and all Encumbrances against the Stock
and Assets, including all Owned Real Property, will be paid or
discharged, or otherwise assumed as an obligation of the Sellers
pursuant to the Sellers' Undertaking Agreement.
(e) Opinion of Counsel for Sellers Buyer shall have
received the opinion of Seller's Counsel dated as of the Closing Date,
in form and substance satisfactory to Buyer and Buyer's counsel,
subject to reasonable and customary qualifications and exceptions, as
set forth on Exhibit I.
8.2 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligation of
Sellers to complete the transactions contemplated at the Closing shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Performance. Each agreement and obligation of Buyer
to be performed or complied with on or before the Closing Date shall
have been duly performed or complied with in all material respects.
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(b) Representations and Warranties True; No Material
Adverse Change. The representations and warranties of Buyer contained
herein shall be true and correct on the Closing Date.
(c) No Violation of Statutes, Orders, etc. There shall
not be in effect any decree or judgment enjoining Sellers from
consummating the transactions contemplated hereby.
IX. INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER BY SELLERS. Sellers agree to
indemnify, defend and hold harmless Buyer and Buyer's employees, agents, heirs,
legal representatives, and assigns from and against any and all claims, suits,
losses, expenses (legal, accounting, investigation and otherwise), damages and
liabilities, including, without limitation, tax liabilities (hereinafter,
collectively "Damages"), arising out of or relating to (i) any liability or
obligation of the Company expressly assumed by Sellers at the Closing Date
hereunder pursuant to the Undertaking Agreement, (ii) any inaccuracy of any
representation or warranty set forth in this Agreement or the breach of any
covenant made by Sellers in or pursuant to this Agreement, as qualified by the
Sellers' Disclosure Memorandum (iii) the improper use, storage, or disposal of
any Materials by the Company prior to the Closing Date, or any Environmental
Action pending, threatened or accrued as of the Closing Date (whether known or
unknown, disclosed or undisclosed), or (iv) any legal claim or cause of action
arising with respect to the conduct or condition of the Company prior to the
Closing, whether or not disclosed by Sellers to Buyer prior to the Closing.
The obligation of the Sellers to indemnify Buyer shall continue notwithstanding
Buyer's knowledge of the inaccuracy of any representation or warranty of the
Company or the Sellers set forth in this Agreement or in any document or
certificate furnished or required to be furnished pursuant to this Agreement,
unless and except to the extent that Buyer's willful or grossly negligent
failure to disclose any such known inaccuracy of any representation or warranty
of the Company or the Sellers causes the Damages sustained by the Company or
Buyer to be aggravated or otherwise increased as a result of such willful or
grossly negligent failure to disclose.
9.2 INDEMNIFICATION OF SELLERS BY BUYER. Buyer agrees to
indemnify, defend and hold harmless Sellers from and against any and all
Damages arising out of or relating to any inaccuracy or any representation or
warranty of Buyer set forth in this Agreement or the breach of any covenant
made by Buyer 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 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
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indemnify in respect to such action and shall not relieve the Indemnifying
Party of any other liability which they may have to any Indemnified Party
unless such failure to notify the Indemnifying Party prejudices the rights of
the Indemnifying Party. In addition to all other remedies provided hereunder
or by law, Buyer shall specifically have the right to make a claim against the
Escrow Amount for any of Buyer's Damages, as may be allowed and otherwise
provided in accordance with the express terms of the Escrow Agreement.
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 Sellers
are the Indemnified Parties for any actual or threatened claim or demand by any
third party, Sellers shall have the right to control the prosecution of any
counterclaim or right related to such a claim or demand, provided that Sellers
agree to reasonably cooperate with Buyer 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.
9.6 TIME LIMITATIONS. Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or with respect to any covenant or obligation to be performed and complied
with, on or prior to the Closing Date, other than those set forth in Sections
3.6, 3.9, and 3.12, unless, on or before two years from the Closing Date Buyer
notifies Sellers of a claim specifying the factual basis of that claim in
reasonable detail to
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the extent then known by Buyer. Any claim with respect to Sections 3.6, 3.9 or
3.12, or a claim for indemnification or reimbursement not based upon any
representation or warranty, or not based upon any covenant or obligation to be
performed and complied with prior to the Closing Date, must be made prior to
the expiration of the applicable statutory period of limitations, including any
extensions to such period, except to the extent otherwise provided in Section
9.7.
