<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 21, 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, on May 17, 1995, a subsidiary of registrant entered
into an agreement to acquire Synergy Group Incorporated ("Synergy"). A copy of
that agreement is filed as exhibit 2 to this report.
Synergy is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Securities and Exchange Commission ("Commission").
Information concerning Synergy, its business, assets and financial statements,
may be obtained from such filings which are available for inspection and copying
at the public reference facilities of the Commission at Room 1024, 450 Fifth
Street N.W., Washington, D.C. 20549, and at the Commission's Regional offices at
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661, and at Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
Under the terms of the agreement, the acquisition is subject to various
conditions and approvals, including the accuracy of various representations and
warranties made by the sellers as to the business, assets, financial condition
and results of operations of Synergy and its subsidiaries, the obtaining of
financing needed by registrant's subsidiary for the acquisition, the issuance of
orders by the Federal Energy Regulatory Commission authorizing the registrant's
issuance of the securities to provide for such financing, and the expiration or
termination of the waiting period for the acquisition under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976.
The acquisition is to be made in association with Empire Gas Corporation
("Empire Gas"), a large propane distribution company headquartered in Lebanon,
Missouri, which has a management experienced in the retail propane distribution
business. Agreements have been entered into with Empire Gas (copies of which
are filed as exhibits 99.1 and 99.2 to this report)
2
<PAGE>
pursuant to which Empire Gas is to have an equity interest in the acquisition
and is engaged to perform the planning and management of the assets and business
operations to be acquired, subject to the direction of the Board of Directors of
the acquiring subsidiary of registrant.
The acquiring subsidiary of registrant (with its immediate parent
corporation, Northwestern Growth Corporation, a wholly-owned subsidiary of
registrant) has granted to an unrelated third party an option to purchase
certain of the retail distribution outlets to be acquired from Synergy. Under
the option, the purchase price is payable in cash and will be based on the price
paid to Synergy for such outlets. Such cash price currently is estimated to be
approximately $40 million which would decrease the cash payment to be made for
the Synergy acquisition to approximately $100 million.
Pro forma financial information for registrant, giving effect to the
acquisition, with and without the exercise of the third party purchase option,
is filed with this report.
3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
---------
(b) PRO FORMA FINANCIAL INFORMATION.
Set forth below are summary financial data extracted from the audited
consolidated statement of operations of the Company for the year ended December
31, 1994, the unaudited consolidated financial statements of the Company as of
March 31, 1995, and for the three months then ended; the summary financial data
extracted from the unaudited statement of operations of Synergy for the 12
months ended December 31, 1994 and for the three months ended March 31, 1995,
and balance sheet information as of March 31, 1995; and the pro forma financial
information for the Company ("the Pro Forma Financial Information") for the
year ended December 31, 1994, for the three months ended March 31, 1995, and as
of March 31, 1995, based on such historical financial statements, to illustrate
the effects of the Acquisition. The Pro Forma Financial Information illustrates
the effects of the Acquisition as adjusted to give effect to the sale of a
certain part of the Synergy business and assets to an unrelated third party
pursuant to its option to acquire such businesses and assets and without
adjustments, assuming such sale will not occur. See Item 5 herein.
The Acquisition will be accounted for using the purchase method of
accounting. After the Acquisition, the total purchase price of the Acquisition
will be allocated to Synergy's tangible and intangible assets and liabilities
based upon their respective fair values. The allocation of the aggregate
purchase price included in the Pro Forma Financial Information is preliminary,
but the final allocation of the purchase price is not expected to differ
materially from the preliminary allocation. The financing plan to be executed
for the funding of the Acquisition is expected to be as presented in the Pro
Forma Financial Information. Although market conditions may impact certain
financing options and assumptions as to interest and dividend rates, the overall
financing plan is not expected to vary materially from that presented.
The pro forma statements of operations for the year ended December 31, 1994
and for the three months ended March 31, 1995, give effect to the Acquisition,
and the related transactions as if they had occurred on January 1, 1994. The pro
forma balance sheet as of March 31, 1995 has been prepared as if the transaction
had occurred on that date. The pro forma financial information does not purport
to present the financial position or results of operations of the Company had
the Acquisition actually been completed as of the dates indicated. In addition,
the pro forma financial information is not necessarily indicative of future
results of operations and should be read in conjunction with the historical
consolidated financial statements of the Company and Synergy which are reported
and filed with the Securities and Exchange Commission.
The following pro forma information assumes that the above-mentioned sale
to an unrelated third party will be made as to a certain part of the Synergy
business and assets.
4
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(Dollars In Thousands)
<TABLE>
<CAPTION>
Estimated
Effects of
Partial Sale
of Assets to
NPS Synergy Unrelated Pro Forma
Historical Historical Third Part(A Subtotal Adjustments Pro Forma
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE $157,266 $128,182 ($28,814) $256,634 - $256,634
COST OF PRODUCT SOLD 80,457 62,242 (14,748) 127,951 - 127,951
---------- ---------- ---------- ---------- ---------- ----------
GROSS PROFIT 76,809 65,940 (14,066) 128,683 - 128,683
---------- ---------- ---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Operating and maintenance expenses 18,191 44,663 (10,046) 52,808 (4,181)(B 48,627
General and administrative 9,707 14,239 - 23,946 (4,944)(B 19,002
Depreciation and amortization 12,439 4,983 (905) 16,517 448 (C 16,965
Property and other taxes 6,104 - - 6,104 - 6,104
---------- ---------- ---------- ---------- ---------- ----------
46,441 63,885 (10,951) 99,375 (8,677) 90,698
---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME 30,368 2,055 (3,115) 29,308 8,677 37,985
---------- ---------- ---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Investment income and other 2,611 1,185 - 3,796 - 3,796
Interest expense (9,670) (11,994) - (21,664) 7,504 (D (14,160)
Debt restructuring costs - (2,976)(G - (2,976) - (2,976)
---------- ---------- ---------- ---------- ---------- ----------
(7,059) (13,785) - (20,844) 7,504 (13,340)
---------- ---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 23,309 (11,730) (3,115) 8,464 16,181 24,645
PROVISION (CREDIT) FOR INCOME TAXES 7,869 (324) (94) 7,451 (269)(E 7,182
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME 15,440 (11,406) (3,021) 1,013 16,450 17,463
DIVIDENDS ON PREFERRED STOCK (120) - - (120) (2,043)(F (2,163)
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME AVAILABLE FOR COMMON $15,320 ($11,406) ($3,021) $893 $14,407 $15,300 (G
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME PER SHARE $2.00 $1.75 (G
---------- ----------
---------- ----------
WEIGHTED AVERAGE SHARES OUTSTANDING 7,677 8,763
---------- ----------
---------- ----------
SELECTED FINANCIAL RATIOS
Interest coverage 5.14 (H 4.65
---------- ----------
---------- ----------
Ratio of earnings to fixed charges 3.39 (H 2.73 (G
---------- ----------
---------- ----------
Ratio of earnings to fixed charges,
including preferred dividends 3.33 (H 2.25 (G
---------- ----------
---------- ----------
</TABLE>
5
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995
(Dollars In Thousands)
<TABLE>
<CAPTION>
Estimated
Effects of
Partial Sale
of Assets to
NPS Synergy Unrelated Pro Forma
Historical Historical Third Party (A Subtotal Adjustments Pro Forma
---------- ---------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE $50,754 $43,233 ($10,958) $83,029 - $83,029
COST OF PRODUCT SOLD 26,185 20,939 (6,001) 41,123 - 41,123
---------- ---------- -------------- ---------- ---------- ----------
GROSS PROFIT 24,569 22,294 (4,957) 41,906 - 41,906
---------- ---------- -------------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Operating and maintenance expenses 4,210 13,102 (2,819) 14,493 (1,071)(B 13,422
General and administrative 2,594 (627)(G - 1,967 (698)(B 1,269
Depreciation and amortization 3,210 1,278 (220) 4,268 72 (C 4,340
Property and other taxes 1,673 - - 1,673 - 1,673
---------- ---------- -------------- ---------- ---------- ----------
11,687 13,753 (3,039) 22,401 (1,697) 20,704
---------- ---------- -------------- ---------- ---------- ----------
OPERATING INCOME 12,882 8,541 (1,918) 19,505 1,697 21,202
---------- ---------- -------------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Investment income and other 565 129 - 694 - 694
Interest expense (2,590) (2,389) - (4,979) 1,267 (D (3,712)
Debt restructuring costs - (75) - (75) - (75)
---------- ---------- -------------- ---------- ---------- ----------
(2,025) (2,335) - (4,360) 1,267 (3,093)
---------- ---------- -------------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 10,857 6,206 (1,918) 15,145 2,964 18,109
PROVISION (CREDIT) FOR INCOME TAXES 3,754 46 - 3,800 203 (E 4,003
---------- ---------- -------------- ---------- ---------- ----------
NET INCOME 7,103 6,160 (1,918) 11,345 2,761 14,106
DIVIDENDS ON PREFERRED STOCK (30) - - (30) (511)(F (541)
---------- ---------- -------------- ---------- ---------- ----------
NET INCOME AVAILABLE FOR COMMON $7,073 $6,160 ($1,918) $11,315 $2,250 $13,565 (G
---------- ---------- -------------- ---------- ---------- ----------
---------- ---------- -------------- ---------- ---------- ----------
NET INCOME PER SHARE $0.92 $1.55 (G
---------- ----------
---------- ----------
WEIGHTED AVERAGE SHARES OUTSTANDING 7,677 8,763
---------- ----------
---------- ----------
SELECTED FINANCIAL RATIOS
Interest coverage 7.53 (H 6.94
---------- ----------
---------- ----------
Ratio of earnings to fixed charges 5.09 (H 5.80 (G
---------- ----------
---------- ----------
Ratio of earnings to fixed charges,
including preferred dividends 5.00 (H 4.90 (G
---------- ----------
---------- ----------
<FN>
Note: The results of operations for Synergy for the three months ended March 31, 1995 are not indicative of a full year's results
of operations.
