<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported) June 25, 1995
------------------------
NORTHWESTERN PUBLIC SERVICE COMPANY
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-692 46-0172280
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
33 Third St. SE
P O Box 1318
Huron, South Dakota 57350-1318
- -------------------------------------------------------------------------------
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code 605 352-8411
----------------------------
<PAGE>
ITEM 5. OTHER EVENTS.
As previously reported, a subsidiary of registrant entered into an
agreement on May 17, 1995 to acquire Synergy Group Incorporated ("Synergy"),
a major propane distribution company. That subsidiary in turn has entered
into an agreement, dated as of July 25, 1995, with Empire Energy Corporation
("Empire Energy"), to sell to Empire Energy 62 of the retail distribution
outlets to be acquired from Synergy under the May 17, 1995 agreement. The
agreement to sell to Empire Energy replaces an option to purchase the retail
distribution outlets which previously had been granted to Empire Energy. The
sale price for the outlets to be sold to Empire Energy is to be determined in
accordance with a price formula, but currently is estimated to involve a cash
payment to the selling subsidiary of approximately $40 million. The closing
of the sale to Empire Energy is subject to the completion of the acquisition
of Synergy and various other conditions.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits. The following exhibits are filed with this report:
Exhibit 2. Asset Purchase Agreement dated as of July 25, 1995
by and between SYN Inc. and Empire Energy Corporation.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTHWESTERN PUBLIC SERVICE COMPANY
By /s/ Rogene A. Thaden
-----------------------------------------
Rogene A. Thaden
Treasurer
By /s/ Alan D. Dietrich
-----------------------------------------
Alan D. Dietrich
Vice President - Corporate Services
& Corporate Secretary
Date: June 27, 1995
<PAGE>
_________________________________________________________________
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SYN, INC.,
AND
EMPIRE ENERGY CORPORATION,
DATED AS OF JULY 25, 1995
_________________________________________________________________
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 PURCHASE AND SALE............................................. 1
SECTION 1.1. AGREEMENT TO SELL AND BUY ASSETS..................... 1
SECTION 1.2. PURCHASE PRICE....................................... 3
SECTION 1.3. EXCHANGED OUTLETS ASSETS............................. 7
SECTION 1.4. PURCHASE PRICE ADJUSTMENTS........................... 8
ARTICLE 2 THE CLOSING.................................................. 11
SECTION 2.1. CLOSING DATE........................................ 11
SECTION 2.2. DELIVERIES BY SYN................................... 11
SECTION 2.3. DELIVERIES BY BUYER................................. 12
SECTION 2.4. ESCROW AGENT........................................ 12
SECTION 2.5. ADJUSTMENTS AND PRORATIONS.......................... 13
SECTION 2.6. ASSUMPTION OF LIABILITIES AND OBLIGATIONS........... 14
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SYN........................ 15
SECTION 3.1. ORGANIZATION AND QUALIFICATION...................... 15
SECTION 3.2. AUTHORITY........................................... 15
SECTION 3.3. CONSENTS AND APPROVALS; NO VIOLATIONS............... 15
SECTION 3.4. ABSENCE OF LIABILITIES.............................. 16
SECTION 3.5. REAL PROPERTY....................................... 16
SECTION 3.6. PERSONAL PROPERTY................................... 17
SECTION 3.7. INTELLECTUAL PROPERTY............................... 19
SECTION 3.8. ASSUMED CONTRACTS................................... 19
SECTION 3.9. LICENSES AND PERMITS................................ 19
SECTION 3.10. PASS-THROUGH FROM SYNERGY PURCHASE AGREEMENT....... 19
SECTION 3.11. CERTAIN FEES....................................... 20
SECTION 3.12. DISCLOSURE......................................... 20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER...................... 20
SECTION 4.1. ORGANIZATION AND QUALIFICATION...................... 20
SECTION 4.2. AUTHORITY........................................... 20
SECTION 4.3. CONSENTS AND APPROVALS; NO VIOLATION................ 21
SECTION 4.4. ABSENCE OF LIABILITIES.............................. 21
SECTION 4.5. ABSENCE OF CERTAIN CHANGES.......................... 21
SECTION 4.6. EXCHANGED OUTLET REAL PROPERTY...................... 22
SECTION 4.7. EXCHANGED OUTLET PERSONAL PROPERTY.................. 22
SECTION 4.8. ASSUMED EXCHANGED OUTLET CONTRACTS.................. 24
SECTION 4.9. LICENSES AND PERMITS................................ 24
SECTION 4.10. CERTAIN FEES....................................... 25
i
<PAGE>
SECTION 4.11. DISCLOSURE.......................................... 25
SECTION 4.12. INTELLECTUAL PROPERTY............................... 25
ARTICLE 5 COVENANTS OF THE PARTIES..................................... 25
SECTION 5.1. CONDUCT OF THE EXCHANGED OUTLETS BUSINESS........... 25
SECTION 5.2. ACCESS TO INFORMATION............................... 27
SECTION 5.3. COMMERCIALLY REASONABLE EFFORTS..................... 27
SECTION 5.4. REGULATORY APPROVALS................................ 27
SECTION 5.5. CONSENTS............................................ 28
SECTION 5.6. PUBLIC ANNOUNCEMENTS................................ 28
SECTION 5.7. ADDITIONAL SCHEDULES AND SUPPLEMENTAL DISCLOSURE.... 28
SECTION 5.8. BOOKS AND RECORDS................................... 29
SECTION 5.9. OPTIONED OUTLETS EMPLOYEES; EMPLOYEE BENEFITS....... 29
SECTION 5.10. EXCHANGED OUTLETS EMPLOYEES; EMPLOYEE BENEFITS..... 30
SECTION 5.11. CERTAIN TAX MATTERS................................ 30
SECTION 5.12. TRADE PAYABLES AND OTHER LIABILITIES............... 31
SECTION 5.13. TITLE EXAMINATION.................................. 31
SECTION 5.14. TANK INVENTORY..................................... 32
SECTION 5.15. COOPERATION........................................ 32
SECTION 5.16. ALLOCATIONS........................................ 32
ARTICLE 6 CONDITIONS................................................... 32A
SECTION 6.1. CONDITIONS TO OBLIGATIONS OF SYN.................... 32A
SECTION 6.2. CONDITIONS TO OBLIGATIONS OF BUYER.................. 33
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER............................ 36
SECTION 7.1. TERMINATION......................................... 36
SECTION 7.2. PROCEDURE AND EFFECT OF TERMINATION................. 36
SECTION 7.3. AMENDMENT, MODIFICATION AND WAIVER.................. 37
ARTICLE 8 SURVIVAL; INDEMNIFICATION.................................... 37
SECTION 8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.......... 37
SECTION 8.2. INDEMNIFICATION BY SYN.............................. 37
SECTION 8.3. INDEMNIFICATION BY BUYER............................ 39
SECTION 8.4. GENERAL PROCEDURES.................................. 39
ARTICLE 9 MISCELLANEOUS................................................ 40
SECTION 9.1. FEES AND EXPENSES................................... 40
SECTION 9.2. FURTHER ASSURANCES.................................. 41
SECTION 9.3. NOTICES............................................. 41
SECTION 9.4. ENTIRE AGREEMENT.................................... 42
SECTION 9.5. SEVERABILITY........................................ 42
ii
<PAGE>
SECTION 9.6. BINDING EFFECT; ASSIGNMENT.......................... 43
SECTION 9.7. NO THIRD PARTY BENEFICIARIES........................ 43
SECTION 9.8. COUNTERPARTS........................................ 43
SECTION 9.9. INTERPRETATION...................................... 43
SECTION 9.10. ARBITRATION........................................ 43
SECTION 9.11. GOVERNING LAW...................................... 44
SCHEDULES
Schedule 3.3 Consents and Approvals of SYN
Schedule 3.5(a) Optioned Outlet Owned Real Property
Schedule 3.5(b) Optioned Outlet Leased Real Property
Schedule 3.6(a) Optioned Outlet Owned Personal Property
Schedule 3.6(b) Optioned Outlet Tanks
Schedule 3.6(c) Optioned Outlet Leased Personal Property
Schedule 4.6(a) Exchanged Outlet Owned Real Property
Schedule 4.6(b) Exchanged Outlet Leased Real Property
Schedule 4.7(a) Exchanged Outlet Owned Personal Property
Schedule 4.7(b) Exchanged Outlet Tanks
Schedule 4.7(c) Exchanged Outlet Leased Personal Property
Schedule 5.9 SYN Severance Plan
EXHIBITS
Exhibit A - Optioned Outlets
Exhibit B - Exchanged Outlets
Exhibit C - Escrow Agreement
iii
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), is made and entered
into as of this 25th day of July, 1995 by and between SYN Inc., a Delaware
corporation (such corporation and its subsidiaries are collectively referred
to as "SYN"), and Empire Energy Corporation, a Tennessee corporation (the
"Buyer").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, SYN is planning to purchase certain assets and stock from
Synergy Group Incorporated, a Delaware corporation and its subsidiaries
(collectively, "Synergy") and S&J Investments, a New York general
partnership, as set forth in the Purchase and Sale Agreement by and among
Sherman C. Vogel, Stephen A. Vogel, Jeffrey K. Vogel, Jon M. Vogel, Jeanette
Vogel, Synergy, S&J Investments (the above entities are referred to
collectively herein as the "Sellers"), SYN Inc., and Northwestern Growth
Corporation ("NGC"), dated as of May 17, 1995 (the "Synergy Purchase
Agreement");
WHEREAS, under the Synergy Purchase Agreement SYN will purchase from
the Sellers various assets, including all of the assets owned by the Sellers
that are used in connection with the conduct of the business (the "Optioned
Outlets Business") or operation of the 62 retail propane outlets listed on
Exhibit A (the "Optioned Outlets");
WHEREAS, SYN desires to sell to Buyer all of the assets owned by the
Sellers that are used in connection with the Optioned Outlets Business (other
than the Excluded Assets, as defined in Section 1.1(c)), and Buyer desires to
purchase all of such assets from SYN, for the consideration and on the terms
and conditions herein provided.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants, agreements and conditions contained
herein, the adequacy of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
<PAGE>
ARTICLE 1
PURCHASE AND SALE
SECTION 1.1. AGREEMENT TO SELL AND BUY ASSETS.
(a) ASSETS. Upon the terms and subject to the conditions of this
Agreement, at the Closing (as defined in Section 2.1), SYN shall sell,
assign, convey and transfer and deliver to Buyer and Buyer will purchase from
SYN, all of the following (collectively, the "Assets"):
(i) the Owned Personal Property, the major items of which are
listed in Schedules 3.6(a) and 3.6(b);
(ii) the Owned Real Property, which is listed in Schedule 3.5(a);
(iii) the Assumed Contracts, as defined in Section 3.8;
(iv) all assignable Licenses and Permits, as defined in Section
3.9;
(v) the Intellectual Property License, as defined in Section 3.7;
(vi) all accounts receivable of the Optioned Outlets Business;
(vii) all inventory held for resale at the Optioned Outlets;
(viii) all files and records of SYN relating to the customers,
routing, assets, inventories, and accounts receivable of the Optioned
Outlets Business that are maintained at the Optioned Outlets and copies of
all such files and records that are maintained at central and regional
offices (the "Transferred Records"); and
(ix) all other assets owned by SYN and used in connection with the
Optioned Outlets Business other than the Excluded Assets.
(b) The Assets shall be conveyed to Buyer free and clear of any
mortgage, lien, pledge, charge, security interest, encumbrance or other
adverse claim of any kind, including without limitation any liens related to
taxes, (collectively, "Liens"), except for Permitted Liens as expressly
permitted in accordance with this Agreement. All leased real property used
in the Optioned Outlets Business and such leased personal property used in
the Optioned Outlets
- 2 -
<PAGE>
Business as Buyer may elect to accept shall be transferred to Buyer subject to
the terms and conditions of such leases.
(c) Notwithstanding the foregoing, the Assets to be conveyed to Buyer
shall not include any of the following Assets (the "Excluded Assets"): (i)
any contracts or agreements (including any Plan as defined in Section 3.4
hereof or any other Employee Benefit Plan) other than the Assumed Contracts
(as defined in Section 3.8 hereof); (ii) SYN's cash on hand as of the Closing
Date and all other cash in any of SYN's bank, money market or savings
accounts; (iii) any utility deposits, any and all insurance policies, letters
of credit, or other similar items and any cash surrender value in regard
thereto; (iv) over-the-road tractors and trailers; and (v) any interest in
the Intellectual Property (as defined in Section 3.7) other than the
Intellectual Property License; PROVIDED, HOWEVER, that nothing in this
Section shall be deemed to relieve Buyer of its obligations under Section 5.9
of this Agreement.
SECTION 1.2. PURCHASE PRICE. Upon the terms and subject to the
conditions of this Agreement, in consideration of the aforesaid sale,
conveyance, assignment, transfer and delivery of the Assets and of SYN's
performance of its other obligations under this Agreement, Buyer shall pay
the Cash Component (as defined below) and transfer certain assets (the
"Exchanged Outlet Assets") used in the operation of the nine (9) retail
outlets currently owned by Buyer ("Exchanged Outlets") listed on Exhibit B
hereto, as more particularly described in Section 1.3 (the Cash Component and
the Exchanged Outlet Assets are jointly referred to herein as "Purchase
Price").