9.7 LIMITATIONS ON AMOUNT. Neither party hereto will have any
liability (for indemnification or otherwise) with respect to the matters
described in Section 9.1 (as to Sellers) or 9.2 (as to Buyer) until the total
of all Damages of the Indemnified Party with respect to such matters exceeds
$50,000 in the aggregate (the "Basket"), and then the Indemnifying Party shall
be responsible to the Indemnified Party for all Damages based thereon from the
first dollar of Damages without regard to the Basket; provided, however, the
Basket (as it applies to the Sellers as the Indemnifying Party) shall not apply
to any claim for indemnification arising out of Section 9.1(iii), a breach of
any representations, warranties or covenants contained in Sections 3.6, 3.9,
3.10 or 3.12, or the Sellers' obligation to discharge Liabilities. The maximum
liability that will be payable by Sellers with respect to the matters described
in Section 9.1(iii), or with respect to any alleged breach of any
representations, warranties or covenants set forth in Section 3.10, will be
limited to $1,000,000 in the aggregate for claims made prior to March 1, 1999,
and will be limited to $500,000 in the aggregate for claims made from March 1,
1999 until February 28, 2000, and no amount or liability will be owed by
Sellers for any claims occurring or made after February 28, 2000.
9.8 APPLICABILITY OF INSURANCE. In case any event shall occur
which would otherwise entitle any party to assert a claim for indemnification
hereunder, no claim, loss, liability, cost or expense shall be deemed to have
been sustained by such party to the extent of any proceeds received or
receivable by such party from any insurance policies with respect thereto.
X. INTENTIONALLY OMITTED
XX.XXX MATTERS
11.1. TAX DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Federal Tax" means any Tax imposed under Subtitle A of the Code.
"Final Determination" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to Taxes other than
Federal Taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the
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filing of claims for refunds, amended returns or appeals from adverse
determinations) or (ii) the payment of Tax by the Company or Sellers, 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 on or after 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.
"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. COVENANTS.
(a) Without the prior written consent of Buyer, Sellers
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 similar to the foregoing
conduct, if any such action or omission would have the effect of increasing the
Tax liability of the Company or Buyer.
(b) All Returns not required to be filed on or before the
date hereof (including any applicable extensions) will be filed when due in
accordance with all applicable laws.
(c) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees incurred during the Tax
Indemnification Period in connection with this Agreement (including any real
property transfer Tax and any similar Tax) shall be accrued by the Company on
the Closing Date Balance Sheet and be paid by the Sellers, in accordance with
this Agreement, when due (including any applicable extensions), and the Company
will, at Sellers' expense, file all necessary Tax returns and other
documentation with respect to all such Taxes and fees.
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11.3. COOPERATION ON TAX MATTERS.
(a) Buyer and Sellers shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
preparation and filing of any Tax return, statement, report or form (including
any report required pursuant to Section 6043 of the Code and all Treasury
Regulations promulgated thereunder), any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention and (upon
the other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding. Buyer
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 Sellers reasonable written notice prior to destroying or
discarding any such books and records and, if Sellers so request, Buyer shall
allow Sellers to take possession of such books and records.
(b) Buyer and Sellers 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).
11.4. TAX INDEMNIFICATION. Sellers hereby jointly and severally
indemnify Buyer against and agree to hold Buyer harmless from any loss,
liability or expense attributable to (i) any Tax with respect to income
(including, to the extent based on income, state franchise Taxes), transfer
Tax, employment or withholding Tax related to employee tips income (actual and
allocated) and related reporting requirements, and gross receipts or royalty
Tax in respect of any franchise operation and any other Tax of the Company
related to the Tax Indemnification Period, (ii) any Tax resulting from Sellers'
breach of the provisions of Section 11.2, 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"). Buyer shall
give Sellers sufficient reasonable notice to enable Sellers to defend or
contest such Loss, and no less than ten days notice of any claim of Loss, and
Sellers shall have the opportunity to defend Buyer in accordance with Section
9.4 hereof.