</TABLE>
6
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1995
(Dollars In Thousands)
<TABLE>
<CAPTION>
Estimated
Sale of Certain
Assets to
NPS Synergy Unrelated Pro Forma
Historical Historical Third Party (I Subtotal Adjustments Pro Forma
---------- ---------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $3,338 $4,123 $40,000 $47,461 ($40,000)(J $7,461
Trade receivables 13,890 17,550 (4,598) 26,842 (958)(K 25,884
Inventories 13,332 10,663 (2,393) 21,602 (1,500)(K 20,102
Prepaid expenses - 1,125 - 1,125 - 1,125
Other 5,765 - - 5,765 - 5,765
---------- ---------- -------------- ---------- ---------- ----------
36,325 33,461 33,009 102,795 (42,458) 60,337
---------- ---------- -------------- ---------- ---------- ----------
PROPERTY AND EQUIPMENT
At cost, net of accumulated depreciation 252,806 70,242 (13,685) 309,363 6,943 (K 316,306
---------- ---------- -------------- ---------- ---------- ----------
OTHER ASSETS (net)
Goodwill and other intangibles - 2,348 (19,324) (16,976) 54,800 (K 37,824
Other 74,301 982 - 75,283 (982)(K 74,301
---------- ---------- -------------- ---------- ---------- ----------
74,301 3,330 (19,324) 58,307 53,818 112,125
---------- ---------- -------------- ---------- ---------- ----------
Total Assets $363,432 $107,033 - $470,465 $18,303 $488,768
---------- ---------- -------------- ---------- ---------- ----------
---------- ---------- -------------- ---------- ---------- ----------
CURRENT LIABILITIES
Commercial paper $6,000 - - $6,000 - $6,000
Current maturities of long-term debt 570 233 - 803 (233)(L 570
Accounts payable and accrued expenses 29,699 11,859 - 41,558 5,455 (K 47,013
---------- ---------- -------------- ---------- ---------- ----------
36,269 12,092 - 48,361 5,222 53,583
---------- ---------- -------------- ---------- ---------- ----------
OTHER LIABILITIES
Deferred income taxes 37,742 2,374 - 40,116 (2,001)(L 38,115
Unamortized investment tax credits 10,444 - - 10,444 - 10,444
Deferred interest payable - 1,029 - 1,029 (1,029)(L -
Other 27,862 949 - 28,811 - 28,811
---------- ---------- -------------- ---------- ---------- ----------
76,048 4,352 - 80,400 (3,030) 77,370
---------- ---------- -------------- ---------- ---------- ----------
LONG TERM DEBT 129,318 92,484 - 221,802 (40,780)(M 181,022
---------- ---------- -------------- ---------- ---------- ----------
TRUST PREFERRED CAPITAL SECURITIES - - - - 24,212 (N 24,212
---------- ---------- -------------- ---------- ---------- ----------
CUMULATIVE PREFERRED STOCK 2,640 41,700 - 44,340 (41,700)(Q 2,640
---------- ---------- -------------- ---------- ---------- ----------
COMMON STOCK EQUITY (DEFICIT)
Common stock 26,870 41 - 26,911 4,107 (O 31,018
Additional paid-in capital 29,923 5,284 - 35,207 21,352 (P 56,559
Retained earnings 59,183 (48,920) - 10,263 48,920 (Q 59,183
Unrealized gain on investments, net 3,181 - - 3,181 - 3,181
---------- ---------- -------------- ---------- ---------- ----------
119,157 (43,595) - 75,562 74,379 149,941
---------- ---------- -------------- ---------- ---------- ----------
Total Liabilities & Stockholders Equity $363,432 $107,033 - $470,465 $18,303 $488,768
---------- ---------- -------------- ---------- ---------- ----------
---------- ---------- -------------- ---------- ---------- ----------
</TABLE>
7
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
A) Represents all relevant statement of operations effects, net of income taxes,
generated by the expected sale of certain Synergy properties to an unrelated
third party. Although an option to sell certain properties has been executed
and it is anticipated that such option will be exercised, in the event the
option is not closed, pro forma net income available for common would have
been $15,343,000 and $14,306,000; and pro forma net income per common share
would have been $1.74 and $1.62 for the year ended December 31, 1994 and for
the three months ended March 31, 1995, respectively. The following represents
the estimated impact on pro forma net income available for common as
presented if the sale does not occur (in thousands):
<TABLE>
<CAPTION>
Three
Year Months
Ended Ended
12/31/94 3/31/95
---------- -----------
Increase (Decrease)
<S> <C> <C>
Pro forma net income available for common
as presented $15,300 $13,565
---------- -----------
1) Operating income retained 3,115 1,918
2) Additional reductions in operating costs and expenses 610 153
3) Increased general and administrative charge (750) (188)
4) Increased interest expense (1,934) (483)
5) Increased income tax expense (180) (455)
6) Increased dividends on preferred stock (818) (204)
---------- -----------
Subtotal 43 741
---------- -----------
Pro forma net income available for common
without sale to third party $15,343 $14,306
---------- -----------
---------- -----------
</TABLE>
The following represents the estimated impact on the pro forma balance sheet
at March 31, 1995 as presented if the sale does not occur (in thousands):
<TABLE>
<CAPTION>
3/31/95
-----------
Increase
(Decrease)
<S> <C>
1) Trade receivables $4,598
2) Inventories 2,393
3) Property and equipment, net 13,685
4) Goodwill 19,324
-----------
Total Assets $40,000
-----------
-----------
1) Long-term debt $28,000
2) Common stock 2,000
3) Preferred stock 10,000
-----------
Total Liabilities & Equity $40,000
-----------
-----------
</TABLE>
8
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
B) Represents the following breakdown of reductions in operating costs and
expenses principally related to employee positions, corporate administrative
expenses and certain other specifically identified cost savings (in
thousands):
<TABLE>
<CAPTION>
Three
Year Months
Ended Ended
12/31/94 3/31/95
---------- -----------
Increase (Decrease)
<S> <C> <C>
Operating expenses -
1) Employee related expenses ($1,834) ($458)
2) Vehicle lease expenses (2,047) (538)
3) Store consolidations (300) (75)
---------- -----------
Total ($4,181) ($1,071)
---------- -----------
---------- -----------
General and administrative expenses -
1) Employee related expenses ($7,863) ($1,431)
2) Occupancy costs (643) (154)
3) Bank account charges (188) (50)
4) Empire Gas general and administrative charge 3,250 812
5) Empire Gas management fee 500 125
---------- -----------
Total ($4,944) ($698)
---------- -----------
---------- -----------
</TABLE>
All general and administrative functions previously performed at Synergy
headquarters would be undertaken by Empire Gas, Inc. under a management
agreement governing the operation of the Synergy properties. (See Item 5
herein.) Under the terms of the management agreement, Empire Gas will be
compensated through a general and administrative charge and a management
fee arrangement.
The vehicle lease expenses are primarily attributable to property owned by
affiliates of existing Synergy shareholders. Such property will be purchased
as a part of the acquisition transaction. In addition, general and
administrative expense savings include shareholder compensation.
C) Represents additional depreciation and amortization of fixed assets and
intangibles related to the adjustment of assets to fair market value in
accordance with the purchase method of accounting.
9
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
D) Represents interest expense savings associated with the retirement of
Synergy's debt as a result of the Acquisition net of additional interest
expense related to NPS issuing new debt securities.
The following table presents a reconciliation of the pro forma interest
expense to the historical interest expense for the year ended December 31,
1994, and the three months ended March 31,1995 (in thousands):
<TABLE>
<CAPTION>
Three
Year Months
Ended Ended
12/31/94 03/31/95
---------- -----------
<S> <C> <C>
Historical interest expense -
NPS $9,670 $2,590
Synergy 11,994 2,389
---------- -----------
21,664 4,979
---------- -----------
Add: Interest on short-term bridge financing at an
assumed rate of 7.5% 649 162
Interest on new debt securities issued for
permanent financing at an assumed rate of 7.5% 3,639 910
Less: Interest on retired long-term debt of Synergy (11,792) (2,339)
---------- -----------
Pro forma adjustment (7,504) (1,267)
---------- -----------
Pro forma interest expense $14,160 $3,712
---------- -----------
---------- -----------
</TABLE>
E) Represents income tax effect of all pro forma adjustments. Such adjustments
assume Synergy will be a separate income tax filing and reporting entity.
F) Represents preferred stock dividend requirements related to the issuance of
new securities as part of the permanent financing. This dividend requirement
is based on an 8.5% pretax rate.
10
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
G) The net income of Synergy for the year ended December 31, 1994 includes a
nonrecurring charge of $2,976,000 for debt restructuring costs. Had the debt
restructuring not occurred, pro forma net income available for common would
have been $18,276,000; pro forma net income per common share would have been
$2.09; ratio of earnings to fixed charges would have been 2.94x; and ratio of
fixed charges, including preferred dividends would have been 2.42x for the
year ended December 31, 1994.
The net income of Synergy for the three months ended March 31, 1995 includes
a nonrecurring credit to general and administrative expense of $4,326,000 for
the reversal of previously accrued shareholders' compensation. Had this
compensation adjustment not been reversed, pro forma net income available
for common would have been $9,239,000; pro forma net income per common share
would have been $1.05; ratio of earnings to fixed charges would have been
4.65x and ratio of earnings to fixed charges, including preferred dividends
would have been 3.93x for the three months ended March 31, 1995.
In accordance with the current guidelines of the SEC, no minority interest
has been recognized even though NPS will initially own 72.5% of the common
stock of SYN.
H) The Company has calculated the interest coverage ratio pursuant to the
Company's general mortgage indenture and has calculated the ratio of
earnings to fixed charges pursuant to Item 503 of the Commission's Regulation
S-K.
I) Represents the sale of certain assets to an unrelated third party in a
separate transaction.
J) Represents cash purchase price from the unrelated third party sale proceeds.
11
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
K) Represents various purchase accounting adjustments to be accounted for in
accordance with the purchase method of accounting.
The following is a detailed allocation of the purchase price and source of
funds, net of underwriting fees, related to the acquisition transaction (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Purchase price $140,000
Add: Debt, acquisition, and transition costs 5,000
-----------
Total 145,000
Less: Sale to an unrelated third party (40,000)
-----------
Adjusted purchase price $105,000
-----------
-----------
Allocation of purchase price -
Cash $4,123
Trade receivables 11,994
Inventories 6,770
Prepaid expenses and other 1,125
Property, plant, and equipment 63,500
Goodwill and other intangibles 37,824
Accounts payable and accrued expenses (17,314)
Customer deposits (949)
Deferred income tax (373)
Long-term debt (1,700)
-----------
Net assets acquired $105,000
-----------
-----------
Source of funds, net -
Long-term debt $50,004
Trust preferred capital securities 24,212
Common stock 30,784
-----------
Total $105,000
-----------
-----------
</TABLE>
L) Represents liabilities and other deferred credits that would be paid with
proceeds of the transaction.