(a) The Cash Component shall be calculated as follows:
(i) The purchase price to be paid by SYN under the Synergy
Purchase Agreement (the "Synergy Purchase Price") shall be determined, and
shall be deemed to be equal to the result of the following calculation:
(1) the total amount of cash paid by SYN to the Sellers (or for the
account of the Sellers to the Paying Agent, as defined in the Synergy
Purchase Agreement) at the first and second closings under the Synergy
Purchase Agreement (the "Synergy Closing") after taking into consideration
all adjustments contemplated by the Synergy Purchase Agreement; PLUS (2)
the fair value, as determined by Baird, Kurtz & Dobson ("BKD"), of the
$1,250,000.00 Promissory Note referred to in Section 1.6(a) of the Synergy
Purchase Agreement, which shall be deemed to be equal to $1,141,553.00;
PLUS (3) $4,500,000; PLUS (4) the total amount of debt and other
obligations of Synergy outstanding immediately after the Synergy Closing
under mortgage loans and similar agreements in favor of third parties that
were entered into in connection with Synergy's acquisition of retail
propane outlets included under the Synergy Purchase Agreement and that SYN
is assuming at the Synergy Closing; PLUS (5) the estimated costs, which
shall be deemed to be equal to $2,500,000.00, to be incurred by SYN in
eliminating Synergy's corporate overhead; plus (6) the sum of all actual
out-of-pocket expenses (including fees and expenses of
- 3 -
<PAGE>
attorneys, accountants and investment bankers for SYN, NGC, Empire Gas
Corporation and Buyer, but not including fees and expenses of attorneys,
accountants and investment bankers for the Sellers) incurred by SYN,
Northwestern Public Service Company and NGC (the "SYN Group") and Buyer in
connection with entering into the transactions (other than financing
transactions) set forth in the Synergy Purchase Agreement and this
Agreement, all of which expenses shall be paid by the SYN Group and in any
event shall not exceed $1,500,000.00 and shall be subject to audit by
Buyer; MINUS (7) the value, as determined by BKD, of all assets (other
than current assets) acquired by SYN from the Sellers that are not assets
of the retail propane outlets to be purchased under the Synergy Purchase
Agreement (the "Outlets") (assets whose value is to be deducted include
the home office company assets, transport terminals, the forklift
business, any surplus land and any other nonretail assets).
(ii) The Synergy Purchase Price shall be allocated between the
Optioned Outlets and the retail propane outlets other than the Optioned
Outlets acquired by SYN pursuant to the Synergy Purchase Agreement (the
"Retained Outlets") as follows:
(1) Earnings before interest, taxes, depreciation and
amortization ("EBITDA") for each Outlet ("Outlet EBITDA") will be
determined from audited financial statements for the fiscal year
ending March 31, 1994.
(2) Outlet EBITDA for each Outlet will be adjusted by adding
back expenses, if any, for such fiscal year that were attributable
to Synergy's home office, transport terminals and other non-retail
operations and that were deducted in arriving at Outlet EBITDA for
such Outlet ("Adjusted Outlet EBITDA").
(3) Aggregate EBITDA will be determined for all Outlets
("Total Outlet EBITDA") and for all Optioned Outlets ("Total
Optioned Outlet EBITDA") by summing the Adjusted Outlet EBITDA of
all Outlets in each such group.
(4) The Synergy Purchase Price will be divided by Total
Outlet EBITDA to determine the price per dollar of Adjusted Outlet
EBITDA (the "Multiple") being paid in the Synergy Transaction.
(5) The portion of the Synergy Purchase Price allocated to
the Optioned Outlets (the "Allocated Price") shall be equal to the
product of Total Optioned Outlet EBITDA and the Multiple.
(iii) The value of the Exchanged Outlet Assets shall be determined
as follows:
- 4 -
<PAGE>
(1) Aggregate EBITDA will be determined for the Exchanged
Outlets ("Exchanged Outlet EBITDA") using the same methodology as
specified in Section 1.2(a)(ii)(1), (2), and (3) above. As part of
such determination, adjustments will be made to the extent necessary
to ensure that EBITDA of the Exchanged Outlets is calculated on the
same basis as EBITDA of the Outlets, and adjustments shall be made
as necessary to take account of the reallocation of customers
described in Section 4.5.
(2) The value of the Exchanged Outlets ("Exchanged Outlet
Value") shall be equal to the product of Exchanged Outlet EBITDA and
the Multiple.
(iv) The Working Capital Adjustment to be added to (in the case of
a positive result) or subtracted from (in the case of a negative result)
the Allocated Price pursuant to Section 1.2(a)(v) shall equal the result
of the following calculation:
(1) Optioned Outlet Working Capital as of the Synergy
closing minus the amount of the Optioned Outlet NWC Adjustment,
minus the Exchanged Outlet Working Capital, plus the amount of the
Exchanged Outlet NWC Adjustment, as such terms are defined below.
(2) The following terms used in computing the Working Capital
Adjustment shall have the following definitions:
(A) "Net Working Capital Factor" shall equal Synergy's
Working Capital at the Second Closing, as defined in the
Synergy Purchase Agreement, divided by Total Outlet EBITDA.
(B) "Optioned Outlet Working Capital" shall mean the
aggregate amount of accounts receivable and inventory held for
resale (valued at the lower of cost or market) conveyed to
Buyer at closing.
(C) "Optioned Outlet NWC Adjustment" shall equal the
Optioned Outlet EBITDA multiplied by the Net Working Capital
Factor.
(D) "Exchanged Outlet Working Capital" shall mean the
aggregate amount of accounts receivable (discounted in
accordance with standard Empire Gas methodology) and inventory
held for resale (valued at the lower of cost or market)
conveyed by Buyer to SYN at closing.
- 5 -
<PAGE>
(E) "Exchanged Outlet NWC Adjustment" shall equal the
Exchanged Outlet EBITDA multiplied by the Net Working Capital
Factor.
(v) The Cash Component shall be equal to the Allocated Price PLUS
$500,000.00, which shall be compensation to SYN for the tax consequences
it expects to incur as a result of this transaction, MINUS the Exchanged
Outlet Value as determined in accordance with Section 1.2(a)(iii), PLUS
OR MINUS the Working Capital Adjustment Amount as determined in accordance
with Section 1.2(a)(iv).
(vi) OPTIONED OUTLET EBITDA. Based upon the financial
information that has been made available by Synergy as of the date of this
Agreement, the parties understand that, for the year ending March 31,
1994, the Total Optioned Outlet EBITDA (as defined in Section
1.2(a)(ii)(3)) is equal to $6,229,600.00 and the Total Outlet EBITDA (as
defined in Section 1.2(a)(ii)(3) is equal to $24,934,800.00. The parties
acknowledge that Total Optioned Outlet EBITDA and Total Outlet EBITDA to
be determined in connection with the calculation of the Purchase Price may
differ from the numbers specified in this subsection because of
information that becomes available after the date of this Agreement.
(vii) EXCHANGED OUTLET EBITDA. For the year ending June 30, 1994,
the Exchanged Outlet EBITDA (as defined in Section 1.2(a)(iii)(1) is equal
to $281,062.00. The parties acknowledge that Exchanged Outlet EBITDA to
be determined in connection with the calculation of the Purchase Price may
differ from the numbers specified in this subsection because of
information that becomes available after the date of this Agreement.
(b) The calculations specified in Section 1.2(a) will be performed by
BKD and reviewed by Arthur Andersen & Co., L.L.P. ("AA"). BKD shall complete
such calculations on a preliminary basis no later than ten (10) days before the
Closing and have AA review the same, and shall advise in writing both Buyer and
SYN of the results of its preliminary calculation. BKD shall prepare final
calculations and a reconciliation of such final calculations to its preliminary
calculations within ninety (90) days after the Closing. The determination of
BKD shall be final and binding on all parties. Within five (5) business days
after BKD delivers its final calculations to the parties, each party shall pay
the other any amount necessary (including interest at the prime rate of interest
of Citibank, N.A.) to put the parties in the position they would have occupied
if the payments made on the Closing Date had been made in accordance with the
final calculations.
- 6 -
<PAGE>
SECTION 1.3. EXCHANGED OUTLET ASSETS
(a) The "Exchanged Outlet Assets" to be conveyed to SYN at Closing
consist of the following tangible and intangible assets used in connection with
the conduct of the business (the "Exchanged Outlet Business") or operation of
the Exchanged Outlets:
(i) the Exchanged Outlet Personal Property, which is listed in
Schedules 4.7(a) and 4.7(b);
(ii) the Exchanged Outlet Real Property, which is listed in
Schedule 4.6(a);
(iii) the Assumed Exchanged Outlet Contracts, as defined in Section
4.8;
(iv) all assignable Exchanged Outlet Licenses and Permits, as
defined in Section 4.9;
(v) all accounts receivable of the Exchanged Outlets Business;
(vi) all inventory held for resale at the Exchanged Outlets;
(vii) all files and records of the Exchanged Outlets relating to
the customers, routing, assets, inventories, and accounts receivable of
the Exchanged Outlets that are maintained at the Exchanged Outlets and
copies of all such files and records that are maintained at central and
regional offices (the "Transferred Exchanged Outlets Records");
(viii) the Exchanged Outlets Intellectual Property License, as
defined in Section 4.12; and
(x) all other assets of the Exchanged Outlets owned by Buyer other
than the Excluded Exchanged Outlet Assets.
(b) The Exchanged Outlet Assets owned by Buyer shall be conveyed to SYN
free and clear of any Liens other than Permitted Liens as expressly permitted in
accordance with this Agreement. All leased real property used in the Exchanged
Outlets Business and such
- 7 -
<PAGE>
leased personal property used in the Exchanged Outlets Business as SYN may elect
to accept shall be conveyed to SYN subject to the terms and conditions of such
leases.
(c) Notwithstanding the foregoing, the Exchanged Outlet Assets to be
conveyed to SYN shall not include any of the following (the "Excluded Exchanged
Outlet Assets"): (i) any contracts or agreements (including any Plan as defined
in Section 4.4 hereof or any other Employee Benefit Plan) other than the Assumed
Exchanged Outlet Contracts (as defined in Section 4.8 hereof); (ii) Buyer's cash
on hand as of the Closing Date and all other cash in any of Buyer's bank, money
market or savings accounts; (iii) any utility deposits, any and all insurance
policies, letters of credit, or other similar items and any cash surrender value
in regard thereto; and (iv) over-the-road tractors and trailers. Nothing in
this Section shall be deemed to relieve SYN of its obligations under Section
5.10 of this Agreement.
SECTION 1.4. PURCHASE PRICE ADJUSTMENTS.
(a) In the event that SYN waives a condition under the Synergy Purchase
Agreement that affects or otherwise pertains to the Optioned Outlets, the
Purchase Price shall be adjusted as follows:
(i) SYN shall provide written notice to Buyer and BKD within one
business day after such waiver specifying each closing condition that was
waived, the Optioned Outlet or Outlets affected by such waiver, and the
facts and circumstances related to the failure of the applicable closing
condition to be satisfied.
(ii) BKD shall estimate the cost, if any, to Buyer of eliminating
any conditions or other circumstances associated with the affected
Optioned Outlets that caused the closing conditions under the Synergy
Purchase Agreement not to be satisfied, and shall report such estimate to
SYN and Buyer.
(iii) The Cash Component shall be decreased by an amount equal to
BKD's estimate of such cost.
(iv) Promptly after Buyer eliminates the conditions or
circumstances that caused the closing conditions under the Synergy
Purchase Agreement not to be satisfied, it shall notify BKD and SYN of the
actual costs that Buyer incurred in eliminating such conditions or
circumstances.
(v) Within ten (10) business days after Buyer provides such
notice, SYN shall pay to Buyer or Buyer shall pay to SYN any amount
necessary to place the parties in the same positions they would have
occupied if the actual costs of eliminating such conditions or
circumstances had been known at Closing.
- 8 -
<PAGE>
(b) In the event that the terms of the Synergy Purchase Agreement are
modified after this Agreement has been executed and such modification results in
a reduction of the price SYN pays the Sellers for the Outlets, then, to the
extent such price reduction is not already taken into consideration by the
provisions of Section 1.2 of this Agreement, the Purchase Price shall be reduced
in order to give Buyer its pro rata share of the benefit of such price
reduction. Without limiting the generality of the preceding sentence, this
Agreement has been negotiated on the understanding that the Sellers will
receive, as part of the Synergy Transaction, 2,500 shares of SYN Series A
Preferred Stock and 17.5% of the common stock of SYN. If the number of shares
of SYN Series A Preferred Stock or the percentage of SYN common stock to be
issued to the Sellers in connection with the Synergy Transaction is reduced, the
Purchase Price shall be adjusted as necessary to take account of such reduction.
(c) In the event that the assets used in the conduct or operation of the
Optioned Outlets Business or the Exchanged Outlets Business include property
leased from third parties other than real estate, vehicles and office machines
of the kind typically leased by businesses, the Cash Component will be adjusted
(upward if such property is leased by Buyer and downward if such property is
leased by Synergy or SYN) by an amount equal to the depreciated replacement cost
of such leased property.
(d) Subject to Section 4.5, the parties intend that Buyer will acquire
at Closing all Assets (other than the Excluded Assets) that were used in
connection with the Optioned Outlets Business as of February 2, 1995; that SYN
will retain all assets that were used in connection with the business of the
Retained Outlets as of February 2, 1995 and will acquire at Closing all
Exchanged Outlet Assets (other than customer storage tanks and the Excluded
Exchanged Outlet Assets) that were used in connection with the Exchanged Outlets
Business as of February 2, 1995, and all customer storage tanks that were
located at or used in connection with the Exchanged Outlets as of July 22, 1995;
and that, between February 2, 1995 and the Closing Date, existing customers of
the Optioned Outlets and of the Exchanged Outlets will be encouraged to remain
customers of those outlets and will not be diverted to other retail propane
outlets that are not the subject of this Agreement.