Buyer shall indemnify Sellers for any Taxes that accrue
against the Company after the Closing Date.
11.5 PURCHASE PRICE ADJUSTMENT. Any amount paid by Sellers, Buyer
or the Company under Section 11.4 will be treated as an adjustment to the
relevant purchase price for all Tax purposes unless a Final Determination
causes any such amount not to constitute an adjustment to the relevant purchase
price. In the event of such a Final Determination, Buyer, the Company or
Sellers, 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
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item that affects more than one Tax) applicable to the recipient of such
payment for the relevant year, reflecting for example, the effect of deductions
available for interest paid or accrued and for Taxes such as state and local
income Taxes. Any payment required to be made by Buyer or Sellers under this
Agreement that is not made when due shall bear interest at the rate per annum
determined, from time to time, under the provision of Section 6621(a)(2) of the
Code for each day until paid.
11.6. SURVIVAL. The provisions of this Article XI with respect to
income (including to the extent based on income, state franchise Taxes),
transfer Taxes, employment or withholding Taxes and related reporting
requirements, shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof).
XII. MISCELLANEOUS
12.1 EXPENSES. Legal, accounting and other costs and expenses
incurred in connection with this transaction shall be paid by the party
incurring such expenses.
12.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made in connection with this
Agreement shall survive the Closing.
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 attached 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
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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.
12.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA.
12.9 NOTICES. All notices of requests, demands or other
communications required or to be given hereunder shall be delivered by hand,
overnight courier, 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 Sellers: Xxxx X. Xxxxxx
Triangle Ice
000 Xxxxxxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxx X. Xxxxxxxx
000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxx 00000
with a copy to: Xxxx X. Xxxxxxxx, Xx.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxx, XX 00000
to Buyer: Packaged Ice, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxx, Chief Executive Officer
with a copy to: Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xx., Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxxxxx
or such other address or addresses as may be expressly designated by
either party by notice given in accordance with the foregoing provision.
12.10 AGENTS OR BROKERS. Sellers and Buyer mutually represent and
agree with each other that no agents or brokers have been utilized in the
solicitation or negotiation of the sale of the Business and no fees,
commissions or expenses of any type shall be due or payable out of the proceeds
of the purchase price by either party to this Agreement.
12.11 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, including without limitation
any alleged violations of
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securities laws, shall be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in San
Antonio, 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.
12.13 NUMBER AND GENDER OF WORDS. When the context so requires in
this Agreement, words of gender shall include either or both genders and the
singular number shall include the plural.
12.14 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement, and all time limitations shall be strictly construed and rigidly
enforced. The failure or delay in the enforcement of any rights or interests
granted herein shall not constitute a waiver of any such right or interest or
be considered as a basis for estoppel.
12.15 CONDITIONAL OBLIGATIONS. None of the provisions of this
Agreement, any of the terms of payment of any amount(s), or any obligations
undertaken in this Agreement, are intended to create or imply any resolutory or
other condition, vendor's lien or privilege, and if such resolutory or other
condition, vendor's lien or privilege, is created or implied, all of the same
are hereby renounced or rescinded, provided that this Section 12.15 shall not
affect Buyer's rights to damages or equitable relief in the event of a breach
by Seller.
(STOCK PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS)
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[STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
Executed on the date first written above.
PACKAGED ICE, INC.
By:
----------------------------------------
XXXXX X. XXXXXX, Chief Executive Officer
SELLERS:
-------------------------------------------
XXXX X. XXXXXX
-------------------------------------------
XXXXXX XXXXXXXX
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LIST OF SCHEDULES AND EXHIBITS
Exhibit A Assets
Exhibit B Property of Party Time Ice Co., Inc. subject to Capital
Leases
Exhibit C Excluded Assets
Exhibit D Escrow Agreement
Exhibit E Undertaking Agreement
Exhibit F Employment Agreement
Exhibit G Noncompetition Agreement
Exhibit H Investment Letter
Exhibit I Opinion of Counsel
Schedule 3.12(e) Real Property Descriptions
Schedule 3.17 Company Plans
Sellers' Disclosure Memorandum