12
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
M) Represents the following debt restructuring of the combined companies (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Historical long-term debt -
NPS $129,318
Synergy 92,484
-----------
Total 221,802
-----------
Add: New debt offering 50,004
Less: Retirement of Synergy long-term debt (90,784)
-----------
Pro forma adjustment (40,780)
-----------
Pro forma long-term debt $181,022
-----------
-----------
</TABLE>
N) Represents the net proceeds expected to be generated by a trust preferred
capital securities offering that is part of the permanent financing.
O) Represents the combination of purchase accounting adjustments eliminating
Synergy's common stock investment of $41,000 against the par value of shares
expected to be sold in a common stock offering that is part of the permanent
financing.
The following provides a summary of the net adjustment (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Par value of shares generated from NPS common stock offering $4,148
Less: elimination of Synergy common stock (41)
-----------
Net $4,107
-----------
-----------
</TABLE>
P) Represents the combination of purchase accounting adjustments eliminating
Synergy's additional paid-in capital of $5,284,000 against the net proceeds
expected to be allocated to NPS additional paid-in capital as a result of the
common stock offering that is part of the permanent financing.
The following provides a summary of the net adjustment (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net allocation to additonal paid-in capital from NPS common stock
offering $26,636
Less: elimination of Synergy additional paid-in capital (5,284)
-----------
Net $21,352
-----------
-----------
</TABLE>
Q) Represents the elimination of Synergy's remaining equity accounts.
13
<PAGE>
The following pro forma information assumes that the above-mentioned sale
to an unrelated third party will not be made as to a certain part of the
Synergy business and assets.
14
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(Dollars In Thousands)
<TABLE>
<CAPTION>
NPS Synergy Pro Forma
Historical Historical Subtotal Adjustments Pro Forma
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE $157,266 $128,182 $285,448 - $285,448
COST OF PRODUCT SOLD 80,457 62,242 142,699 - 142,699
---------- ---------- ---------- ---------- ----------
GROSS PROFIT 76,809 65,940 142,749 - 142,749
---------- ---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Operating and maintenance expenses 18,191 44,663 62,854 (4,791)(A 58,063
General and administrative 9,707 14,239 23,946 (4,194)(A 19,752
Depreciation and amortization 12,439 4,983 17,422 448 (B 17,870
Property and other taxes 6,104 6,104 - 6,104
---------- ---------- ---------- ---------- ----------
46,441 63,885 110,326 (8,537) 101,789
---------- ---------- ---------- ---------- ----------
OPERATING INCOME 30,368 2,055 32,423 8,537 40,960
---------- ---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Investment income and other 2,611 1,185 3,796 - 3,796
Interest expense (9,670) (11,994) (21,664) 5,570 (C (16,094)
Debt restructuring costs - (2,976)(F (2,976) - (2,976)
---------- ---------- ---------- ---------- ----------
(7,059) (13,785) (20,844) 5,570 (15,274)
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 23,309 (11,730) 11,579 14,107 25,686
PROVISION (CREDIT) FOR INCOME TAXES 7,869 (324) 7,545 (183)(D 7,362
---------- ---------- ---------- ---------- ----------
NET INCOME 15,440 (11,406) 4,034 14,290 18,324
DIVIDENDS ON PREFERRED STOCK (120) (120) (2,861)(E (2,981)
---------- ---------- ---------- ---------- ----------
NET INCOME AVAILABLE FOR COMMON $15,320 ($11,406) $3,914 $11,429 $15,343 (F
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
NET INCOME PER SHARE $2.00 $1.74 (F
---------- ----------
---------- ----------
WEIGHTED AVERAGE SHARES OUTSTANDING 7,677 8,831
---------- ----------
---------- ----------
SELECTED FINANCIAL RATIOS
Interest coverage 5.14 (G 4.24
---------- ----------
---------- ----------
Ratio of earnings to fixed charges 3.39 (G 2.59 (F
---------- ----------
---------- ----------
Ratio of earnings to fixed charges,
including preferred dividends 3.33 (G 2.05 (F
---------- ----------
---------- ----------
</TABLE>
15
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995
(Dollars In Thousands)
<TABLE>
<CAPTION>
NPS Synergy Pro Forma
Historical Historical Subtotal Adjustments Pro Forma
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE $50,754 $43,233 $93,987 - $93,987
COST OF PRODUCT SOLD 26,185 20,939 47,124 - 47,124
---------- ---------- ---------- ---------- ----------
GROSS PROFIT 24,569 22,294 46,863 - 46,863
---------- ---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Operating and maintenance expenses 4,210 13,102 17,312 (1,224)(A 16,088
General and administrative 2,594 (627)(F 1,967 (510)(A 1,457
Depreciation and amortization 3,210 1,278 4,488 72 (B 4,560
Property and other taxes 1,673 1,673 - 1,673
---------- ---------- ---------- ---------- ----------
11,687 13,753 25,440 (1,662) 23,778
---------- ---------- ---------- ---------- ----------
OPERATING INCOME 12,882 8,541 21,423 1,662 23,085
---------- ---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Investment income and other 565 129 694 - 694
Interest expense (2,590) (2,389) (4,979) 784 (C (4,195)
Debt restructuring costs - (75) (75) - (75)
---------- ---------- ---------- ---------- ----------
(2,025) (2,335) (4,360) 784 (3,576)
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 10,857 6,206 17,063 2,446 19,509
PROVISION (CREDIT) FOR INCOME TAXES 3,754 46 3,800 658 (D 4,458
---------- ---------- ---------- ---------- ----------
NET INCOME 7,103 6,160 13,263 1,788 15,051
DIVIDENDS ON PREFERRED STOCK (30) (30) (715)(E (745)
---------- ---------- ---------- ---------- ----------
NET INCOME AVAILABLE FOR COMMON $7,073 $6,160 $13,233 $1,073 $14,306 (F
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
NET INCOME PER SHARE $0.92 $1.62 (F
---------- ----------
---------- ----------
WEIGHTED AVERAGE SHARES OUTSTANDING 7,677 8,831
---------- ----------
---------- ----------
SELECTED FINANCIAL RATIOS
Interest coverage 7.53 (G 6.50
---------- ----------
---------- ----------
Ratio of earnings to fixed charges 5.09 (G 5.58 (F
---------- ----------
---------- ----------
Ratio of earnings to fixed charges,
including preferred dividends 5.00 (G 4.55 (F
---------- ----------
---------- ----------
<FN>
Note: The results of operations for Synergy for the three months ended March 31, 1995 are not indicative of a full year's results
of operations.
</TABLE>
16
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1995
(Dollars In Thousands)
<TABLE>
<CAPTION>
NPS Synergy Pro Forma
Historical Historical Subtotal Adjustments Pro Forma
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $3,338 $4,123 $7,461 - $7,461
Trade receivables 13,890 17,550 31,440 (958)(H 30,482
Inventories 13,332 10,663 23,995 (1,500)(H 22,495
Prepaid expenses - 1,125 1,125 - 1,125
Other 5,765 - 5,765 - 5,765
---------- ---------- ---------- ---------- ----------
36,325 33,461 69,786 (2,458) 67,328
---------- ---------- ---------- ---------- ----------
PROPERTY AND EQUIPMENT
At cost, net of accumulated depreciation 252,806 70,242 323,048 6,943 (H 329,991
---------- ---------- ---------- ---------- ----------
OTHER ASSETS (net)
Goodwill and other intangibles - 2,348 2,348 54,800 (H 57,148
Other 74,301 982 75,283 (982)(H 74,301
---------- ---------- ---------- ---------- ----------
74,301 3,330 77,631 53,818 131,449
---------- ---------- ---------- ---------- ----------
Total Assets $363,432 $107,033 $470,465 $58,303 $528,768
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
CURRENT LIABILITIES
Commercial paper $6,000 - $6,000 - $6,000
Current maturities of long-term debt 570 233 803 (233)(I 570
Accounts payable and accrued expenses 29,699 11,859 41,558 5,455 (H 47,013
---------- ---------- ---------- ---------- ----------
36,269 12,092 48,361 5,222 53,583
---------- ---------- ---------- ---------- ----------
OTHER LIABILITIES
Deferred income taxes 37,742 2,374 40,116 (2,001)(I 38,115
Unamortized investment tax credits 10,444 - 10,444 - 10,444
Deferred interest payable - 1,029 1,029 (1,029)(I -
Other 27,862 949 28,811 - 28,811
---------- ---------- ---------- ---------- ----------
76,048 4,352 80,400 (3,030) 77,370
---------- ---------- ---------- ---------- ----------
LONG TERM DEBT 129,318 92,484 221,802 (12,389)(J 209,413
---------- ---------- ---------- ---------- ----------
TRUST PREFERRED CAPITAL SECURITIES - - - 33,897 (K 33,897
---------- ---------- ---------- ---------- ----------
CUMULATIVE PREFERRED STOCK 2,640 41,700 44,340 (41,700)(N 2,640
---------- ---------- ---------- ---------- ----------
Common Stock EQUITY (DEFICIT)
Common stock 26,870 41 26,911 4,365 (L 31,276
Additional paid-in capital 29,923 5,284 35,207 23,018 (M 58,225
Retained earnings 59,183 (48,920) 10,263 48,920 (N 59,183
Unrealized gain on investments, net 3,181 - 3,181 - 3,181
---------- ---------- ---------- ---------- ----------
119,157 (43,595) 75,562 76,303 151,865
---------- ---------- ---------- ---------- ----------
Total Liabilities & Stockholders Equity $363,432 $107,033 $470,465 $58,303 $528,768
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
17
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
A) Represents the following breakdown of reductions in operating costs and
expenses principally related to employee positions, corporate administrative
expenses, and certain other specifically identified cost savings (in
thousands):
<TABLE>
<CAPTION>
Three
Year Months
Ended Ended
12/31/94 3/31/95
--------- ----------
<S> <C> <C>
Increase (Decrease)
Operating expenses -
1) Employee related expenses ($2,444) ($611)
2) Vehicle lease expenses (2,047) (538)
3) Store consolidations (300) (75)
--------- ----------
Total ($4,791) ($1,224)
--------- ----------
--------- ----------
General, and administrative expenses -
1) Employee related expenses ($7,863) ($1,431)
2) Occupancy costs (643) (154)
3) Bank account charges (188) (50)
4) Empire Gas general and administrative charge 4,000 1,000
5) Empire Gas management fee 500 125
--------- ----------
Total ($4,194) ($510)
--------- ----------
--------- ----------
</TABLE>
All general and administrative functions previously performed at Synergy
headquarters would be undertaken by Empire Gas, Inc. under a management
agreement governing the operation of the Synergy properties. (See Item 5
herein.) Under the terms of the management agreement, Empire Gas will be
compensated through a general and administrative charge and a management
fee arrangement.