(i) In the event that it is discovered after Closing that assets
(other than Excluded Assets) or the accounts of existing customers of the
Optioned Outlets were transferred by Sellers or SYN to the Retained
Outlets between February 2, 1995 and the Closing Date; that assets or the
accounts of existing customers of the Retained Outlets were transferred by
Sellers or SYN to the Optioned Outlets between February 2, 1995 and the
Closing Date; or that assets (other than customer storage tanks and
Excluded Exchanged Outlet Assets) or the accounts of existing customers of
the Exchanged Outlets were transferred by Buyer to other outlets owned by
Buyer between February 2, 1995 and the Closing Date, or that customer
storage tanks of the Exchanged Outlets were transferred by Buyer to other
outlets owned by Buyer between July 23, 1995 and the Closing Date, then
the party acquiring the outlet from which
- 9 -
<PAGE>
such assets and/or customer accounts were transferred may assert a claim
for adjustment under this Section 1.4(d). (The transfers listed in this
Section 1.4(d)(i) are referred to collectively as "Compensable
Transfers.")
(ii) Claims for adjustment under this Section 1.4(d), if any, must
be submitted within sixty (60) days after the Closing Date. Each party's
claim for adjustment shall be submitted in writing to the other party
(with a copy to BKD) and shall include a list of assets and customers
transferred, together with supporting documentation.
(iii) During the 60-day period immediately following submission of
the claims for adjustment, the parties shall consult and negotiate with
each other in an attempt to verify their respective claims, to determine
the disposition of assets and/or customers transferred from the outlets,
and to agree on procedures and a schedule for restoring transferred assets
and/or customers to the outlets.
(iv) Within ten (10) days after the end of such 60-day period, each
party shall deliver to BKD a final claim for transferred assets and/or
customers that have not been restored to the outlets or otherwise resolved
through the consultation and negotiation process specified above. Within
thirty (30) days after receipt of each party's final claim, BKD shall
evaluate each transfer listed in each party's final claim to determine
whether it is a Compensable Transfer, determine the value of each
Compensable Transfer and the aggregate value of the party's final claim,
and deliver a report to both parties reflecting its conclusions. In
determining the aggregate value of a party's final claim, BKD shall take
into account assets and customers transferred into the party's outlets
during the period from February 2, 1995 through the Closing Date as well
as assets and customers transferred out of the party's outlets during that
period. Each party agrees to provide to BKD such additional information
as BKD may request in order to evaluate and value the parties' final
claims for adjustment. BKD's decision shall be binding on both parties.
(v) If BKD's valuation of one party's final claim exceeds its
valuation of the other party's final claim by more than $75,000, the
second party shall pay to the first party within ten (10) days after BKD
issues its report an amount equal to the excess of the first party's claim
over $75,000. Such payment may be made in cash, in assets comparable in
number, quality and condition to those that are the subject of the first
party's final claim, or in a combination of cash and assets.
(e) Within ninety (90) days after the Closing, BKD shall review
Synergy's expenditures for fixed assets between May 17, 1995 and the Closing and
provide a written report to the parties specifying the extent, if any, to which
the total of all such expenditures for fixed assets conveyed to Buyer at Closing
differs from the product of (i) Synergy's total expenditures for fixed assets
between May 17, 1995 and the Closing and (ii) the ratio of the
- 10 -
<PAGE>
Purchase Price (prior to adjustment under this Section 1.4(e)) to the Synergy
Purchase Price (the result of such calculation is referred to as the "Fixed
Asset Differential"). Within ten (10) days after BKD issues its report under
this Section 1.4(e), Buyer shall pay to SYN (if the Fixed Asset Differential is
greater than zero) or SYN shall pay to Buyer (if the Fixed Asset Differential is
less than zero) an amount equal to the Fixed Asset Differential.
ARTICLE 2
THE CLOSING
SECTION 2.1. CLOSING DATE. As soon as the conditions to Closing set
forth herein have been satisfied or waived, the closing with respect to
Buyer's purchase of the Assets (the "Closing") shall take place at the
offices of the Escrow Agent (as defined in Section 2.4) or such other place
as the parties may agree. The date of the Closing (the "Closing Date") shall
be the same day as the date of the first closing under the Synergy Purchase
Agreement.
SECTION 2.2. DELIVERIES BY SYN. On the Closing Date, SYN shall
deliver to Escrow Agent for deposit in escrow ("Escrow") under the Escrow
Agreement (as defined in Section 2.4) the following (the "SYN Deliverables"),
in form and substance reasonably satisfactory to Buyer and its counsel:
(a) Duly executed bills of sale, vehicle title certificates, special
warranty deeds, assignments and other transfer documents sufficient to vest good
and marketable title to the Assets in the name of Buyer free and clear of all
Liens, except for Permitted Liens;
(b) Good Standing Certificates for SYN from the State of Delaware and
all other states in which qualification and good standing are necessary in order
for SYN to perform its obligations under this Agreement, dated as of a date no
more than ten (10) days before the Closing Date;
(c) A certified copy of any necessary resolutions of SYN evidencing
approval of this Agreement and the transactions contemplated hereby;
(d) The certificate of an officer of SYN described in Section 6.2(c)
hereof;
(e) Appropriate assumption agreements pursuant to which SYN shall assume
and undertake to perform Buyer's obligations arising after the Closing Date
under the Assumed Exchanged Outlet Contracts (as defined in Section 4.8 hereof);
and
(f) All other documents (including permits to do business),
certificates, instruments or writings required to be delivered by SYN at or
prior to the Closing pursuant to this Agreement or otherwise required in
connection herewith.
- 11 -
<PAGE>
SECTION 2.3. DELIVERIES BY BUYER. On the Closing Date, Buyer shall
deliver to Escrow Agent for deposit in Escrow under the Escrow Agreement the
following (the "Buyer Deliverables"), in form and substance reasonably
satisfactory to SYN and its counsel:
(a) The Cash Component;
(b) Duly executed bills of sale, vehicle title certificates, special
warranty deeds, assignments and other transfer documents sufficient to vest good
and marketable title to the Exchanged Outlet Assets in the name of SYN free and
clear of all Liens, except for Permitted Liens;
(c) Good Standing Certificates for Buyer from the state of Tennessee and
all other states in which qualification and good standing are necessary in order
for Buyer to perform its obligations under this Agreement, dated as of a date no
more than ten (10) days before the Closing Date;
(d) A certified copy of any necessary resolutions of Buyer evidencing
approval of this Agreement and the transactions contemplated hereby
(e) The certificate of an officer of Buyer described in Section 6.1(c)
hereof;
(f) Appropriate assumption agreements pursuant to which Buyer shall
assume and undertake to perform SYN's obligations arising after the Closing Date
under the Assumed Contracts, as defined in Section 3.8; and
(g) all other documents (including permits to do business),
certificates, instruments or writings required to be delivered by Buyer at or
prior to the Closing pursuant to this Agreement or otherwise required in
connection herewith.
SECTION 2.4. ESCROW AGENT.
(a) Prior to the Closing Date, Buyer and SYN shall enter into an escrow
agreement substantially in the form of Exhibit C attached hereto (the "Escrow
Agreement") with a mutually acceptable escrow agent with offices in New York
("Escrow Agent"). On the Closing Date, after the first closing under the
Synergy Purchase Agreement, Buyer will deliver to the Escrow Agent the Buyer
Deliverables and SYN will deliver to the Escrow Agent the SYN Deliverables. The
Escrow Agent will hold the items deposited with it in accordance with the Escrow
Agreement.
(b) Upon receipt of a written notice from SYN and Buyer informing the
Escrow Agent that the second closing under the Synergy Purchase Agreement has
occurred, the Escrow Agent shall disburse all cash and deliver the Buyer
Deliverables to SYN and shall
- 12 -
<PAGE>
deliver the SYN Deliverables to Buyer, whereupon the Closing shall be deemed to
have occurred as of the Closing Date.
(c) In the event the Escrow Agent does not receive the written notice
referred to in Section 2.4(b) above within five (5) days after the SYN
Deliverables and the Buyer Deliverables are placed in escrow, the Escrow Agent
shall return (i) the Cash Component and the Buyer Deliverables to Buyer and (ii)
the SYN Deliverables to SYN unless otherwise instructed in writing by SYN and
Buyer. SYN shall then reimburse Buyer for any and all fees, charges and
expenses incurred by Buyer as a result of entering into the Escrow Agreement and
transferring the funds and documents to the Escrow Agent.
SECTION 2.5. ADJUSTMENTS AND PRORATIONS.
(a) All expenses arising from the Optioned Outlets Business up to 11:59
p.m. on the Closing Date, including business and license fees, utility charges,
rent, real and personal property taxes and assessments levied against the Assets
(except for taxes arising from the transfer of the Assets hereunder), and
similar prepaid and deferred items, shall be prorated between Buyer and SYN in
accordance with the principle that SYN shall be responsible for all expenses,
costs and liabilities allocable to the operation of the Optioned Outlets for the
period through the Closing Date, and Buyer shall be responsible for all
expenses, costs and obligations allocable to the operation of the Optioned
Outlets after the Closing Date. There shall be no adjustment for, and SYN shall
remain solely liable with respect to, any contracts or agreements not included
in the Assumed Contracts and any other obligation or liability not expressly
assumed by Buyer in accordance with Section 2.6. Any adjustments or prorations
to be made pursuant to this Section 2.5 shall, insofar as practical, be
determined and paid on the Closing Date, with final settlement and payment by
the appropriate party occurring no later than 90 days after the Closing Date.
(b) All expenses arising from the business and operations of the
Exchanged Outlets up to 11:59 p.m. on the Closing Date, including business and
license fees, utility charges, rent, real and personal property taxes and
assessments levied against the Exchanged Outlet Assets (except for taxes arising
from the transfer of the Exchanged Outlet Assets hereunder), and similar prepaid
and deferred items, shall be prorated between Buyer and SYN in accordance with
the principle that Buyer shall be responsible for all expenses, costs and
liabilities allocable to the operation of the Exchanged Outlets for the period
through the Closing Date, and SYN shall be responsible for all expenses, costs
and obligations allocable to the operation of the Exchanged Outlets after the
Closing Date. There shall be no adjustment for, and Buyer shall remain solely
liable with respect to, any contracts or agreements not included in the Assumed
Exchanged Outlet Contracts and any other obligation or liability not expressly
assumed by SYN in accordance with Section 2.6. Any adjustments or prorations to
be made pursuant to this Section 2.5 shall, insofar as practical, be determined
and paid on the
- 13 -
<PAGE>
Closing Date, with final settlement and payment by the appropriate party
occurring no later than 90 days after the Closing Date.
SECTION 2.6. ASSUMPTION OF LIABILITIES AND OBLIGATIONS.
(a) As of the Closing Date, Buyer shall assume, pay, discharge and
perform (i) all obligations and liabilities arising out of Buyer's ownership of
the Assets or its operation of the Optioned Outlets after the Closing Date,
including Buyer's obligations under Section 5.9 of this Agreement, and (ii) all
obligations and liabilities of SYN or of Synergy under the Assumed Contracts
arising after the Closing Date and resulting from Buyer's ownership of the
Assets or its operation of the Optioned Outlets after the Closing Date. All
other obligations and liabilities of SYN, including but not limited to (1) any
and all obligations under any contract or agreement not included in the Assumed
Contracts, (2) any obligations under the Assumed Contracts relating to the time
period through the Closing Date, (3) any claims or pending or future litigation
or proceedings relating to the operation of the Optioned Outlets on and prior to
the Closing Date, (4) any liabilities and obligations arising under or relating
to any Employee Benefit Plan (as defined in Section 3.4) or Multiemployer
Pension Plan (as defined in Section 3(37) of ERISA), and (5) any other
liabilities and obligations arising from SYN or Synergy's operation of the
Optioned Outlets on and prior to the Closing Date, shall remain and be the
obligations and liabilities solely of SYN.
(b) As of the Closing Date, SYN shall assume, pay, discharge and perform
(i) all obligations and liabilities arising out of SYN's ownership of the
Exchanged Outlet Assets or its operation of the Exchanged Outlets after the
Closing Date, including its obligations under Section 5.10 of this Agreement,
and (ii) all obligations and liabilities of Buyer under the Assumed Exchanged
Outlet Contracts that arise after the Closing Date and resulting from SYN's
ownership of the Exchanged Outlet Assets or its operation of the Exchanged
Outlets after the Closing Date. All other obligations and liabilities of Buyer,
including but not limited to (1) any and all obligations under any contract or
agreement not included in the Assumed Exchanged Outlet Contracts, (2) any
obligations under the Assumed Exchanged Outlet Contracts relating to the time
period through the Closing Date, (3) any claims or pending or future litigation
or proceedings relating to the operation of the Exchanged Outlets on and prior
to the Closing Date, (4) any liabilities and obligations arising under or
relating to any Employee Benefit Plan (as defined in Section 4.4) or
Multiemployer Pension Plan (as defined in Section 3(37) of ERISA), and (5) any
other liabilities and obligations arising from Buyer's operation of the
Exchanged Outlets on and prior to the Closing Date, shall remain and be the
obligations and liabilities solely of Buyer.