The vehicle lease expenses are primarily attributable to property owned by
affiliates of existing Synergy shareholders. Such property will be purchased
as a part of the acquisition transaction. In addition, general and
administrative expense savings include shareholder compensation.
B) Represents additional depreciation and amortization of fixed assets and
intangibles related to the adjustment of assets to fair market value in
accordance with the purchase method of accounting.
18
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
C) Represents interest expense savings associated with the retirement of
Synergy's debt as a result of the Acquisition net of additional interest
expense related to NPS issuing new debt securities.
The following table presents a reconciliation of the pro forma interest
expense to the historical interest expense for the year ended December 31,
1994, and the three months ended March 31,1995 (in thousands):
<TABLE>
<CAPTION>
Three
Year Months
Ended Ended
12/31/94 3/31/95
--------- ----------
<S> <C> <C>
Historical interest expense -
NPS $9,670 $2,590
Synergy 11,994 2,389
--------- ----------
21,664 4,979
--------- ----------
Add: Interest on short-term bridge financing at an
assumed rate of 7.5% 517 129
Interest on new debt securities issued for permanent
financing at an assumed rate of 7.5% 5,705 1,426
Less: Interest on retired long-term debt of Synergy (11,792) (2,339)
--------- ----------
Pro forma adjustment (5,570) (784)
--------- ----------
Pro forma interest expense $16,094 $4,195
--------- ----------
--------- ----------
</TABLE>
D) Represents income tax effect of all pro forma adjustments. Such adjustments
assume Synergy will be a separate income tax filing and reporting entity.
E) Represents preferred stock dividend requirements related to the issuance of
new securities as part of the permanent financing. This dividend requirement
is based on an 8.5% pretax rate.
F) The net income of Synergy for the year ended December 31, 1994 includes a
nonrecurring charge of $2,976,000 for debt restructuring costs. Had the debt
restructuring not occurred, pro forma net income available for common would
have been $18,319,000; pro forma net income per common share would have been
$2.07; ratio of earnings to fixed charges would have been 2.77x; and ratio of
fixed charges, including preferred dividends would have been 2.20x for the
year ended December 31, 1994.
19
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
The net income of Synergy for the three months ended March 31, 1995 includes
a nonrecurring credit to general and administrative expense of $4,326,000 for
the reversal of previously accrued shareholders' compensation. Had this
compensation adjustment not been reversed, pro forma net income available
for common would have been $9,980,000; pro forma net income per common share
would have been $1.13; ratio of earnings to fixed charges would have been
4.56x; and ratio of earnings to fixed charges, including preferred dividends
would have been 3.72x for the three months ended March 31, 1995.
In accordance with the current guidelines of the SEC, no minority interest
has been recognized even though NPS will initially own 72.5% of the common
stock of SYN.
20
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
G) The Company has calculated the interest coverage ratio pursuant to the
Company's general mortgage indenture and has calculated the ratio of earnings
to fixed charges pursuant to Item 503 of the Commission's Regulation S-K.
H) Represents various purchase accounting adjustments to be accounted for in
accordance with the purchase method of accounting.
The following is a detailed allocation of the purchase price and source of
funds, net of underwriting fees, related to the acquisition transaction (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Purchase price $140,000
Add: Debt, acquisition, and transition costs 5,000
----------
Total $145,000
----------
----------
Allocation of purchase price -
Cash $4,123
Trade receivables 16,592
Inventories 9,163
Prepaid expenses and other 1,125
Property, plant, and equipment 77,185
Goodwill and other intangibles 57,148
Accounts payable and accrued expenses (17,314)
Customer deposits (949)
Deferred income tax (373)
Long-term debt (1,700)
----------
Net assets acquired $145,000
----------
----------
21
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
Source of funds, net -
Long-term debt $78,395
Trust preferred capital securities 33,897
Common stock 32,708
----------
Total $145,000
----------
----------
</TABLE>
I) Represents liabilities and other deferred credits that would be paid with
proceeds of the transaction.
J) Represents the following debt restructuring of the combined companies (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Historical long-term debt -
NPS $129,318
Synergy 92,484
----------
Total 221,802
----------
Add: New debt offering 78,395
Less: Retirement of Synergy long-term debt (90,784)
----------
Pro forma adjustment (12,389)
----------
Pro forma long-term debt $209,413
----------
----------
</TABLE>
K) Represents the net proceeds expected to be generated by a trust preferred
capital securities offering that is part of the permanent financing.
L) Represents the combination of purchase accounting adjustments eliminating
Synergy's common stock investment of $41,000 against the par value of shares
expected to be sold in a common stock offering that is part of the permanent
financing.
The following provides a summary of the net adjustment (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Par value of shares generated from NPS common stock offering $4,406
Less: elimination of Synergy common stock (41)
----------
Net $4,365
----------
----------
</TABLE>
22
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
M) Represents the combination of purchase accounting adjustments eliminating
Synergy's additional paid-in capital $5,284,000 against the net proceeds
expected to be allocated to NPS additional paid-in capital as a result of the
common stock offering that is part of the permanent financing.
The following provides a summary of the net adjustment (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net allocation to additional paid-in capital from NPS common stock
offering $28,302
Less: elimination of Synergy additional paid-in capital (5,284)
----------
Net $23,018
----------
----------
</TABLE>
N) Represents the elimination of Synergy's remaining equity accounts.
23
<PAGE>
(c) EXHIBITS. The following exhibits are filed with this report:
Exhibit 2. Purchase and Sale Agreement, dated as of May 17, 1995,
among Sherman C. Vogel, Stephen A. Vogel, Jeffrey K. Vogel, Jon M. Vogel,
Jeanette Vogel, Synergy Group Incorporated, S&J Investments, SYN Inc. and
Northwestern Growth Corporation, including exhibit B thereto, the form of
Agreement Among SYN Inc. and Its Stockholders.
Exhibit 99.1. Management Agreement dated May 17, 1995, among Empire
Gas Corporation, Northwestern Growth Corporation and SYN Inc.
Exhibit 99.2. Agreement Among Initial Stockholders and SYN Inc.,
dated May 17, 1995, among Empire Gas Corporation, Northwestern Growth
Corporation and SYN Inc.
24
<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 20, 1995
<PAGE>
- -----------------------------------------------------------------
- -----------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
BY AND AMONG
SHERMAN C. VOGEL,
STEPHEN A. VOGEL,
JEFFREY K. VOGEL,
JON M. VOGEL,
JEANETTE VOGEL,
SYNERGY GROUP INCORPORATED,
S&J INVESTMENTS,
SYN INC.,
AND
NORTHWESTERN GROWTH CORPORATION
DATED AS OF MAY 17, 1995
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
I. PURCHASE AND SALE OF ASSETS AND COMPANY STOCK
1.1 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . 4
1.2 PURCHASE AND SALE OF COMPANY STOCK . . . . . . . . 4
1.3 CONSIDERATION FOR THE ASSETS . . . . . . . . . . . 5
1.4 CONSIDERATION FOR THE S&J ASSETS . . . . . . . . . 5
1.5 CONSIDERATION FOR THE SERIES B SHARES . . . . . . . 5
1.6 CONSIDERATION FOR THE SHARES. . . . . . . . . . . . 6
1.7 DETERMINATION OF WORKING CAPITAL . . . . . . . . . 9
1.8 CONTRACT ESCROW FUNDS . . . . . . . . . . . . . . . 11
1.9 C&L MATTERS ESCROW FUNDS . . . . . . . . . . . . . 12
II. DIRECTIONS RELATING TO THE ASSET PURCHASE PRICE
AND RELATED MATTERS
2.1 THE ASSET PURCHASE PRICE . . . . . . . . . . . . . 13
2.2 ADDITIONAL SERIES A NOTES REDEMPTION AMOUNT . . . . 14
2.3 PURCHASE AND SALE OF SERIES B NOTES . . . . . . . . 14
2.4 ADDITIONAL CREDIT AGREEMENT AMOUNT . . . . . . . . 15
III. THE CLOSINGS
3.1 FIRST CLOSING . . . . . . . . . . . . . . . . . . . 15
3.2 SECOND CLOSING . . . . . . . . . . . . . . . . . . 16
3.3 DELIVERIES AT THE FIRST CLOSING. . . . . . . . . . 16
3.4 DELIVERIES BY BUYER AT THE SECOND CLOSING. . . . . 18
3.5 DELIVERIES BY THE STOCKHOLDERS AND S&J AT THE
SECOND CLOSING. . . . . . . . . . . . . . . . . . . 20
IV. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
4.1 ORGANIZATION AND QUALIFICATION OF THE COMPANY . . 22
4.2 AUTHORITY . . . . . . . . . . . . . . . . . . . . 23
4.3 CAPITALIZATION . . . . . . . . . . . . . . . . . . 25
4.4 CONSENTS AND APPROVALS; NO VIOLATION . . . . . . . 28
4.5 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . 29
4.6 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . 31
4.7 ABSENCE OF CERTAIN CHANGES . . . . . . . . . . . . 31
4.8 REAL PROPERTY. . . . . . . . . . . . . . . . . . 32
4.9 PERSONAL PROPERTY. . . . . . . . . . . . . . . . 34
4.10 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . 37
-i-
<PAGE>
Page
----
4.11 LABOR MATTERS . . . . . . . . . . . . . . . . . . 37
4.12 TAXES . . . . . . . . . . . . . . . . . . . . . . 39
4.13 EMPLOYEE BENEFIT PLANS; ERISA. . . . . . . . . . 40
4.14 CERTAIN CONTRACTS AND ARRANGEMENTS . . . . . . . . 44
4.15 COMPLIANCE WITH APPLICABLE LAW . . . . . . . . . . 45
4.16 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . 46
4.17 AGREEMENTS WITH AFFILIATES . . . . . . . . . . . . 49
4.18 SECURITIES AND EXCHANGE COMMISSION DOCUMENTS . . . 49
4.19 CERTAIN FEES . . . . . . . . . . . . . . . . . . . 50
4.20 INSURANCE . . . . . . . . . . . . . . . . . . . . 50
4.21 SAFETY WARNINGS . . . . . . . . . . . . . . . . . 50
4.22 ACQUISITION FOR INVESTMENT . . . . . . . . . . . . 51
4.23 DISCLOSURE . . . . . . . . . . . . . . . . . . . . 51
V. REPRESENTATIONS AND WARRANTIES OF BUYER AND NGC
5.1 ORGANIZATION AND AUTHORITY . . . . . . . . . . . . 52
5.2 CONSENTS AND APPROVALS; NO VIOLATION . . . . . . . 54
5.3 LITIGATION. . . . . . . . . . . . . . . . . . . 55
5.4 FINANCING . . . . . . . . . . . . . . . . . . . . 55
5.5 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . 56
5.6 ACQUISITION FOR INVESTMENT . . . . . . . . . . . . 56
5.7 BROKERS AND FINDERS . . . . . . . . . . . . . . . 57
5.8 CAPITALIZATION OF BUYER. . . . . . . . . . . . . . 57
5.9 DISCLOSURE . . . . . . . . . . . . . . . . . . . . 58
5.10 CONTRACTS, AGREEMENTS AND ARRANGEMENTS . . . . . . 59
5.11 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . 59
5.12 ASSETS AND LIABILITIES . . . . . . . . . . . . . . 60
5.13 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . 60
VI. COVENANTS OF THE PARTIES
6.1 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . 60
6.2 ACCESS TO INFORMATION . . . . . . . . . . . . . . 65
6.3 COMMERCIALLY REASONABLE EFFORTS . . . . . . . . . 66
6.4 REGULATORY APPROVALS . . . . . . . . . . . . . . . 66
6.5 CONSENTS . . . . . . . . . . . . . . . . . . . . . 67
6.6 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . 67
6.7 SUPPLEMENTAL DISCLOSURE . . . . . . . . . . . . . 68
6.8 BOOKS AND RECORDS . . . . . . . . . . . . . . . . 68
6.9 EMPLOYEES; EMPLOYEE BENEFITS . . . . . . . . . . . 69
6.10 CERTAIN TAX MATTERS . . . . . . . . . . . . . . . 70
6.11 CONFIDENTIALITY AGREEMENT . . . . . . . . . . . . 73
-ii-
<PAGE>
Page
----
6.12 THE SERIES A NOTES . . . . . . . . . . . . . . . . 74
6.13 FINANCING . . . . . . . . . . . . . . . . . . . . 75
6.14 RESIGNATIONS . . . . . . . . . . . . . . . . . . . 76
6.15 COVENANT NOT TO COMPETE . . . . . . . . . . . . . 76
6.16 STOCKHOLDERS' AGREEMENT . . . . . . . . . . . . . 77
6.17 CONTRACT ESCROW AGREEMENT . . . . . . . . . . . . 77
6.18 COMPANY AUDIT . . . . . . . . . . . . . . . . . . 77
6.19 SUBSIDIARY CORPORATE ACTION . . . . . . . . . . . 78
6.20 NGC GUARANTY . . . . . . . . . . . . . . . . . . . 78
6.21 OTHER DOCUMENTS OF BUYER . . . . . . . . . . . . . 79
6.22 TITLE EXAMINATION . . . . . . . . . . . . . . . . 79
6.23 SENIOR SUBORDINATED NOTES . . . . . . . . . . . . 79
6.24 CAPITALIZATION . . . . . . . . . . . . . . . . . . 80
6.25 TANK INVENTORY . . . . . . . . . . . . . . . . . . 80
6.26 C&L MATTERS ESCROW AGREEMENT . . . . . . . . . . . 83
6.27 THE PROMISSORY NOTE . . . . . . . . . . . . . . . 83
6.28 SECTION 351 OF THE CODE . . . . . . . . . . . . . 84
6.29 LEASE OF CERTAIN ASSETS . . . . . . . . . . . . . 84
VII. CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND S&J
AT THE FIRST CLOSING . . . . . . . . . . . . . . . 85
7.2 CONDITIONS TO OBLIGATIONS OF BUYER AT THE FIRST
CLOSING. . . . . . . . . . . . . . . . . . . . . . 88
7.3 CONDITIONS TO OBLIGATIONS AT THE SECOND CLOSING. . 91
VIII. TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION . . . . . . . . . . . . . . . . . . . . 92
8.2 PROCEDURE AND EFFECT OF TERMINATION . . . . . . . . 93
8.3 AMENDMENT, MODIFICATION AND WAIVER . . . . . . . . 94
IX. SURVIVAL; INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . 95
9.2 INDEMNIFICATION BY THE STOCKHOLDERS . . . . . . . . 96
9.3 INDEMNIFICATION BY BUYER . . . . . . . . . . . . . 99
9.4 GENERAL PROCEDURES . . . . . . . . . . . . . . . . 99
9.5 STOCKHOLDERS' AGENT . . . . . . . . . . . . . . . . 103
9.6 INDEMNIFICATION OBLIGATIONS. . . . . . . . . . . . 104
-iii-
<PAGE>
Page
----
XI. C&L MATTERS
10.1 C&L MATTERS. . . . . . . . . . . . . . . . . . . . 104
10.2 ADJUSTMENTS TO THE C&L MATTERS ESCROW FUNDS. . . . 106
10.3 C&L MATTERS GOVERNANCE. . . . . . . . . . . . . . 107
XI. MISCELLANEOUS
11.1 FEES AND EXPENSES . . . . . . . . . . . . . . . . 110
11.2 FURTHER ASSURANCES . . . . . . . . . . . . . . . 110
11.3 NOTICES . . . . . . . . . . . . . . . . . . . . . 110
11.4 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . 113
11.5 SEVERABILITY . . . . . . . . . . . . . . . . . . 113
11.6 BINDING EFFECT; ASSIGNMENT . . . . . . . . . . . 114
11.7 NO THIRD PARTY BENEFICIARIES . . . . . . . . . . 114
11.8 COUNTERPARTS . . . . . . . . . . . . . . . . . . 115
11.9 INTERPRETATION . . . . . . . . . . . . . . . . . 115
11.10 ARBITRATION . . . . . . . . . . . . . . . . . . . 116
11.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . 116
-iv-
<PAGE>
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT, dated as of May 17, 1995
(this "Agreement"), by and among Sherman C. Vogel, Stephen A.
Vogel, Jeffrey K. Vogel, Jon M. Vogel and Jeanette Vogel
(collectively, the "Stockholders", and each individually, a
"Stockholder"); Synergy Group Incorporated, a Delaware
corporation (the "Company", and collectively with the
Stockholders, "Sellers"); S&J Investments, a New York general
partnership ("S&J"); SYN Inc., a Delaware corporation ("Buyer");
and Northwestern Growth Corporation, a South Dakota corporation
("NGC").
W I T N E S S E T H
WHEREAS, Buyer is a corporation, newly formed by NGC and
Empire Gas Corporation, a Missouri corporation ("Empire"), to
consummate the transactions contemplated by this Agreement;
WHEREAS, the Stockholders are the owners of all of the
issued and outstanding shares of Class A Common Stock, par value
$1.00 per share (the "Class A Common Stock"), and Class B Common
Stock, no par value (the "Class B Common Stock", and together
with the Class A Common Stock, the "Common Stock"), of the
Company;
-2-
<PAGE>
WHEREAS, certain of the Stockholders are the owners of all
the issued and outstanding shares of Series A Preferred Stock, no
par value (the "Series A Preferred Stock"), of the Company;
WHEREAS, S&J is the owner of all of the issued and
outstanding shares of Series B Preferred Stock, no par value (the
"Series B Preferred Stock"), of the Company;
WHEREAS, upon the terms and subject to the conditions of
this Agreement, the Company and certain of its Operating
Subsidiaries (as defined in Section 4.3(b) hereof) desire to sell
to Buyer, and Buyer desires to purchase from the Company and such
Operating Subsidiaries, certain assets of the Company and such
Operating Subsidiaries;
WHEREAS, upon the terms and subject to the conditions of
this Agreement, the Stockholders desire to sell to Buyer, and
Buyer desires to purchase from the Stockholders, all of the
Common Stock and Series A Preferred Stock owned by the
Stockholders;
WHEREAS, certain of the Stockholders are the general
partners of S&J and, upon the terms and subject to the conditions
of this Agreement, desire to cause S&J to sell to Buyer, and
Buyer desires to purchase from S&J, certain assets owned by S&J
which are currently leased to the Company and its Operating
Subsidiaries and all of the Series B Preferred Stock owned by
S&J.
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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:
I. PURCHASE AND SALE OF ASSETS AND COMPANY STOCK
1.1 PURCHASE AND SALE OF ASSETS. Upon the terms and
subject to the conditions of this Agreement, concurrently at the
First Closing (as defined in Section 3.1 hereof), with the
closing of each transaction conditioned upon the closing of the
other, (a) the Company shall, and shall cause certain of its
Operating Subsidiaries to, sell, assign, convey and transfer to
Buyer, and Buyer shall purchase, acquire and accept from the
Company and such Operating Subsidiaries, clear title to the
assets set forth on Schedule I attached hereto (the "Assets"),
and (b) S&J shall sell, assign, convey and transfer to Buyer, and
Buyer shall purchase, acquire and accept from S&J, clear title to
the assets set forth on Schedule II attached hereto (the "S&J
Assets").
1.2 PURCHASE AND SALE OF COMPANY STOCK. Upon the terms and
subject to the conditions of this Agreement, concurrently at the
Second Closing (as defined in Section 3.2 hereof), with the
closing of each transaction conditioned upon the closing of the
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other, (a) S&J shall sell, assign, convey, transfer and deliver
to Buyer, and Buyer shall purchase, acquire and accept from S&J,
1670 shares of Series B Preferred Stock (the "Series B Shares"),
and (b) the Stockholders shall sell, assign, convey, transfer and
deliver to Buyer, and Buyer shall purchase, acquire and accept
from the Stockholders, 405 shares of Class A Common Stock, 405
shares of Class B Common Stock, and 2500 shares of Series A
Preferred Stock (such shares of Common Stock, together with such
shares of Series A Preferred Stock, the "Shares").