- 14 -
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SYN
SYN hereby represents and warrants to Buyer as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION. SYN is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
corporate authority to own, lease and operate its properties and to carry on
its business as now being conducted. SYN is duly qualified or licensed and
in good standing to do business as a foreign corporation in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except in any
such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not, individually or in the aggregate, have a material
adverse effect on the ability of SYN to perform its obligations under this
Agreement. SYN has heretofore made available to Buyer complete and correct
copies of its certificate of incorporation and by-laws, as currently in
effect.
SECTION 3.2. AUTHORITY. SYN has the capacity to execute and deliver
this Agreement, the Escrow Agreement and the executed documents included in
the SYN Deliverables (the "SYN Documents") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement by SYN and consummation of the transactions contemplated hereby
have been duly and validly authorized by the board of directors of SYN, and
no other corporate proceedings on the part of SYN are necessary to authorize
this Agreement or the consummation of the transactions so contemplated. This
Agreement has been, and the other SYN Documents will be, duly executed and
delivered by SYN and, assuming the due and valid execution and delivery by
Buyer (and by the Escrow Agent as to the Escrow Agreement) of the SYN
Documents, each constitutes, and when executed and delivered will constitute,
a valid and binding agreement of SYN, enforceable against it in accordance
with its terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally, and (b) as such enforceability may be
limited by general principles of equity, regardless of whether asserted in a
proceeding in equity or law.
SECTION 3.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set
forth in Schedule 3.3 and except for applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), neither the execution and delivery of this Agreement by SYN, nor the
execution and delivery of the SYN Documents by SYN, nor the consummation by
SYN of the transactions contemplated hereby or thereby nor compliance by SYN
with any of the provisions hereof or thereof will (a) require any filing
with, or the obtaining of any permit, authorization, consent or approval of,
any governmental or regulatory authority, (b) conflict with or result in any
breach of any provision of the
- 15 -
<PAGE>
certificate of incorporation or by-laws of SYN, (c) result in a default (or give
rise to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which SYN or any of its
assets may be bound except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained or that do not, individually or in the aggregate, affect SYN's
ability to perform its obligations under this Agreement; or (d) assuming
compliance with the HSR Act, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to SYN, excluding from the foregoing
clauses (a), (c) and (d) such requirements, defaults or violations which become
applicable as a result of the regulatory status of Buyer or its affiliates or as
a result of the business or activities in which Buyer or its affiliates is or
proposes to be engaged or proposes that Optioned Outlets be engaged, other than
the Optioned Outlets Business.
SECTION 3.4. ABSENCE OF LIABILITIES. There is no claim, liability, or
indebtedness of any nature, direct or indirect, secured or unsecured,
contingent or absolute, known or unknown, matured or unmatured, arising on or
before the Closing Date, whether by contract or by operation of law, in
connection with the Optioned Outlets Business or with respect to any Employee
Benefit Plan or other Plan currently or formerly maintained by Synergy or its
ERISA Affiliates, or maintained by SYN or any of its ERISA Affiliates after
June 30, 1994, or to which any of the foregoing are or were obligated to make
contributions, for which Buyer will become liable as a result of its purchase
of the Assets or as a result of the transactions contemplated by this
Agreement. As used in the foregoing sentence, "Employee Benefit Plan" means
employee benefit plan as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"); "Plan" means any Employee Benefit Plan
and any other employee benefit, stock option, deferred compensation, bonus
and fringe benefit plans maintained for the benefit of or contributed to by
Synergy or SYN or any ERISA Affiliate for any present or former employee of
the Optioned Outlets Business; and "ERISA Affiliate" means a controlled group
of corporations of which SYN or Synergy is or has been a member within the
meaning of Section 414(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), any group of corporations or entities currently or formerly
under common control with SYN or Synergy within the meaning of Section 414(c)
of the Code or any affiliated service group of which SYN or Synergy is or has
been a member within the meaning of Section 414(m) of the Code.
SECTION 3.5. REAL PROPERTY.
(a) Owned Real Property. Schedule 3.5(a) lists all real property owned
by the Sellers that is used in the Optioned Outlets Business (the "Owned Real
Property"). As of the Closing Date, SYN will have good and marketable title to
the Owned Real Property. Such title will be good and marketable and free and
clear of all Liens, except for Permitted Liens. The term "Permitted Liens"
shall mean (i) Liens for water and sewer charges and current taxes not yet due
and payable or being contested in good faith, (ii) mechanics', carriers',
workers',
- 16 -
<PAGE>
repairers', materialmen's, warehousemen's and other similar Liens arising or
incurred in the ordinary course of business to the extent the obligations giving
rise to such Liens are not yet due and payable and remain the obligations of SYN
following Closing, (iii) such other easements, rights of way, imperfections of
title and zoning restrictions as would not materially adversely interfere with
the use of, the affected properties and assets of the Optioned Outlets Business,
and i(v) Liens arising or resulting from any action taken by Buyer of any of its
affiliates; provided, however, that Permitted Liens shall not include any
Excluded Liens. The term "Excluded Liens" shall mean all liens other than the
Liens described in items (i), (ii) and (iv) of the immediately preceding
sentence that secure payment of any liability. The Permitted Liens do not
individually, or in the aggregate, impair the conduct of the Optioned Outlets
Business.
(b) Leased Real Property. Schedule 3.5(b) lists, as of the Closing Date,
all leased real property used in the operation of the Optioned Outlets Business
(the "Leased Real Property" and, together with the Owned Real Property, the
"Real Property").
SECTION 3.6. PERSONAL PROPERTY.
(a) Schedule 3.6(a) includes all vehicles and all other major items of
tangible personal property owned by Sellers and used in the conduct or operation
of the Optioned Outlets Business (such items, together with the consumer propane
tanks, bulk storage tanks and all other personal property owned by Sellers and
used in the Optioned Outlets Business, are hereinafter referred to as the "Owned
Personal Property"). As of the Closing Date, SYN will have good and marketable
title in and to all of the Owned Personal Property, free and clear of any Liens,
leases or other encumbrances.
(b) Schedule 3.6(b) sets forth the number, size and branch location of
consumer propane tanks and bulk storage tanks used in the Optioned Outlets
Business. The number of consumer propane tanks set forth in Schedule 3.6(b) is
no more than 5% greater than the actual number of consumer propane tanks owned
by SYN and used in the Optioned Outlets Business; provided, however, Buyer
hereby acknowledges for purposes of this representation and warranty that SYN
shall be given a credit for the number of consumer propane tanks owned by SYN
and used in the Optioned Outlets Business which exceeds the number set forth in
Schedule 3.6(b) for each size category, such credit to be used against, to the
extent it exists, the number by which the actual number of consumer propane
tanks owned by SYN and used in the Optioned Outlets Business for a size category
is less than the number of consumer propane tanks set forth in such size
category on Schedule 3.6(b). Buyer and SYN agree that Damages (as defined in
Section 8.2 hereof) for a breach of this representation resulting from a
shortage of consumer propane tanks (after applying the credit referred to above)
will be determined by reference to the American Tank and Welding new tank price
for such types and sizes of tanks, except that if Buyer is able to acquire tanks
of the same types, sizes and quality (from a source identified to Buyer by SYN)
at a cost that is less than such new tank cost plus shipping costs,
- 17 -
<PAGE>
then Damages will be determined by reference to such cheaper cost. As of the
Closing Date, SYN will have good title to all of the consumer propane tanks and
bulk storage tanks set forth in Schedule 3.6(b). Good title to each such tank
shall be evidenced by:
(i) such tank being held in inventory on the lot of a branch
location of one of the Optioned Outlets at the time of Closing,
(ii) SYN producing a previously executed tank contract; a customer
supply agreement executed by the customer relating to tanks with a
capacity of 100 pounds or less which states that SYN is providing the tank
for use by the customer (such agreement shall not be required to list a
serial number for the tank); a work order executed by the customer (such
work order shall include the serial number of the tank); a bill of sale;
or a tank supplier invoice; and such tank being physically located on the
premises of the customer and such tank being free of any adverse claim of
ownership by a customer,
(iii) the customer acknowledging, in writing to Buyer or otherwise
to Buyer's reasonable satisfaction, that SYN owns the tank,
(iv) Buyer or any of its affiliates securing a newly executed tank
contract with the customer, or
(v) SYN or Buyer being able to gain physical possession of such
tank.
After the Closing Date, if Buyer is unable to substantiate SYN's good title to a
tank pursuant to any of clauses (i) through (v) above, Buyer shall promptly
notify SYN of such fact and SYN shall have the opportunity, for a period ending
on the later of 90 days after delivery of such notice or 180 days after the
second closing under the Synergy Agreement, to assist in establishing SYN's good
title to such tank as defined in clauses (i) through (v) above. Buyer shall
provide reasonable cooperation to SYN in such efforts.
(c) Schedule 3.6(c) lists all items of personal property used in
connection with the conduct or operation of the Optioned Outlets Business that
are subject to leases from parties other than the Sellers that Buyer has elected
to assume (the "Leased Personal Property and, together with the Owned Personal
Property, the "Personal Property").
(d) Substantially all the consumer propane tanks, bulk storage tanks and
vehicles used in the Optioned Outlets Business are in generally good condition
and repair, normal wear and tear excepted, and generally fit for the uses for
which they are intended. Substantially all such consumer propane tanks, bulk
storage tanks and vehicles are suitable for their intended uses and are equipped
with appropriate data plates.
- 18 -
<PAGE>
SECTION 3.7. INTELLECTUAL PROPERTY. As of the Closing Date, SYN will
own or possess adequate and enforceable long-term licenses or other rights to
use without payment all copyrights, patents, trade names, trademarks and
similar rights, including all Synergy trade names, trademarks and logos, that
previously have been used in the conduct or operation of the Optioned Outlets
Business (the "Intellectual Property"). At Closing, SYN will grant Buyer a
nonexclusive perpetual royalty-free license to use the Intellectual Property
solely in connection with the conduct or operation of the Optioned Outlets
Business (the "Intellectual Property License").
SECTION 3.8. ASSUMED CONTRACTS.
(a) Buyer will assume as of the day immediately following the Closing
Date all customer tank contracts of the Optioned Outlets (the "Customer Tank
Contracts"), all leases of Leased Real Property and all leases of Leased
Personal Property (collectively, the "Assumed Contracts"); provided, however,
that SYN shall retain and pay all liabilities arising on or before the Closing
Date under the Assumed Contracts. All Assumed Contracts are valid, binding and
enforceable in accordance with their terms against the parties to such Assumed
Contracts and there exists no default by Sellers or SYN under such Assumed
Contracts other than defaults that will be cured by SYN at no cost to Buyer
within thirty (30) days after Closing. SYN is not aware of any intention by any
party to any Assumed Contract to (i) terminate such contract or amend the terms
thereof, (ii) refuse to renew the same upon expiration of its terms, or (iii)
renew the same upon expiration only on terms and conditions which are more
onerous than those pertaining to such existing contract.
(b) The parties acknowledge the existence of a collective bargaining
agreement covering certain Synergy personnel currently employed in connection
with the Albertville, Alabama Optioned Outlet (the "Albertville Union
Contract"). Neither the Albertville Union Contract nor any other collective
bargaining agreement is included in the Assumed Contracts.
SECTION 3.9. LICENSES AND PERMITS. At Closing, SYN will assign to
Buyer all federal, state, local, or municipal licenses, permits,
certificates, orders, franchises, approvals and authorizations necessary for
ownership of the Assets and the conduct of the Optioned Outlets Business
(collectively, the "Licenses and Permits") that it acquires in the Synergy
Transaction and that are assignable, with such assignment to become effective
upon the second closing under the Synergy Purchase Agreement.
SECTION 3.10. PASS-THROUGH FROM SYNERGY PURCHASE AGREEMENT. Buyer
shall have the benefit of all representations, warranties and covenants of
the Sellers under the Synergy Purchase Agreement insofar as they pertain to
the Optioned Outlets, the Optioned Outlets Business, or the Assets; PROVIDED,
HOWEVER, that Buyer's recourse against the Sellers under this Section 3.10
shall be limited to that specified in Section 8.2 of this Agreement.
- 19 -
<PAGE>
SECTION 3.11. CERTAIN FEES. Neither SYN nor any of its affiliates has
entered into or will enter into any agreement, arrangement or understanding
with any person or firm which will result in the obligation of Buyer or any
affiliate of Buyer to pay any finder's fee, brokerage commission or similar
payment in connection with the transactions contemplated hereby.
SECTION 3.12. DISCLOSURE. No representation or warranty by SYN in
this Agreement, the SYN Documents, the Schedules, or the certificate
described in Section 6.2(c) hereof contains or will contain an untrue
statement of material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to SYN as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
corporate authority to own, lease and operate its properties and to carry on
its business as now being conducted. Buyer is duly qualified or licensed and
in good standing to do business as a foreign corporation in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except in any
such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not, individually or in the aggregate, have a material
adverse effect on the ability of Buyer to perform its obligations under this
Agreement. Buyer has heretofore made available to Buyer complete and correct
copies of its certificate of incorporation and by-laws, as currently in
effect.
SECTION 4.2. AUTHORITY. Buyer has the capacity to execute and deliver
this Agreement, the Escrow Agreement and the executed documents included in
the Buyer Deliverables (the "Buyer Documents") and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement by Buyer and consummation of the transactions contemplated
hereby have been duly and validly authorized by the board of directors of
Buyer, and no other corporate proceedings on the part of Buyer are necessary
to authorize this Agreement or the consummation of the transactions so
contemplated. This Agreement has been, and the other Buyer Documents will
be, duly executed and delivered by Buyer and, assuming the due and valid
execution and delivery by SYN (and by the Escrow Agent as to the Escrow
Agreement) of the Buyer Documents, each constitutes, and when executed and
delivered will constitute, a valid and binding agreement of Buyer,
enforceable against it in accordance with its terms, except (a) as such
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization and other similar laws
- 20 -
<PAGE>
affecting creditors' rights generally, and (b) as such enforceability may be
limited by general principles of equity, regardless of whether asserted in a
proceeding in equity or law.
SECTION 4.3. CONSENTS AND APPROVALS; NO VIOLATION. Except for
applicable requirements of the HSR Act, neither the execution and delivery of
this Agreement by Buyer nor the consummation by Buyer of the transactions
contemplated hereby or thereby, nor compliance by Buyer with any of the
provisions hereof or thereof will (a) require any filing with, or the
obtaining of any permit, authorization, consent or approval of, any
governmental or regulatory authority, (b) conflict with or result in any
breach of any provision of the certificate of incorporation or by-laws of
Buyer or any of its respective subsidiaries, (c) result in a default (or give
rise to any right of termination, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which Buyer or
any of its subsidiaries or any of its assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained or that do not, individually
or in the aggregate, impair Buyer's ability to perform its obligations under
this Agreement, or (d) assuming compliance with the HSR Act, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Buyer or any affiliate.
SECTION 4.4. ABSENCE OF LIABILITIES. There is no claim, liability, or
indebtedness of any nature, direct or indirect, secured or unsecured,
contingent or absolute, known or unknown, matured or unmatured, arising on or
before the Closing Date, whether by contract or by operation of law, in
connection with the Exchanged Outlets Business or with respect to any
Employee Benefit Plan or other Plan currently or formerly maintained by Buyer
or any of its ERISA Affiliates after June 30, 1994, or to which any of the
foregoing are or were obligated to make contributions, for which SYN will
become liable as a result of its purchase of the Exchanged Outlet Assets or
as a result of the transaction contemplated by this Agreement. As used in the
foregoing sentence, "Employee Benefit Plan" means employee benefit plan as
defined in Section 3(3) of ERISA; "Plan" means any Employee Benefit Plan and
any other employee benefit, stock option, deferred compensation, bonus and
fringe benefit plans maintained for the benefit of or contributed to by Buyer
or any ERISA Affiliate for any present or former employee of the Exchanged
Outlets Business; and "ERISA Affiliate" means a controlled group of
corporations of which Buyer is or has been a member within the meaning of
Section 414(b) of the Code, any group of corporations or entities currently
or formerly under common control with Buyer within the meaning of Section
414(c) of the Code or any affiliated service group of which Buyer is or has
been a member within the meaning of Section 414(m) of the Code.
SECTION 4.5. ABSENCE OF CERTAIN CHANGES. Since December 31, 1994,
Buyer has conducted the Exchanged Outlets Business in the ordinary course and
in substantially the same manner as presently conducted and has made all
reasonable efforts consistent with past practices to preserve its
relationships with customers, suppliers and others with whom the
- 21 -
<PAGE>
Exchanged Outlets deal. Notwithstanding the foregoing, the parties acknowledge
that, as part of a rationalization of service areas among different outlets
owned by Buyer, approximately 150 customers of the Exchanged Outlets, most of
whom were customers of the Columbus, Mississippi outlet and the balance of whom
were customers of the Amory, Mississippi outlet, have been transferred to other
retail propane outlets owned by Buyer.
SECTION 4.6. EXCHANGED OUTLET REAL PROPERTY.
(a) Owned Real Property. Schedule 4.6(a) lists all real property owned
by the Buyer that is used in the Exchanged Outlets Business (the "Owned
Exchanged Outlet Real Property"). Buyer has good and marketable title to the
Owned Exchanged Outlet Real Property. Such title is good and marketable and
free and clear of all Liens, except for Permitted Liens. The term "Permitted
Liens" shall mean (i) Liens for water and sewer charges and current taxes not
yet due and payable or being contested in good faith, (ii) mechanics',
carriers', workers', repairers', materialmen's, warehousemen's and other similar
Liens arising or incurred in the ordinary course of business to the extent the
obligations giving rise to such Liens are not yet due and payable and remain the
obligations of Buyer following Closing, (iii) such other easements, rights of
way, imperfections of title and zoning restrictions as would not materially
adversely interfere with the use of, the affected properties and assets of the
Exchanged Outlets Business, and (iv) Liens arising or resulting from any action
taken by SYN of any of its affiliates; provided, however, that Permitted Liens
shall not include any Excluded Liens. The term "Excluded Liens" shall mean all
liens other than the Liens described in items (i), (ii) and (iv) of the
immediately preceding sentence that secure payment of any liability. The
Permitted Liens do not individually, or in the aggregate, impair the conduct of
the Exchanged Outlets Business.
(b) Leased Real Property. Schedule 4.6(b) lists, as of the Closing Date,
all leased real property used in the operation of the Exchanged Outlets Business
(the "Leased Exchanged Outlet Real Property" and, together with the Owned
Exchanged Outlet Real Property, the "Exchanged Outlet Real Property").
SECTION 4.7. EXCHANGED OUTLET PERSONAL PROPERTY.
(a) Schedule 4.7(a) lists all vehicles and all other major items of
tangible personal property owned by Buyer and used in the conduct or operation
of the Exchanged Outlets Business (such items, together with the consumer
propane tanks, bulk storage tanks and all other personal property owned by Buyer
and used in the Exchanged Outlets Business, are hereinafter referred to as the
"Owned Exchanged Outlet Personal Property"). Buyer has good and marketable
title in and to all of the Owned Exchanged Outlet Personal Property, free and
clear of any Liens, leases or other encumbrances.
- 22 -
<PAGE>
(b) Schedule 4.7(b) sets forth the number, size and branch location of
consumer propane tanks and bulk storage tanks used in the Exchanged Outlets
Business. The number of consumer propane tanks set forth in Schedule 4.7(b) is
no more than 5% greater than the actual number of consumer propane tanks owned
by Buyer and used in the Exchanged Outlets Business; provided, however, SYN
hereby acknowledges for purposes of this representation and warranty that Buyer
shall be given a credit for the number of consumer propane tanks owned by Buyer
and used in the Exchanged Outlets Business which exceeds the number set forth in
Schedule 4.7(b) for each size category, such credit to be used against, to the
extent it exists, the number by which the actual number of consumer propane
tanks owned by Buyer and used in the Exchanged Outlets Business for a size
category is less than the number of consumer propane tanks set forth in such
size category on Schedule 4.7(b). Buyer and SYN agree that Damages (as defined
in Section 8.3 hereof) for a breach of this representation resulting from a
shortage of consumer propane tanks (after applying the credit referred to above)
will be determined by reference to the American Tank and Welding new tank price
for such types and sizes of tanks, except that if SYN is able to acquire tanks
of the same types, sizes and quality (from a source identified to SYN by Buyer)
at a cost that is less than such new tank cost plus shipping costs, then Damages
will be determined by reference to such cheaper cost. Buyer has good title to
all of the consumer propane tanks and bulk storage tanks set forth in Schedule
4.7(b). Good title to each such tank shall be evidenced by:
(i) such tank being held in inventory on the lot of a branch
location of one of the Exchanged Outlets at the time of Closing,
(ii) Buyer producing a previously executed tank contract; a
customer supply agreement executed by the customer relating to tanks with
a capacity of 100 pounds or less which states that Buyer is providing the
tank for use by the customer (such agreement shall not be required to list
a serial number for the tank); a work order executed by the customer (such
work order shall include the serial number of the tank); a bill of sale;
or a tank supplier invoice; and such tank being physically located on the
premises of the customer and such tank being free of any adverse claim of
ownership by a customer,
(iii) the customer acknowledging, in writing to SYN or otherwise to
SYN's reasonable satisfaction, that Buyer owns the tank,
(iv) SYN or any of its affiliates securing a newly executed tank
contract with the customer, or
(v) SYN or Buyer being able to gain physical possession of such
tank.
After the Closing Date, if SYN is unable to substantiate Buyer's good title
to a tank pursuant to any of clauses (i) through (v) above, SYN shall
promptly notify Buyer of such fact and
- 23 -
<PAGE>
Buyer shall have the opportunity to assist in establishing Buyer's good title
to such tank as defined in clauses (i) through (v) above. SYN shall provide
reasonable cooperation to Buyer in such efforts.
(c) Schedule 4.7(c) lists all items of personal property used in
connection with the conduct or operation of the Exchanged Outlets Business that
are subject to leases from parties other than the Buyer that SYN has elected to
assume (the "Leased Exchanged Outlet Personal Property" and, together with the
Owned Exchanged Outlet Personal Property, the "Exchanged Outlet Personal
Property").
(d) Substantially all the consumer propane tanks, bulk storage tanks and
vehicles used in the Exchanged Outlets Business are in generally good condition
and repair, normal wear and tear excepted, and generally fit for the uses for
which they are intended. Substantially all such consumer propane tanks, bulk
storage tanks and vehicles are suitable for their intended uses and are equipped
with appropriate data plates.
SECTION 4.8. ASSUMED EXCHANGED OUTLET CONTRACTS.
(a) SYN will assume as of the day immediately following the Closing Date
all customer tank contracts of the Exchanged Outlets with customers located in
Mississippi or Arkansas (the "Exchanged Outlet Customer Tank Contracts"), all
leases of Leased Exchanged Outlet Real Property and all leases of Leased
Exchanged Outlet Personal Property (collectively, the "Assumed Exchanged Outlet
Contracts"); provided, however, that Buyer shall retain and pay all liabilities
arising on or before the Closing Date under the Assumed Exchanged Outlet
Contracts. All Assumed Exchanged Outlet Contracts are valid, binding and
enforceable in accordance with their terms against the parties to such Assumed
Exchanged Outlet Contracts and there exists no default by Buyer under such
Assumed Exchanged Outlet Contracts other than defaults that will be cured by
Buyer at no cost to SYN within thirty (30) days after Closing. Buyer is not
aware of any intention by any party to any Assumed Exchanged Outlet Contract to
(i) terminate such contract or amend the terms thereof, (ii) refuse to renew the
same upon expiration of its terms, or (iii) renew the same upon expiration only
on terms and conditions which are more onerous than those pertaining to such
existing contract.
(b) The Assumed Exchanged Outlet Contracts do not include any collective
bargaining agreements.
SECTION 4.9. LICENSES AND PERMITS. Buyer possesses all federal,
state, local, or municipal licenses, permits, certificates, orders,
franchises, approvals and authorizations necessary for ownership of the
Exchanged Outlet Assets and the conduct of the Exchanged Outlets Business
(collectively, the "Exchanged Outlet Licenses and Permits"). At Closing,
Buyer will assign to SYN all assignable Exchanged Outlet Licenses and Permits.
- 24 -
<PAGE>
SECTION 4.10. CERTAIN FEES. Neither Buyer nor any of its affiliates
has entered into or will enter into any agreement, arrangement or
understanding with any person or firm which will result in the obligation of
SYN or any affiliate of SYN to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
SECTION 4.11. DISCLOSURE. No representation or warranty by Buyer in
this Agreement, the Buyer Documents, the Schedules, or the certificate
described in Section 6.2(c) hereof contains or will contain an untrue
statement of material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
SECTION 4.12. INTELLECTUAL PROPERTY. As of the Closing Date, Buyer
will own or possess adequate and enforceable long-term licenses or other
rights to use without payment all copyrights, patents, trade names,
trademarks and similar rights that previously have been used in the conduct
or operation of the Exchanged Outlets Business (the "Buyer Intellectual
Property"). At Closing, Buyer will grant SYN a nonexclusive perpetual
royalty-free license to use the Buyer Intellectual Property solely in
connection with the conduct or operation of the Exchanged Outlets Business
(the "Exchanged Outlets Intellectual Property License").
ARTICLE 5
COVENANTS OF THE PARTIES
SECTION 5.1. CONDUCT OF THE EXCHANGED OUTLETS BUSINESS. From the date
hereof through the Closing Date:
(a) Buyer shall operate the Exchanged Outlets Business in the ordinary
course consistent with past practices;
(b) Except as required by applicable law, contractual obligations or
other understandings or arrangements existing on the date hereof, (all of
which have been disclosed to SYN in the Schedules,) the Buyer shall not, with
respect to the Exchanged Outlets Business, (i) agree to pay any pension,
retirement allowance or other employee benefit to any employee associated
with the Exchanged Outlet Business, whether past or present, other than in
accordance with past practices; (ii) enter into any new employment,
severance, consulting, or other compensation agreement with any existing
employee associated with the Exchanged Outlet Business or amend or commit
itself to amend any such agreement or similar arrangement in existence on the
date hereof; (iii) commit itself to any pension, profit-sharing, deferred
compensation, group insurance, severance pay, retirement or other employee
benefit plan, fund or similar arrangement covering employees associated with
the Exchanged Outlet Business (other than the Buyer Severance Plan as defined
in Section 5.10(a)) or amend or commit itself to amend any of such plans,
funds or similar arrangements in existence on the
- 25 -
<PAGE>
date hereof or (iv) enter into any collective bargaining agreement covering
employees associated with the Exchanged Outlet Business;
(c) Except for the sale of products and services and the purchase of
materials for resale or consumption or the replacement of worn, damaged or
obsolete equipment, in the ordinary course of business, Buyer shall not, with
respect to the Exchanged Outlets Business, (i) sell, transfer or otherwise
dispose of any Exchanged Outlet Assets or (ii) create or permit to exist any new
Lien on any of the Exchanged Outlet Assets.