1.3 CONSIDERATION FOR THE ASSETS. Upon the terms and
subject to the conditions of this Agreement, in consideration of
the aforesaid sale, assignment, conveyance and transfer of the
Assets, at the First Closing, Buyer shall pay $80,826,000 in cash
(the "Asset Purchase Price") to the Company and its Operating
Subsidiaries or, as directed by the Company in Section 2.1
hereof, on behalf of the Company and its Operating Subsidiaries,
to the person or persons set forth in Section 2.1 hereof.
1.4 CONSIDERATION FOR THE S&J ASSETS. Upon the terms and
subject to the conditions of this Agreement, in consideration of
the aforesaid sale, assignment, conveyance and transfer and
delivery of the S&J Assets, at the First Closing, Buyer shall pay
$1,500,000 in cash (the "S&J Asset Purchase Price") to S&J.
1.5 CONSIDERATION FOR THE SERIES B SHARES. Upon the terms
and subject to the conditions of this Agreement, in consideration
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of the aforesaid sale, conveyance, assignment, transfer and
delivery of the Series B Shares at the Second Closing, Buyer
shall pay $16,700,000 in cash (the "Series B Shares Purchase
Price") to S&J.
1.6 CONSIDERATION FOR THE SHARES.
(a) Upon the terms and subject to the conditions of
this Agreement, in consideration of the aforesaid sale,
conveyance, assignment, transfer and delivery of the Shares, at
the Second Closing, Buyer shall pay or deliver to, or as directed
by, the Stockholders: (i) the Cash Component (as defined below)
plus or minus an estimate, prepared by the Stockholders with the
assistance of the Company's accountants, delivered to Buyer (and
accompanied by the consolidated balance sheet of the Company and
its Subsidiaries, as of the month end required by the proviso in
this sentence, prepared from their books and records on a basis
consistent with the Interim Statements (as defined in Section 4.5
hereof)) at least ten business days prior to the First Closing
Date of the amount of any adjustment to the Cash Component under
Sections 1.6(b) and 1.6(c) hereof (the Cash Component plus or
minus such estimate being hereinafter called the "Closing Date
Amount"); provided, however, that for purposes of determining the
estimate to be used in calculating the Closing Date Amount, the
most recent month end next preceding the First Closing Date by at
least fifteen business days shall be substituted for the Second
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Closing Date in Sections 1.6(b) and 1.6(c) hereof, (ii) a
promissory note in the principal amount of $1,250,000, executed
by Buyer as the maker, dated as of the Second Closing Date, and
made payable to the order of the Stockholders as set forth
therein (the "Promissory Note"), (iii) 2,500 shares of Buyer
Series A Preferred Stock (as defined in Section 5.8 hereof), and
(iv) 17,500 shares of Buyer Common Stock (as defined in Section
5.8 hereof) (such Buyer Common Stock, collectively with the
Promissory Note, the Buyer Series A Preferred Stock and the Cash
Component (as adjusted pursuant to this Section 1.6), the "Stock
Purchase Price"). The "Cash Component" shall equal $137,500,000
in cash minus (1) the Asset Purchase Price, (2) the S&J Asset
Purchase Price, (3) the Series B Shares Purchase Price, (4) the
amounts payable pursuant to Section 2.4 hereof other than the
additional interest referred to therein, (5) the Senior
Subordinated Note Amount (as defined in Section 6.23 hereof) (6)
the Contract Escrow Cash (as defined in Section 1.8 hereof), and
(7) the C&L Stockholder Amount (as defined in Section 1.9
hereof).
(b) The Cash Component shall be increased by the
amount by which the Working Capital (as defined in Section 1.6(c)
hereof) of the Company as of the Second Closing Date (as defined
in Section 3.2 hereof) exceeds $21,042,000 (the consolidated
working capital of the Company as of December 31, 1994, excluding
accrued interest and the current portion of long-term debt and
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accruals for compensation deferred by and payable to the
Stockholders and including the Company's total litigation reserve
(the "December Amount")) and the Cash Component shall be
decreased by the amount by which the Working Capital of the
Company as of the Second Closing Date is less than the December
Amount (the Cash Component as so increased or decreased shall
hereinafter be referred to as the "Adjusted Cash Component").
Promptly after preparation and final determination, pursuant to
Section 1.7 hereof, of the Statement of Working Capital (as
defined in Section 1.6(c) hereof) (but in no event later than
three business days thereafter), if the Closing Date Amount is
less than the Adjusted Cash Component, Buyer shall, and if the
Closing Date Amount is more than the Adjusted Cash Component, the
Stockholders' Agent (as defined in Section 9.5 hereof) shall,
make payment to the other in cash of the amount of such
difference, together with an amount in cash equal to the interest
accrued thereon at an interest rate per annum equal to the
interest rate announced by Citibank, N.A. as its base rate,
calculated on the basis of the actual number of days elapsed from
the Second Closing Date to the date of payment divided by 365, by
wire transfer to the bank accounts designated by the party to
receive such funds at least one business day prior to the date of
such payment.
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(c) For purposes of this Agreement, the following
terms have the following meanings:
(i) "Statement of Working Capital" means a
consolidated statement of the Working Capital of the Company and
its consolidated subsidiaries as of the Second Closing Date
prepared from the books and records of the Company and its
consolidated subsidiaries, as adjusted to reflect the results of
any physical inventory taken by Buyer as of the Second Closing
Date, in accordance with generally accepted accounting principles
("GAAP"), without any requirement for consistency with the
Interim Statements (as defined in Section 4.5 hereof) (except as
set forth in the definition of Working Capital); and
(ii) "Working Capital" of the Company as of the
Second Closing Date means the consolidated current assets of the
Company and its consolidated subsidiaries, less all amounts with
respect to consolidated current liabilities of the Company and
its consolidated subsidiaries, excluding accrued interest and the
current portion of long-term debt and accruals for compensation
deferred by and payable to the Stockholders and including the
Company's total litigation reserve, calculated as of the close of
business on such date, without giving effect to the transactions
contemplated by this Agreement.
1.7 DETERMINATION OF WORKING CAPITAL. As promptly as
practicable, but not more than 90 days after the Second Closing
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Date, Buyer shall cause its accountants to prepare and deliver to
the Stockholders' Agent the Statement of Working Capital. The
Stockholders' Agent and its authorized representatives shall be
entitled to review the Statement of Working Capital and the books
and records of the Company and its consolidated Subsidiaries and
the work papers used to prepare such Statement of Working
Capital. If the Stockholders' Agent disagrees with any item on
the Statement of Working Capital, the Stockholders' Agent shall
notify Buyer in writing of such disagreement (stating the reasons
therefor) within 30 days after the Stockholders' Agent's receipt
of the Statement of Working Capital from Buyer, and Buyer and the
Stockholders' Agent shall attempt to resolve such disagreement.
If Buyer and the Stockholders' Agent are unable to agree in
writing on the Statement of Working Capital within 30 days after
receipt of the Stockholders' Agent's notice of disagreement,
Buyer and the Stockholders' Agent shall refer such disagreement
to a firm of independent certified public accountants (the
"Firm") selected and agreed to in writing by Buyer's accountant
and an accountant designated by the Stockholders' Agent. The
Firm shall resolve any such disagreement and shall determine the
Statement of Working Capital resulting therefrom. Such Statement
of Working Capital as determined by the Firm shall become the
Statement of Working Capital for purposes of this Agreement and
shall be conclusive and binding on all parties hereto. If Buyer
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and the Stockholders' Agent agree in writing on the Statement of
Working Capital within 30 days after the Stockholders' Agent's
receipt of the Statement of Working Capital from Buyer or if the
Stockholders' Agent does not send a notice of disagreement within
30 days after receipt of the Statement of Working Capital, the
Statement of Working Capital for purposes of this Agreement shall
be the Statement of Working Capital received by the Stockholders'
Agent pursuant to the first sentence of this Section 1.7. If
Buyer fails to cause its accountant to prepare and deliver the
Statement of Working Capital within 90 days after the Second
Closing Date, unless otherwise agreed to in writing by Buyer and
the Stockholders' Agent, the accountant designated by the
Stockholders' Agent shall have the right to prepare and deliver
to Buyer, and Buyer will provide access to the books and records
of the Company necessary or desirable to complete, the Statement
of Working Capital, and such Statement of Working Capital shall
be the Statement of Working Capital for purposes of this
Agreement. Buyer and the Stockholders hereby agree that the cost
of the Firm shall be borne equally by Buyer, on the one hand, and
the Stockholders, on the other hand.
1.8 CONTRACT ESCROW FUNDS. Simultaneously with the Second
Closing, Buyer shall deliver to the Contract Escrow Agent, as
defined in and, pursuant to the Contract Escrow Agreement (as
defined in Section 6.17 hereof) (i) $6,250,000 in cash (the
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"Contract Escrow Cash") (ii) 2,500 shares of Buyer Series A
Preferred Stock, and (iii) the Promissory Note (the Promissory
Note, collectively with such shares of Buyer Series A Preferred
Stock and the Contract Escrow Cash, the "Contract Escrow Funds").
1.9 C&L MATTERS ESCROW FUNDS. Simultaneously with the
Second Closing, the following shall be delivered to the C&L
Matters Escrow Agent, as defined in and, pursuant to the C&L
Matters Escrow Agreement (as defined in Section 6.26 hereof):
(a) Buyer shall deliver, out of its own funds, an
amount in cash equal to the Company's litigation reserve as set
forth on the consolidated balance sheet used for purposes of
determining the Closing Date Amount (the "C&L Reserve") and
$250,000 in cash (the "C&L Additional Amount");
(b) Buyer shall deliver, on behalf of the
Stockholders, an amount in cash equal to $4,000,000 less the C&L
Reserve and the C&L Additional Amount (the "C&L Stockholder
Amount," and collectively with the C&L Reserve and the C&L
Additional Amount, the "C&L Matters Escrow Cash"); and
(c) Buyer shall deliver 17,500 shares of Buyer Common
Stock (such stock together with the C&L Matters Escrow Cash, the
"C&L Matters Escrow Funds").