(d) Buyer shall maintain the Exchanged Outlet Assets in regular
operating condition and repair, subject to normal wear and tear, and make all
necessary renewals, additions and replacements thereto consistent with past
practice;
(e) Buyer shall not enter into any contract or commitment or engage in
any transaction with respect to the Exchanged Outlets Business other than in the
ordinary course of business;
(f) Buyer shall maintain in effect adequate insurance with respect to
the Exchanged Outlet Assets;
(g) Except as specified in Section 4.5, Buyer shall use reasonable
efforts to preserve for SYN the present relationships with suppliers and
customers and others having business relations with the Exchanged Outlets
Business;
(h) Buyer shall not sell, assign, transfer or license any patent,
trademark, trade name, trade secret, license, customer list, brand name or
pending application for any patent or trademark, or any technical information or
other proprietary information used in the operation of the Exchanged Outlets
Business;
(i) Buyer shall not do any act or omit to do any act, or permit any act
or omission to act, if within its reasonable control, which will cause a
material breach of any of its respective contracts, commitments or obligations
of the Exchanged Outlets Business;
(j) Buyer shall substantially comply with all laws, regulations and
orders applicable to the Exchanged Outlets Business or the Exchanged Outlet
Assets or as may be required for the valid and effective transfer of the
Exchanged Outlet Assets;
(k) Buyer shall maintain the books of account and financial records
relating to the customers, assets, inventories, and accounts receivable of the
Exchanged Outlets Business in the usual, regular and ordinary manner on a basis
consistent with prior years; and
(l) Buyer shall not agree to take any action prohibited by this Section
5.1.
- 26 -
<PAGE>
SECTION 5.2. ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the Closing Date, SYN will
use commercially reasonable efforts to (i) arrange for Buyer's authorized
representatives to have reasonable access to, or obtain for Buyer copies of, the
books and records of the Optioned Outlets Business; (ii) obtain for Buyer such
information about the offices, other facilities and properties of the Optioned
Outlets Business as Buyer may request or SYN may obtain through its own due
diligence; (iii) if permitted by Sellers, arrange for Buyer to make such
inspections thereof as Buyer may reasonably request; and (iv) make available to
or obtain for Buyer such other financial and operating data and other
information with respect to the Optioned Outlets Business and the Assets as
Buyer may from time to time reasonably request; provided, however, that any such
investigation shall be conducted during normal business hours and in such a
manner as not to unreasonably interfere with the personnel and the operation of
the Optioned Outlets Business. In addition, SYN will make available to Buyer
any information with respect to Optioned Outlets Business that it receives in
the course of its due diligence investigation under the Synergy Purchase
Agreement, including all reasonably segregable portions of company-wide reports
that deal with the Optioned Outlets Business.
(b) Between the date of this Agreement and the Closing Date, Buyer will
use commercially reasonable efforts to (i) give SYN and its authorized
representatives reasonable access to all books and records and offices, other
facilities and properties of the Exchanged Outlets Business; (ii) permit SYN to
make such inspections thereof as SYN may reasonably request; and (iii) cause its
officers to furnish SYN with such financial and operating data and other
information with respect to the Exchanged Outlets Business and Exchanged Outlet
Assets as SYN may from time to time reasonably request; provided, however, that
any such investigation shall be conducted during normal business hours and in
such a manner as not to unreasonably interfere with the personnel and the
operation of the Exchanged Outlets Business.
SECTION 5.3. COMMERCIALLY REASONABLE EFFORTS. Subject to the express
terms and conditions of this Agreement, SYN and Buyer will use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement without unnecessary delay.
SECTION 5.4. REGULATORY APPROVALS. SYN and Buyer shall each promptly
make, and cause to be made, any and all filings which are required under the
HSR Act and each agrees to furnish the other with such necessary information
and reasonable assistance as may be requested in connection with the
preparation of necessary filings and submissions to the Federal Trade
Commission and the Antitrust Division of the Department of Justice. Each
party shall use commercially reasonable efforts to respond promptly to any
request for additional information, or other formal or information request
for information, witnesses or documents which may be made by any governmental
or regulatory authority pertaining to the
- 27 -
<PAGE>
transactions contemplated hereby, and shall prepare promptly all further
applications and instruments necessary to desirable in order to obtain, at
the earliest practicable date, expiration or termination of the waiting
period under the HSR Act with respect to the transactions contemplated
hereby, and shall keep the other party fully apprised of its actions with
respect thereto.
SECTION 5.5. CONSENTS. SYN and Buyer shall cooperate, and use
commercially reasonable efforts, to make all filings and obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities, and other third parties necessary to consummate the
transactions contemplated by this Agreement and to carry on the Optioned
Outlets Business and the Exchanged Outlet Business substantially in the
manner as heretofore conducted. Without limiting the generality of the
foregoing, each party shall use commercially reasonable efforts to obtain all
necessary consents to assign the Assumed Contracts or the Assumed Exchanged
Outlet Contracts, as the case may be, to the other as of the Closing Date.
If any consent necessary to permit the assignment of an Assumed Contract or
an Assumed Exchanged Outlet Contract cannot be obtained by the Closing Date,
the parties shall use commercially reasonable efforts to obtain such consent
and effect the assignment of the affected contract as soon after the Closing
as is possible. If any necessary consent cannot be obtained after Closing
despite the commercially reasonable efforts of the parties, the parties shall
cooperate to put in place such alternative arrangements as may be necessary
to give the party to which the affected contract was to have been assigned
substantially the same economic benefits and detriments as it would have had
if such assignment had been completed as of the Closing Date.
SECTION 5.6. PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, SYN and
Buyer will consult with each other before issuing any report, statement or
press releases or otherwise making any public statements with respect to this
Agreement and the transactions contemplated hereby and will not issue any
such report, statement or press release or make any such public statement
without such prior consultation and approval of the other party (which shall
not be unreasonably withheld), except as required by law.
SECTION 5.7. ADDITIONAL SCHEDULES AND SUPPLEMENTAL DISCLOSURE. SYN
and Buyer acknowledge that, at the time of execution of this Agreement,
certain Schedules contemplated by this Agreement (the "Omitted Schedules")
had not yet been prepared. Such Omitted Schedules shall be prepared and
attached to this Agreement prior to Closing; provided, however, that such
Omitted Schedules must be acceptable to both parties. SYN and Buyer shall
have the right from time to time prior to the Closing to supplement the
Schedules with respect to any matter hereafter arising which, if existing or
known as of the date of this Agreement, would have been required to be set
forth or described in the Schedules. However, no such supplement of the
Schedules shall be deemed to cure any breach of any representation or
warranty made in this Agreement unless the party to whom such representation
or warranty is made specifically agrees thereto in writing.
- 28 -
<PAGE>
SECTION 5.8. BOOKS AND RECORDS. SYN and Buyer agree that, for a
period of one year after the Closing Date, each party (at its expense) shall
(a) have the right, at any time during business hours for any proper purpose,
to inspect and to make copies of any books, records and files relating to the
Optioned Outlets Business or the Exchanged Outlets Business that pertain to
operations prior to the Closing Date, and (b) give written notice to the
other party no later than 20 business days prior to any destruction of any
such books, records or files in order to allow the other party to inspect
and/or make copies of such books, records or files prior to destruction
thereof. Each party further agrees that the other shall have reasonable
access to the employees of the Optioned Outlets Business or the Exchanged
Outlets Business, as the case may be, for purposes of handling litigation or
claims with respect to such Outlets. Nothing in this Section shall be deemed
to limit the rights of the parties under Section 5.15 of this Agreement.
SECTION 5.9. OPTIONED OUTLETS EMPLOYEES; EMPLOYEE BENEFITS.
(a) SYN shall use commercially reasonable efforts to obtain for Buyer
job and salary history regarding employees associated with the Optioned Outlets
Business and to provide Buyer, if permitted by Sellers, with an opportunity
prior to the Closing Date to meet with appropriate supervising personnel to
discuss the qualifications and performance of such employees and with the
employees themselves to discuss opportunities for employment. Buyer shall have
the right, but not the obligation, to offer employment to any employee who has
been involved in the operation of the Optioned Outlets Business and holds a
position no higher than regional manager. SYN shall terminate all such
employees as of the Closing Date. The parties agree that SYN may (but shall not
be required to) establish a severance plan with respect to such employees
consistent with the terms set forth in Schedule 5.9 (the "SYN Severance Plan").
Buyer shall be responsible for making all severance and termination payments
under the SYN Severance Plan to employees associated with the Optioned Outlets
whose termination is required by this Section 5.9 and who (i) are not offered
employment by Buyer on substantially the same terms and conditions as those
under which they were employed by Sellers or (ii) are hired by Buyer but, within
one year after the Closing Date, are terminated or have their rate of pay
reduced and terminate their employment within one week after such reduction.
SYN shall be responsible for and bear all liability for all other salary and
benefit continuation (including COBRA benefits) and/or severance and termination
payments relating to any employee or former employee of the Optioned Outlets
that may be found payable as a result of (i) any termination or constructive
termination of employment of any such employee on or before the Closing Date or
(ii) the transactions contemplated by this Agreement.
(b) SYN shall be responsible for furnishing a Form W-2 to each employee
of the Optioned Outlets Business disclosing all wages and other compensation
paid by Synergy or SYN for the period through the Closing Date and taxes
withheld therefrom, and Buyer shall be responsible for furnishing a Form W-2 to
each employee of the Optioned Outlets Business who is hired by Buyer disclosing
all wages and other compensation paid by Buyer for the period after the Closing
Date and taxes withheld therefrom.
- 29 -
<PAGE>
(c) SYN shall be responsible for paying workers' compensation claims
filed by employees associated with the Optioned Outlets Business with respect to
incidents that occurred through the Closing Date. Buyer shall notify SYN
promptly after receiving any workers' compensation claims resulting from
incidents that occurred through the Closing Date and SYN shall be responsible
for defending against or otherwise dealing with such claims.
SECTION 5.10. EXCHANGED OUTLETS EMPLOYEES; EMPLOYEE BENEFITS.
(a) Buyer shall make available to SYN job and salary history regarding
employees associated with the Exchanged Outlets Business and to provide SYN with
an opportunity prior to the Closing Date to meet with appropriate supervising
personnel to discuss the qualifications and performance of such employees and
with the employees themselves to discuss opportunities for employment. SYN
shall have the right, but not the obligation, to offer employment to any
employee who has been involved in the operation of the Exchanged Outlets
Business and holds a position no higher than regional manager. Buyer shall
terminate all such employees as of the Closing Date. Buyer shall be responsible
for and bear all liability for all salary and benefit continuation (including
COBRA benefits) and/or severance and termination payments relating to any
employee or former employee of the Exchanged Outlets that may be found payable
as a result of (i) any termination or constructive termination of employment of
any such employee on or before the Closing Date or (ii) the transactions
contemplated by this Agreement.
(b) Buyer shall be responsible for furnishing a Form W-2 to each
employee of the Exchanged Outlets Business disclosing all wages and other
compensation paid by Buyer for the period through the Closing Date and taxes
withheld therefrom, and SYN shall be responsible for furnishing a Form W-2 to
each employee of the Exchanged Outlets Business who is hired by SYN disclosing
all wages and other compensation paid by SYN for the period after the Closing
Date and taxes withheld therefrom.
(c) Buyer shall be responsible for paying workers' compensation claims
filed by employees associated with the Exchanged Outlets Business with respect
to incidents that occurred through the Closing Date. SYN shall notify Buyer
promptly after receiving any workers' compensation claims resulting from
incidents that occurred through the Closing Date and Buyer shall be responsible
for defending against or otherwise dealing with such claims.
SECTION 5.11. CERTAIN TAX MATTERS.
(a) The parties shall share equally all sales, use, transfer, filing,
conveyance, recording, and other similar taxes and fees, including, without
limitation all applicable real estate transfer taxes and recording fees and
stock transfer taxes arising out of or in connection with the transactions
effected pursuant to this Agreement (collectively, "Transfer Taxes"). The
taxes and fees incurred in connection with the transactions effected pursuant
to the
- 30 -
<PAGE>
Synergy Purchase Agreement shall be borne solely by the parties to that
agreement and shall not be included in the calculation of the Cash Component.
If either party has primary responsibility under applicable law for the
payment of any particular Transfer Tax such party shall prepare and file the
relevant Tax Return, pay the Transfer Taxes shown on such Tax Return, and
provide a written request to the other party for reimbursement of one-half of
the amount of the Transfer Taxes shown on such Tax Return and setting forth
how such Transfer Taxes were calculated.
(b) Each of Buyer and SYN shall provide the other party with such
assistance as such party may reasonably request in connection with the
preparation of any Tax Return relating to the transactions contemplated by this
Agreement, any audit or other examination by any taxing authority, or any
judicial or administrative proceedings relating to the liability for Taxes
relating to the transactions contemplated by this Agreement, and each will
retain and provide the requesting party with any records or information which
may be relevant to such return, audit or examination, proceedings or
determination. Any information obtained pursuant to this Section 5.11 or
pursuant to any other Section hereof providing for the furnishing of information
or the review of any Tax Return or other schedule relating to Taxes shall be
kept confidential by the parties hereto.