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II. DIRECTIONS RELATING TO THE ASSET PURCHASE PRICE
AND RELATED MATTERS
2.1 THE ASSET PURCHASE PRICE. The Company hereby directs
Buyer, on behalf of the Company, to pay and apply the Asset
Purchase Price at the First Closing as follows:
(a) to deposit with the paying agent (selected by the
Stockholders' Agent (the "Paying Agent")) pursuant to and in
accordance with the terms of the Indenture, dated as of September
15, 1993 (the "Indenture"), governing the Company's Series A and
Series B Increasing Rate Senior Secured Notes due 2000 (the
"Notes"), that part of the Asset Purchase Price equal to the
amount necessary to redeem all of the issued and outstanding
Series A Notes as of the First Closing Date (as defined in
Section 3.1 hereof) at their principal amount, plus accrued
interest on such Series A Notes calculated through the First
Closing Date and the related costs and expenses (the "Redemption
Expenses") in excess of $20,000, if any, as certified in writing
by the Paying Agent or the Trustee to the Stockholders' Agent and
Buyer at least one business day prior to the First Closing Date
(collectively, the "Seller Series A Notes Redemption Amount");
and
(b) to pay to S&J as the Lender under the Revolving
Credit Agreement, dated as of August 3, 1989, between the Company
and S&J (the "Credit Agreement"), in the event that the Asset
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Purchase Price exceeds the Seller Series A Notes Redemption
Amount and the Series B Notes Purchase Amount (as defined in
Section 2.3 hereof), such excess amount (the "Additional
Amount"), up to all amounts outstanding under the Credit
Agreement on the First Closing Date, plus any accrued and unpaid
interest thereon, as certified in writing by S&J to the Company
and Buyer at least one business day prior to the First Closing
Date (the "Credit Agreement Amount").
2.2 ADDITIONAL SERIES A NOTES REDEMPTION AMOUNT.
Simultaneously with the First Closing, with respect to all the
issued and outstanding Series A Notes as of the First Closing
Date, Buyer shall deposit with the Paying Agent in accordance
with the terms of the Indenture, out of Buyer's own funds, an
amount in cash equal to the interest that will accrue on such
Series A Notes from the First Closing Date through the redemption
date for such Series A Notes and an amount equal to the lesser of
the Redemption Expenses and $20,000, as certified in writing by
the Paying Agent or the Trustee to the Stockholders' Agent and
Buyer at least one business day prior to the First Closing Date
(the "Additional Series A Notes Redemption Amount," and together
with the Seller Series A Notes Redemption Amount, the "Series A
Notes Redemption Amount").
2.3 PURCHASE AND SALE OF SERIES B NOTES. Simultaneously
with the First Closing, the Stockholders shall cause the holders
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of the Series B Notes to sell, convey, assign, transfer and
deliver to the Company, and the Company shall purchase, acquire
and accept from such holders, all of the outstanding Series B
Notes. In consideration of the aforesaid sale, conveyance,
assignment, transfer and delivery of the Series B Notes,
simultaneously with the First Closing, Buyer shall pay in cash,
on behalf of the Company, to or for the accounts of the holders
of the Series B Notes the principal amount plus accrued interest
on such Series B Notes calculated through the First Closing Date
as certified in writing by the Paying Agent or the Trustee to the
Stockholders' Agent and Buyer at least one business day prior to
the First Closing Date (the "Series B Notes Purchase Amount").
2.4 ADDITIONAL CREDIT AGREEMENT AMOUNT. Simultaneously
with the Second Closing, Buyer shall pay to S&J, out of Buyer's
own funds, an amount in cash equal to the Credit Agreement Amount
less the Additional Amount, plus interest on such amount
calculated at the rate set forth in the Credit Agreement from the
First Closing Date through the Second Closing Date.
III. THE CLOSINGS
3.1 FIRST CLOSING. Subject to the conditions to the First
Closing set forth herein, the closing of the transactions
contemplated by Sections 1.1, 1.3, 1.4, 2.1, 2.2 and 2.3 hereof
(the "First Closing") will take place at the offices of Skadden,
Arps,
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Slate, Meagher & Flom, at 2:00 p.m., New York City time, on a
date not later than the fifth business day after the date of
satisfaction (or waiver, if applicable) of the conditions set
forth in Sections 7.1(f), 7.2(f) and 7.2(i) hereof; provided,
that the next day is a business day, or such other place, date
and time as shall be agreed upon in writing by Buyer and the
Stockholders' Agent. The date on which the First Closing occurs
is referred to herein as the "First Closing Date."
3.2 SECOND CLOSING. Subject to the conditions to the
Second Closing set forth herein, the closing of the transactions
contemplated by this Agreement, other than those contemplated to
occur at the First Closing (the "Second Closing"), will take
place at the offices of Skadden, Arps, Slate, Meagher & Flom, at
9:00 a.m., New York City time, on the first business day
following the First Closing Date. The date on which the Second
Closing occurs is referred to herein as the "Second Closing
Date."
3.3 DELIVERIES AT THE FIRST CLOSING.
(a) At the First Closing, Buyer shall deliver or cause
to be delivered the following:
(i) the Series A Notes Redemption Amount, by wire
transfer (as defined in Section 11.9(c) hereof) to the bank
account designated to Buyer at least one business day prior to
the First Closing Date by the Paying Agent (the "Paying Agent
Account");
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(ii) the S&J Asset Purchase Price, by wire
transfer to the bank account designated to Buyer at least one
business day prior to the First Closing Date by S&J (the "S&J
Account");
(iii) the Additional Amount, by wire transfer to
the S&J Account;
(iv) the Series B Notes Purchase Amount, by wire
transfer to the bank accounts designated to Buyer by the
Stockholders' Agent at least one business day prior to the First
Closing Date; and
(v) to the Stockholders' Agent, the certificates
of an officer of Buyer and NGC, respectively, described in
Section 7.1(c) hereof.
(b) At the First Closing, the Company shall deliver or
cause to be delivered to Buyer the following:
(i) a duly executed bill of sale for the Assets
in a form mutually satisfactory to Buyer and the Company;
(ii) such other instruments of conveyance,
transfer and assignment as shall be required to effect the
conveyance, transfer and assignment of the Assets;
(iii) any and all such instruments as are
necessary to release all security interests, liens and
encumbrances on the Assets, other than the Permitted Liens; and
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(iv) the certificates of the Company and the
Stockholders described in Section 7.2(c) hereof.
(c) At the First Closing, S&J shall deliver or cause
to be delivered to Buyer the following:
(i) a duly executed bill of sale for the S&J
Assets in a form mutually satisfactory to Buyer and S&J;
(ii) vehicle title certificates and such other
instruments of conveyance, transfer and assignment as shall be
required to effect the conveyance, transfer and assignment of the
S&J Assets; and
(iii) any and all such instruments as are
necessary to release all security interests, liens and
encumbrances on the S&J Assets.
(d) At the First Closing, the Stockholders' Agent
shall deliver or cause to be delivered to Buyer the Series B
Notes together with instruments of transfer thereof in form and
substance satisfactory to Buyer.
3.4 DELIVERIES BY BUYER AT THE SECOND CLOSING.
At the Second Closing, Buyer shall deliver or cause to
be delivered the following:
(a) (i) the Contract Escrow Cash, by wire transfer to
the bank account designated to Buyer by the Contract Escrow Agent
at least one business day prior to the First Closing Date, (ii)
to the Contract Escrow Agent (x) stock certificates evidencing
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the 2,500 shares of Buyer Series A Preferred Stock, duly executed
and validly issued in definitive form by Buyer, in the name of
the Contract Escrow Agent, and (y) the Promissory Note duly
executed and validly issued by Buyer;
(b) the Closing Date Amount, by wire transfer to the
bank accounts and in the amounts allocated to each Stockholder
designated to Buyer by the Stockholders' Agent at least one
business day prior to the First Closing Date (the "Stockholders'
Accounts");
(c) (i) the C&L Matters Escrow Cash by wire transfer
to the bank account designated by the C&L Matters Escrow Agent at
least one business day prior to the First Closing Date, and (ii)
to the C&L Matters Escrow Agent, stock certificates, duly
executed and validly issued in definitive form by Buyer, in such
names of the Stockholders and number of shares per Stockholder
designated by the Stockholders' Agent at least one business day
prior to the First Closing Date, representing in the aggregate
17,500 shares of Buyer Common Stock;
(d) the Series B Shares Purchase Price, and the
amounts payable pursuant to Section 2.4 hereof, by wire transfer
to the S&J Account;
(e) to the Stockholders' Agent, counterparts to the
Non-Competition Agreements (as defined in Section 6.15 hereof)
duly executed by Buyer;
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(f) to the Stockholders' Agent, counterparts to the
Stockholders' Agreement (as defined in Section 6.16 hereof) duly
executed by Buyer;
(g) to the Stockholders' Agent, counterparts to the
Contract Escrow Agreement duly executed by Buyer and the Contract
Escrow Agent;
(h) to the Stockholders' Agent, counterparts to the
C&L Matters Escrow Agreement duly executed by Buyer and the C&L
Matters Escrow Agent; and
(i) all other documents, certificates, instruments or
writings required to be delivered by Buyer at or prior to the
Second Closing pursuant to this Agreement or otherwise required
in connection herewith.
3.5 DELIVERIES BY THE STOCKHOLDERS AND S&J AT THE SECOND
CLOSING.
(a) At the Second Closing, the Stockholders shall
deliver or cause to be delivered the following:
(i) to Buyer, stock certificates representing the
Shares, accompanied by stock powers duly executed in blank with
signatures guaranteed (as defined in Section 11.9(e) hereof);
(ii) to the C&L Matters Escrow Agent, stock
powers duly executed in blank with signatures guaranteed relating
to the Buyer Common Stock;
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(iii) to Buyer, counterparts to the Non-
Competition Agreements duly executed by each of the Stockholders;
(iv) to Buyer, counterparts to the Stockholders'
Agreement duly executed by each of the Stockholders;
(v) to Buyer and the Contract Escrow Agent,
counterparts to the Contract Escrow Agreement duly executed by
each of the Stockholders;
(vi) to Buyer and the C&L Matters Escrow Agent,
counterparts to the C&L Matters Escrow Agreement duly executed by
each of the Stockholders;
(vii) to Buyer a general release, executed by
each of the Stockholders, releasing the Company and its
Subsidiaries, and their respective directors, officers and
employees, as such, from all claims that such Stockholders (or
any of them) might have against such released parties, and all
liabilities owed to such Stockholders (or any of them) by such
released parties, arising from or pertaining to matters prior to
the Second Closing Date, excepting from such release those
matters contemplated by this Agreement or set forth on Section
4.17 of the Disclosure Schedule (as defined in Section 4.3(b)
hereof); and
(viii) all other documents, certificates,
instruments or writings required to be delivered by the
Stockholders at
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or prior to the Second Closing pursuant to this Agreement or
otherwise required in connection herewith.