(c) For purposes of this Agreement, (i) the term "Taxes" shall mean all
taxes, levies or other like assessments, charges or fees, including, without
limitation, income, corporation, gross receipts, transfer, excise, property,
sales, licenses, payroll, withholding, social security and franchise or other
governmental taxes, imposed by the United States, or any state, county or local
government or subdivision or agency thereof; and such term shall include any
interest, penalties or additions to tax attributable to such taxes; and (ii) the
term "Tax Return" shall mean any report, return, statement or other written
information required to be supplied to a taxing authority in connection with
Taxes.
SECTION 5.12. TRADE PAYABLES AND OTHER LIABILITIES.
(a) Buyer will retain and pay all trade payables, accrued operating
expenses, long-term debt and all other liabilities of any nature whatsoever
(including liabilities under the Assumed Exchanged Outlet Contracts and all
Taxes other than Transfer Taxes) related to the Exchanged Outlets Business and
arising on or before the Closing Date.
(b) SYN will retain and pay all trade payables, accrued operating
expenses, long-term debt and other liabilities of any nature whatsoever
(including liabilities under the Assumed Contracts and all Taxes other than
Transfer Taxes) related to Optioned Outlets Business and arising on or before
the Closing Date.
SECTION 5.13. TITLE EXAMINATION. Each party shall furnish to the
other when received any title insurance commitments in its possession with
respect to any real property as
- 31 -
<PAGE>
well as any security interest, tax lien and judgment searches at the state
level and at the county level that has been performed with respect to the
Assets or the Exchanged Outlet Assets. Each party shall cooperate with the
other and use commercially reasonable efforts to comply with all reasonable
requests of the other to assist the other in the foregoing.
SECTION 5.13. TANK INVENTORY. SYN will furnish to Buyer when received
from Synergy under the Synergy Purchase Agreement the results of a physical
inventory of the consumer propane tanks used in the operation of the Optioned
Outlets Business and all verifications of executed tank contracts or customer
supply agreements executed by any customer relating to the Optioned Outlets
Business.
SECTION 5.14. COOPERATION. Both Buyer and SYN will cooperate with
respect to litigation matters concerning the Optioned Outlets Business and
the Exchanged Outlets Business by making available at no cost copies of files
and any then-current employees familiar with the matters that are the subject
of such litigation.
SECTION 5.16. ALLOCATIONS. During the period beginning on the day
after the Closing Date and ending on March 31, 1996 (the "Allocation Period"),
pipeline and rail tank car allocations shall be divided between the parties as
follows:
(a) SYN shall retain all allocations of transmission capacity on the
Dixie Pipeline acquired from Sellers; provided, however, that SYN agrees to make
available to Buyer at Buyer's request all such transmission capacity, if any,
that is surplus to the needs of SYN and/or Empire Gas Corporation during the
Allocation Period.
(b) Buyer shall retain all of its allocations of transmission capacity
on the Dixie Pipeline that have been used to support the Exchanged Outlets.
(c) SYN shall have the right to participate, to the same extent that the
Exchanged Outlets previously have participated, in all other pipeline
allocations and all tank car allocations that have been used by Buyer in
connection with the Exchanged Outlets Business; and
(d) Buyer shall have the right to participate, to the same extent
that the Optioned Outlets previously have participated, in all allocations of
transmission capacity on the Cherokee Pipeline and the Williams Pipeline and
all tank car allocations that have been used by Sellers or SYN in connection
with the Optioned Outlets Business.
- 32 -
<PAGE>
ARTICLE 6
CONDITIONS
SECTION 6.1. CONDITIONS TO OBLIGATIONS OF SYN. The obligations of SYN
to consummate the transactions contemplated by this Agreement to occur at the
Closing are subject to the fulfillment at or prior to the Closing of each of
the following conditions (any or all of which, except for the condition set
forth in Section 6.1(f) hereof, may be waived in whole or in part by SYN):
(a) Representations and Warranties. The representations and warranties
made by Buyer in this Agreement shall be true and correct when made and at and
as of the Closing Date as though such representations and warranties were made
at and as of the Closing Date, except for representations and warranties that
speak as of a specific date or time other than the Closing Date (which need only
be true and correct as of such date or time).
(b) Performance. Buyer shall have performed and complied with all
agreements, obligations, covenants and conditions required by this Agreement to
be so performed or complied with by Buyer at or prior to the Closing, including
delivery of the required items under Section 2.4 to the Escrow Agent.
(c) Officer's Certificate. Buyer shall have delivered to SYN a
certificate, satisfactory in form to SYN, dated the Closing Date and executed by
an executive officer of Buyer to the effect of paragraphs (a) and (b) above and
to the effect that Buyer intends to consummate the Closing and is not aware of
any reason the Closing will not occur.
- 32A -
<PAGE>
(d) No Litigation. There shall not be instituted any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree which (i) restrains or
prohibits the consummation of the transactions contemplated hereby or (ii)
imposes damages or remedies which would have a material adverse effect on SYN.
(e) No Injunction. There shall not be in effect any writ, judgment,
order (including a preliminary restraining order), injunction or decree of any
court or governmental agency or body of competent jurisdiction enjoining,
restraining or prohibiting the consummation of the transaction contemplated
hereby.
(f) Expiration of Termination of HSR Act Period. All waiting periods
applicable to the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
(g) Release of Liens. At or prior to Closing, Buyer shall have
delivered to SYN all documents and instruments necessary to release any Liens,
liabilities or claims against the Exchanged Outlet Assets other than Permitted
Liens.
(h) First Closing under the Synergy Purchase Agreement. The first
closing as defined under the Synergy Purchase Agreement shall have occurred.
SECTION 6.2. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to consummate the transactions contemplated by this Agreement to occur
at the Closing are subject to the fulfillment at or prior to the Closing of
each of the following conditions (any or all of which, except for the
condition set forth in Section 6.2(f) hereof, may be waived in whole or in
part by Buyer):
(a) Representations and Warranties. The representations and warranties
made by SYN in this Agreement shall be true and correct when made and at and as
of the Closing Date as though such representations and warranties were made at
and as of the Closing Date, except for representations and warranties that speak
as of a specific date or time other than the Closing Date (which need only be
true and correct as of such date or time).
(b) Performance. SYN shall have performed and complied with all
agreements, obligations, covenants and conditions required by this Agreement to
be so performed or complied with by SYN at or prior to the Closing, including
delivery of the required items under Section 2.4 to the Escrow Agent.
(c) SYN's Certificate. SYN shall have delivered to Buyer a certificate,
satisfactory in form to Buyer, dated the Closing Date and executed by an
executive officer of SYN to the
- 33 -
<PAGE>
effect of paragraphs (a) and (b) above and to the effect that SYN intends to
consummate the Closing and is not aware of any reason the Closing will not
occur.
(d) No Litigation. There shall not be instituted any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental or other regulatory or administrative agency or commission
requesting or looking toward an order, judgment or decree which (i) restrains or
prohibits the consummation of the transactions contemplated hereby, or (ii)
imposes damages or remedies which would have a material adverse effect on Buyer.
(e) No Injunction. There shall not be in effect any writ, judgment,
order (including a preliminary restraining orders) injunction or decree of any
court or governmental agency or body of competent jurisdiction enjoining,
restraining or prohibiting the consummation of the transaction contemplated
hereby.
(f) Expiration or Termination of HSR Act Period. All waiting periods
applicable to the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
(g) Release of Liens. At or prior to Closing, SYN shall have delivered
to Buyer all documents and instruments necessary to release any Liens,
liabilities or claims against the Assets other than Permitted Liens.
(h) First Closing under the Synergy Purchase Agreement. The first
closing as defined under the Synergy Purchase Agreement shall have occurred.
(i) Absence of Certain Changes. From May 17, 1995 through the Closing
Date, Synergy shall have conducted the Optioned Outlets Business in the ordinary
course and in substantially the same manner as previously conducted and shall
have made all reasonable efforts consistent with past practices to preserve its
relationships with customers, suppliers and others with whom the Optioned
Outlets deal. In particular:
(i) Except as required by applicable law or by contractual
obligations or other understandings or arrangements existing on the date
hereof, (all of which have been disclosed to Buyer in the Schedules),
neither Synergy nor SYN shall have (A) paid or agreed to pay any pension,
retirement allowance or other employee benefit to any employees associated
with the Optioned Outlets Business, whether past or present; (B) entered
into any new employment, severance, consulting, or other compensation
agreement with any existing employee associated with the Optioned Outlets
Business (other than the SYN Severance Plan as defined in Section 5.9) or
amended or committed itself to amend any such agreement or similar
arrangement in existence on the date hereof; (C) committed itself to any
pension, profit-sharing, deferred
- 34 -
<PAGE>
compensation, group insurance, severance pay, retirement or other employee
benefit plan, fund or similar arrangement covering employees associated
with the Optioned Outlets Business or amended or committed itself to amend
any of such plans, funds or similar arrangements in existence on the date
hereof; or (D) entered into any collective bargaining agreement with
respect to employees associated with the Optioned Outlets Business;
(ii) Except for the sale of products and services and the purchase
of materials for resale or consumption or the replacement of worn, damaged
or obsolete equipment, in the ordinary course of business, neither Synergy
nor SYN, with respect to the Optioned Outlets Business, shall have (A)
sold, transferred or otherwise disposed of any Assets or (B) created or
permitted to exist any Lien (other than Permitted Liens) on any of the
Assets;
(iii) SYN and Synergy shall have maintained the Assets in regular
operating condition and repair, subject to normal wear and tear, and made
all necessary renewals, additions and replacements thereto consistent with
past practice;
(iv) Neither SYN nor Synergy shall have entered into any contract
or commitment or engaged in any transaction with respect to the Optioned
Outlets Business other than in the ordinary course of business;
(v) SYN and Synergy shall have maintained in effect adequate
insurance with respect to the Assets;
(vi) SYN and Synergy shall have used reasonable efforts to preserve
for Buyer the present relationships with suppliers and customers and
others having business relations with the Optioned Outlets Business;
(vii) Neither SYN nor Synergy shall have sold, assigned, transferred
or licensed any patent, trademark, trade name, trade secret, license,
customer list, brand name or pending application for any patent or
trademark, or any technical information or other proprietary information
used in the operation of the Optioned Outlets Business in a transaction
that prevents SYN from granting Buyer the Intellectual Property License at
Closing;
(viii)Neither SYN nor Synergy shall have done any act or omitted to
do any act, or permitted any act or omission to act, if within its
reasonable control, which caused or will cause a material breach of any of
the contracts, commitments or obligations of the Optioned Outlets
Business;
- 35 -
<PAGE>
(ix) SYN and Synergy shall have substantially complied with all
laws, regulations and orders applicable to the Optioned Outlets Business
or the Assets or as may be required for the valid and effective transfer
of the Assets;
(x) SYN and Synergy shall have maintained the Transferred Records
of the Optioned Outlets Business in the usual, regular and ordinary manner
on a basis consistent with prior years; and
(xi) Neither SYN nor Synergy shall have agreed to take any action
prohibited by this Section 6.2(i).
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written agreement of each SYN and Buyer;
(b) at any time after September 30, 1995 by any party hereto, if the
Closing shall not have been consummated on or prior to such date (unless the
failure to consummate the Closing by such date shall be due to a breach of the
Agreement by the party seeking termination); or
(c) at any time, upon SYN giving written notice to Buyer that the
Synergy Purchase Agreement has been terminated.
SECTION 7.2. PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to Sections 7.1(b) or (c) hereof, written notice
thereof shall forthwith be given by the party so terminating to the other
party and this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned, without further action by SYN or Buyer. If this
Agreement is terminated pursuant to Section 7.1 hereof:
(a) each party shall redeliver all documents, work papers and other
materials of the other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) all filings, applications and other submissions made pursuant to
Sections 5.4 and 5.5 hereof shall, to the extent practicable, be withdrawn from
the agency or other person to which made; and
- 36 -
<PAGE>
(c) there shall be no liability or obligation hereunder on the part of
SYN or Buyer or any of their respective directors, officers, employees,
affiliates, agents or representatives, except that SYN and Buyer, as the case
may be, may have liability to the other if the basis of termination is a
willful, material breach by SYN or Buyer, as the case may be, of one or more of
the provisions of this Agreement, and except that the obligations provided for
in this Section 7.2 and 9.1 hereof shall survive any such termination.
SECTION 7.3. AMENDMENT, MODIFICATION AND WAIVER. This Agreement may
be amended, modified or supplemented at any time by written agreement
executed by SYN and Buyer. Any failure of SYN, on the one hand, or Buyer, on
the other hand to comply with any term or provision of this Agreement may be
waived by the other party at any time by an instrument in writing signed by
or on behalf of such other party, but such waiver or failure to insist upon
strict compliance with such term or provision shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure to comply.
ARTICLE 8
SURVIVAL; INDEMNIFICATION
SECTION 8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in this Agreement shall survive the
Closing Date for a period ending on the earlier of (a) the date the audit
report relating to the March 31, 1996 audit of the consolidated financial
statements of SYN and its subsidiaries has been signed by SYN's accountants
and delivered to SYN and (b) June 30, 1996; provided, however, that the
representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.4,
3.5(a), 4.1, 4.2, 4.3, 4.4 and 4.6(a) hereof shall survive the Closing Date
indefinitely, and the representations and warranties contained in Section
3.6(b) and 4.7(b) shall survive for 180 days after the Closing Date.
Following the Closing Date, neither the period of survival nor the liability
of SYN or Buyer with respect to their respective representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the other party. If written notice of a claim has been given prior
to the expiration of the applicable representations and warranties, then the
relevant representations and warranties shall survive as to such claim until
such claim has been finally resolved.
SECTION 8.2. INDEMNIFICATION BY SYN. Subject to the limitations set
forth in this Article 8, SYN shall indemnify Buyer and its affiliates,
officers, directors, employees, agents, successors and assigns for, and shall
defend and hold them harmless from, against and with respect to all loss,
liability, damage (including exemplary damages) and expense (including,
without limitation, reasonable attorneys' fees and costs and expenses
reasonably incurred in investigating any claim, but excluding those losses,
liabilities, damages or expenses covered by insurance) (collectively,
"Damages") that result from any breach of or noncompliance with any of SYN's
representations, warranties, covenants or agreements contained in this
Agreement, including the certificate referred to in Section 6.2(c) hereof;
provided, however, that SYN's
- 37 -
<PAGE>
liability for amounts otherwise indemnifiable for a breach of its
representations and warranties under this Agreement shall be limited as follows:
(a) To the extent that Buyer suffers Damages that result solely from a
breach of the representations, warranties and covenants of the Sellers under the
Synergy Purchase Agreement that are passed through to Buyer under Section 3.10
of this Agreement and are not attributable to breach of any representation,
warranty or covenant of SYN under this Agreement ("Pass-Through Damages"), Buyer
shall so notify SYN in writing and, provided SYN timely asserts and diligently
prosecutes to a conclusion a claim for indemnity under the Synergy Purchase
Agreement on Buyer's behalf but in SYN's own name with respect to such
Pass-Through Damages, then SYN shall have no personal liability to Buyer with
respect to such Pass-Through Damages. Instead, Buyer shall be entitled to share
on a pro rata basis (based upon the ratio of (i) its Pass-Through Damages in
excess of $175,000.00 (except to the extent disallowed by the trier of fact in
any proceeding seeking to enforce such indemnity claim) to (ii) all damages
suffered by SYN and Buyer in excess of $700,000.00 (except to the extent
disallowed by such trier of fact) as a result of a breach of Sellers'
representations, warranties and covenants under the Synergy Purchase Agreement)
in all amounts recovered (net of the costs of recovery, including reasonable
attorney's fees and expenses) under the indemnity provisions of the Synergy
Purchase Agreement; provided, however, that Buyer shall not be entitled to any
recovery under this Section 8.2(a) for the first $175,000.00 of Pass-Through
Damages and that Buyer's recovery under this Section 8.2(a) shall not exceed 25%
of SYN's maximum recovery under Article X of the Synergy Agreement. Attorney's
fees and other expenses incurrred by SYN in asserting claims against the Sellers
for breach of representations, warranties and covenants under the Synergy
Purchase Agreement shall be shared between Buyer and SYN pro rata based upon (x)
Buyer's Pass-Through Damages in excess of $175,000 that are asserted by SYN as a
claim against Sellers and (y) all damages suffered by SYN in excess of $525,000
that are attributable to breach of any representation, warranty or covenant of
Sellers under the Synergy Purchase Agreement. In addition, Buyer shall have the
right to participate at its own expense in the prosecution of SYN's claim for
indemnity under the Synergy Purchase Agreement with respect to Buyer's
Pass-Through Damages, but SYN shall have sole control of the prosecution of such
claim so long as it is diligently prosecuting Buyer's claim in good faith.
(b) SYN shall have no obligation to indemnify Buyer against liabilities
arising after the Closing Date under contracts associated with the Optioned
Outlet Business that become binding upon Buyer by operation of law.
(c) SYN's liability for indemnity with respect to breach of all other
representations, warranties and covenants of SYN in this Agreement shall be
unlimited.
(d) Notwithstanding the foregoing, in the event that Buyer has been
partially compensated through a reduction of the Purchase Price with respect to
matters as to which it is entitled to indemnity under this
- 38 -
<PAGE>
Section 8.2, Buyer shall be entitled to recover under this Section 8.2 only
the excess of its claim for indemnity over the amount of such partial
compensation.
SECTION 8.3. INDEMNIFICATION BY BUYER.
(a) Subject to the limitations set forth in this Article 8, Buyer shall
indemnify SYN and its affiliates, officers, directors, employees, agents,
successors and assigns for, and shall defend and hold them harmless from,
against and with respect to all Damages that result from any breach of or
noncompliance with any of Buyer's representations, warranties, covenants or
agreements contained in this Agreement, including the certificate referred to in
Section 6.1(c) hereof.
(b) Buyer shall have no obligation to indemnify SYN under Sections 4.6
and 4.7 hereof for breach of any representation, warranty or covenant with
respect to the Exchanged Outlet Assets except to the extent that the value of
all such Exchanged Outlet Assets, as determined by BKD, is less than the
Adjusted Exchanged Outlet Value under Section 1.2(a)(iii) hereof.
(c) Buyer shall have no obligation to indemnify SYN against liabilities
arising after the Closing Date under contracts associated with the Exchanged
Outlet Business that become binding upon SYN by operation of law.
(d) Notwithstanding the foregoing, in the event that SYN has been
partially compensated through an increase of the Purchase Price with respect to
matters as to which it is entitled to indemnity under this Section 8.3, SYN
shall be entitled to recover under this Section 8.3 only the excess of its claim
for indemnity over the amount of such partial compensation.
SECTION 8.4. GENERAL PROCEDURES.
(a) Notice. A party that may be entitled to indemnification under this
Article 8 (an "Indemnified Person") shall give written notice to the other party
(the "Indemnifying Person") of the assertion of any claim, or the commencement
or any suit, action of proceeding, which such party discovers or of which it
receives notice which might give rise to a claim under this Article 8 ("Claim").
Such notice shall specify (i) that a Claim is being made; (ii) the section or
sections of this Agreement under which such Claim is made and why a Claim
exists; and (iii) in reasonable detail, to the extent known, each individual
item of Damages, including all items which in the aggregate comprise the
deductible and all items which offset any Claim.
(b) Third Party Claims. The obligations and liabilities of the
Indemnifying Person under this Article 8 with respect to Damages arising from
Claims of any third party which are subject to the indemnification provided
for in this Article 8 ("Third Party Claims") shall be
- 39 -
<PAGE>
governed by and contingent upon the following additional terms and
conditions: if an Indemnified Person shall receive notice of any Third Party
Claim, the Indemnified Person shall give the Indemnifying Person notice of
such Third Party Claim within thirty (30) days of the receipt by the
Indemnified Person of such notice; provided, however, that the failure to
provide such notice shall not release the Indemnifying Person from any of its
obligations under this Article 8 except to the extent the Indemnifying Person
is prejudiced by such failure and shall not relieve the Indemnifying Person
from any other obligation or liability that it may have to any Indemnified
Person other than under this Article 8. The Indemnifying Person shall be
entitled to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice if it gives notice of its intention
to do so to the Indemnified Person within five (5) days of the receipt of
such notice from the Indemnified Person; provided, however, that if there
exists, under applicable standards of professional conduct, a conflict
between the positions of such parties on any significant issue that would
make it inappropriate in the judgment of the Indemnified Person, in its sole
discretion, for the same counsel to represent both the Indemnified Person and
the Indemnifying Person, then the Indemnified Person shall be entitled to
retain its own counsel at the Indemnifying Person's sole expense. In the
event the Indemnifying Person exercises the right to undertake any such
defense against any such Third Party Claim as provided above, the Indemnified
person shall cooperate with the Indemnifying Person in such defense and make
available to the Indemnifying Person, at the Indemnifying Person's expense,
all witnesses, pertinent records, materials and information in the
Indemnified Person's possession or under the Indemnified Person's control
relating thereto as is reasonably required by the Indemnifying Person.
Similarly, in the event the Indemnified Person is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnifying
Person shall cooperate with the Indemnified Person in such defense and make
available to the Indemnified Person, at the Indemnified Person's expense, all
such witnesses, records, materials and information in the Indemnifying
Person's possession or under the Indemnifying Person's control relating
thereto as is reasonably required by the Indemnified Person. No such Third
Party Claim may be settled by the Indemnifying Person without the prior
written consent of the Indemnified Person (which consent shall not be
unreasonably withheld if the Indemnified Person would be not unduly
prejudiced); except that a Third Party Claim which does not involve
allegations of criminal or fraudulent conduct by the Indemnified Person and
seeks only nonexemplary damages against the Indemnified Person may be settled
by the Indemnifying Person if such settlement involves a complete release of
the Indemnified Person from liability.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. FEES AND EXPENSES. If the transactions contemplated by
this Agreement are not consummated, Buyer and SYN shall pay their own fees
and expenses incurred by them in connection with, or in anticipation of, this
Agreement and the consummation of the transactions contemplated hereby;
provided, however, that if the Closing
- 40 -
<PAGE>
occurs in escrow but the transaction is not consummated, Buyer shall be
entitled to reimbursement of all fees, charges and expenses it incurred in
placing the Cash Component and the Buyer Documents in escrow.
SECTION 9.2. FURTHER ASSURANCES. From time to time after the Closing
Date, at the request of SYN or Buyer, and at the expense of the party so
requesting, SYN or Buyer, as the case may be, shall execute and deliver to
such requesting party such documents and take such other action as such
requesting party may reasonably request in order to consummate more
effectively the transactions contemplated hereby.
SECTION 9.3. NOTICES. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered
personally or by facsimile transmission or mailed (certified or registered
mail, postage prepaid, return receipt requested):
(a) If to SYN, to
SYN Inc.
c/o Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Attention: Merle Lewis, Chairman
with copies to:
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606
Attention: James M. Van Vliet, Jr., Esq.
and
Empire Gas Corporation
P.O. Box 303
1700 South Jefferson
Lebanon, Missouri 65536
Attention: Paul S. Lindsey
and
Guilfoil Petzall & Shoemake
Suite 2000
- 41 -
<PAGE>
100 North Broadway
St. Louis, Missouri 63102
Attention: Jim J. Shoemake, Esq.
(b) If to Buyer, to
Empire Energy Corporation
1700 South Jefferson
Lebanon, Missouri 65536
Attention: Robert W. Plaster
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037-1420
Attention: Richard W. Cass
or to such other person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date on which so
hand-delivered, upon transmission of the facsimile transmission by the sender
and issuance by the transmitting machine of a confirmation slip confirming that
the number of pages constituting the notice have been transmitted without error,
or on the third business day following the date on which so mailed, except for a
notice of change of address, which shall be effective only upon receipt thereof.
In the case of a notice sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to the addressee at the address
provided for above. However, such mailing shall in no way alter the time at
which the facsimile notice is deemed received.
SECTION 9.4. ENTIRE AGREEMENT. This Agreement and the exhibits
hereto, the Schedules, and other documents and certificates to be delivered
pursuant hereto which form a part hereof contain the entire understanding of
the parties hereto with respect to their subject matter and supersedes all
prior agreements and understandings, oral and written, with respect to their
subject matter.
SECTION 9.5. SEVERABILITY. Should any provision of this Agreement for
any reason be declared invalid or unenforceable, such decision shall not
affect the validity or enforceability of any of the other provisions of this
Agreement, which remaining provisions shall remain in full force and effect
and the application of such invalid or unenforceable provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall be valid and be enforce to the fullest extent permitted
by law.
- 42 -
<PAGE>
SECTION 9.6. BINDING EFFECT; ASSIGNMENT. This Agreement and all of
the provisions hereof shall be binding upon and shall insure to the benefit
of SYN and Buyer and their respective successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, directly or indirectly, by either SYN or Buyer
without the prior written consent of the other party; except that it is
understood and agreed between the parties that Buyer may assign to one or
more of its existing or to be formed subsidiaries all or part of Buyer's
rights to purchase assets under this Agreement, but such assignment shall not
relieve Buyer of any of its obligations under this Agreement.
SECTION 9.7. NO THIRD PARTY BENEFICIARIES. This Agreement is solely
for the benefit of SYN and its successors and permitted assigns, with respect
to the obligations of Buyer under this Agreement, and for the benefit of
Buyer and its successors and permitted assigns, with respect to the
obligations of SYN under this Agreement, and, except as provided in Sections
8.2 and 8.3 hereof, this Agreement shall not be deemed to confer upon or give
to any other third party any remedy, claim, liability, reimbursement, cause
of action or other right.
SECTION 9.8. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but both of which
collectively shall constitute one and the same instrument.
SECTION 9.9. INTERPRETATION.
(a) The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.
(b) As used in this Agreement, the term "person" shall mean and include
an individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(c) As used in this Agreement, the term "wire transfer" shall mean the
wire transfer of U.S. dollars in immediately available funds.
(d) As used in this Agreement, the term "affiliate" shall have the
meaning set forth in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
SECTION 9.10. ARBITRATION. Any dispute arising under this Agreement
shall be resolved by arbitration. The parties hereto agree to observe and be
bound by the procedures of the American Arbitration Association ("AAA") and
to submit all such disputes to the office of the AAA in the State of Missouri.
- 43 -
<PAGE>
SECTION 9.11. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Missouri (regardless of the laws that might otherwise
govern under applicable principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
EMPIRE ENERGY CORPORATION
By: /s/Stephen R. Plaster
________________________________________
Stephen R. Plaster
President
SYN, INC.
By: ________________________________________
By:
Title:
- 44 -
<PAGE>
SECTION 9.11. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Missouri (regardless of the laws that might otherwise
govern under applicable principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
EMPIRE ENERGY CORPORATION
By: ________________________________________
Stephen R. Plaster
President
SYN, INC.
By: /s/Paul S. Lindsey
________________________________________
By:
Title:
- 45 -