(b) At the Second Closing, S&J shall deliver or cause
to be delivered to Buyer the following:
(i) stock certificates representing the Series B
Shares accompanied by stock powers duly executed in blank with
signatures guaranteed;
(ii) any and all such instruments as are
necessary to release all security interests, liens and
encumbrances in favor of S&J on the assets of the Company
pursuant to the Credit Agreement; and
(iii) all other documents, certificates,
instruments or writings required to be delivered by S&J at or
prior to the Second Closing pursuant to this Agreement or
otherwise required in connection herewith.
IV. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders hereby represent and warrant to Buyer as
follows:
4.1 ORGANIZATION AND QUALIFICATION OF THE COMPANY. Each of
the Company and its Operating Subsidiaries 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
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its properties and to carry on its business as now being
conducted. Each of the Company and its Operating Subsidiaries 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 business,
properties, results of operations or financial condition of the
affected corporation. Sellers have heretofore made available to
Buyer complete and correct copies of the Company's and its
Operating Subsidiaries' respective Certificates of Incorporation,
and By-Laws, as currently in effect.
4.2 AUTHORITY. (a) Each of the Stockholders has the
capacity to execute and deliver this Agreement, the Stockholders'
Agreement, the Contract Escrow Agreement, the C&L Matters Escrow
Agreement and their respective Non-Competition Agreements (the
"Seller Documents") and to consummate the transactions
contemplated hereby and thereby, and the Company has the
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and
consummation by the Company of the transactions contemplated
hereby have been
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duly and validly authorized by the Board of Directors of the
Company and the Stockholders, and except as contemplated by
Section 6.19 hereof, no other corporate proceedings on the part
of the Company or the Stockholders are necessary to authorize
this Agreement or the consummation of the transactions so
contemplated. This Agreement has been, and the other Seller
Documents will be, duly executed and delivered by the Company, in
the case of this Agreement, and the Stockholders (or their
agent), in the case of the Seller Documents, and, assuming the
due and valid execution and delivery by Buyer of the Seller
Documents, by NGC of this Agreement and by the Contract Escrow
Agent of the Contract Escrow Agreement and by the C&L Matters
Escrow Agent of the C&L Matters Escrow Agreement, each
constitutes, and when executed and delivered will constitute, a
valid and binding agreement of each Seller, enforceable against
each of them in accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization and other similar laws affecting
creditors' rights generally, and (ii) as such enforceability may
be limited by general principles of equity, regardless of whether
asserted in a proceeding in equity or law.
(b) S&J is a general partnership duly organized and
validly existing under the laws of its jurisdiction of formation
and has all requisite power and authority to own, lease and
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operate its properties and to carry on its business as now being
conducted. S&J has the power and authority, under applicable law
and its organizational documents, to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by S&J and the
consummation of the transactions by S&J contemplated hereby have
been duly and validly authorized by S&J, and the person executing
and delivering this Agreement on behalf of S&J has been
authorized to do so. This Agreement has been duly executed and
delivered by S&J, and, assuming the due and valid execution and
delivery by Buyer of the Seller Documents and by NGC of this
Agreement, constitutes, and when executed and delivered will
constitute, a valid and binding obligation of S&J, enforceable
against S&J in accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization and other similar laws affecting
creditors' rights generally, and (ii) as such enforceability may
be limited by general principles of equity, regardless of whether
asserted in a proceeding in equity or law.
4.3 CAPITALIZATION.
(a) The authorized capital stock of the Company
consists of (i) 2,000 shares of Class A Common Stock, 405 shares
of which are issued and outstanding, (ii) 2,000 shares of Class B
Common Stock, 405 shares of which are issued and outstanding,
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(iii) 10,000 shares of Series A Preferred Stock, 2,500 shares of
which are issued and outstanding, and (iv) 5,000 shares of
Series B Preferred Stock, 1,670 shares of which are issued and
outstanding. The Shares and the Series B Shares are validly
issued, fully paid and nonassessable and are not subject to any
preemptive rights. The Shares and the Series B Shares represent
all of the issued and outstanding shares of capital stock of the
Company. The Shares are owned beneficially and of record by the
respective Stockholders in the amounts set forth opposite their
names on Section 4.3(a) of a disclosure schedule being delivered
by Sellers to Buyer concurrently herewith (the "Disclosure
Schedule"). The Series B Shares are owned beneficially and of
record by S&J. There are no other shares of capital stock of the
Company issued or outstanding, or any options, warrants,
convertible securities, calls, subscriptions or other rights,
agreements or commitments obligating the Company to issue any
shares of capital stock or obligating the Stockholders, or
restricting the Stockholders' right, to transfer or sell any
Shares or obligating S&J, or restricting S&J's right, to transfer
or sell any of the Series B Shares. Upon consummation of the
transactions contemplated hereby, the Stockholders will transfer
to Buyer good and marketable title to the Shares and S&J will
transfer to Buyer good and marketable title to the Series B
Shares, free and clear of all options, pledges, security
interests, liens and encum-
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brances, other than any option, pledge, security interest, lien
or encumbrance which may arise from any acts or omissions by, or
the status of or any facts pertaining to, Buyer or its
affiliates. There are no dividends which have been declared or
which have accrued on the Shares or the Series B Shares which are
unpaid.
(b) The Company currently conducts its operations and
owns all its assets either directly or through twenty-three
operating subsidiaries (the "Operating Subsidiaries"). The
names, jurisdictions of incorporation and number of shares of
capital stock outstanding of each of the Operating Subsidiaries
are set forth on Section 4.3(b) of the Disclosure Schedule.
Section 4.3(b) of the Disclosure Schedule also sets forth the
name and jurisdiction of incorporation of each other corporation
and entity owned or controlled by the Company (collectively, with
the "Operating Subsidiaries, the "Subsidiaries"). All of the
issued and outstanding shares of capital stock of the
Subsidiaries (the "Subsidiary Shares") are validly issued, fully
paid and nonassessable and are not subject to any preemptive
rights. The Subsidiary Shares represent all of the issued and
outstanding shares of capital stock of the Subsidiaries, and,
assuming redemption of the Notes, there are no options, warrants,
convertible securities, calls, subscriptions or other rights,
agreements or commitments obligating any of the Subsidiaries to
issue any
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shares of its capital stock or obligating the Company, or
restricting the Company's right, to transfer or sell any
Subsidiary Shares. The Subsidiary Shares are owned beneficially
and of record by the Company or a Subsidiary of the Company, free
and clear of all options, pledges, security interests, liens and
encumbrances, assuming redemption of the Notes. Except for
securities of, or loans to, the Subsidiaries, the Company does
not directly or indirectly through a Subsidiary, own any capital
stock of or other equity interest in any corporation, partnership
or other business entity or have outstanding a loan made to any
such entity excluding normal extensions of credit in the ordinary
course of business.
4.4 CONSENTS AND APPROVALS; NO VIOLATION. 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 the Company, or the
execution and delivery of the Seller Documents by the
Stockholders nor the consummation by Sellers of the transactions
contemplated hereby or thereby nor compliance by Sellers 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
certificates of incorporation or by-laws of the Company or any of
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its Subsidiaries, (c) assuming redemption of the Notes and
payment of all outstanding obligations under the Credit
Agreement, result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the
terms, conditions or provisions of the contracts set forth in
Section 4.14 of the Disclosure Schedule, except for such defaults
(or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained, or (d)
assuming compliance with the HSR Act, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the
Company or its Subsidiaries, 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 are or propose to be engaged or
propose that the Company and its subsidiaries be engaged (other
than the business or activities in which the Company and its
Subsidiaries are engaged as of the date of this Agreement).
4.5 FINANCIAL STATEMENTS. Sellers have delivered to Buyer
(a) the Company's Form 10-Q for the quarter ended December 31,
1994, which contained the unaudited consolidated balance sheet of
the Company and its subsidiaries as of December 31, 1994, and the
unaudited consolidated statements of operations and retained
earnings (deficit) and cash flows of the Company and its subsid-
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iaries for the nine months ended December 31, 1994, and the notes
thereto (such financial statements and notes collectively, the
"Interim Statements"), (b) the audited consolidated balance
sheets of the Company and its subsidiaries as of March 31, 1994
and 1993 and the audited consolidated statements of operations
and retained earnings (deficit) and cash flows for the three
years ended March 31, 1994, 1993, and 1992 together with the
notes thereto and the Report of KPMG Peat Marwick LLP thereon
(such financial statements, notes and report, together with the
Interim Statements, the "Financial Statements"), and (c) the
"preliminary trial balances" for the consolidated financial
statements of the Company and its subsidiaries as of March 31,
1995 and for the twelve months then ended. The Financial
Statements present fairly the consolidated assets, liabilities
and consolidated financial position of the Company and its
subsidiaries and, with respect to the consolidated statements of
operations and retained earnings and cash flows set forth in the
Financial Statements, present fairly the consolidated results of
operations and cash flows of the Company and its subsidiaries,
for the periods or as of the dates set forth therein, in each
case in conformity with GAAP consistently applied, except as
otherwise disclosed therein, subject, in the case of the Interim
Statements, to normal, recurring year-end audit adjustments which
in the aggregate are not material.
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4.6 ABSENCE OF UNDISCLOSED LIABILITIES. The liabilities
and obligations of the Company and its Subsidiaries (whether
direct, indirect, accrued or contingent) (other than (a)
liabilities and obligations reflected or reserved against in the
consolidated balance sheet of the Company and its Subsidiaries,
or in the notes thereto, in the Interim Statements, (b)
liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the
Interim Statements, (c) all C&L Matters and all claims, actions,
proceedings and investigations disclosed in Sections 4.11, 4.13,
and 4.16 of the Disclosure Schedule, and (d) contractual
obligations incurred in the ordinary course of business and not
required to be reflected or reserved against on a balance sheet
prepared in accordance with GAAP) do not exceed $25,000 in the
aggregate. To the knowledge of the Stockholders, the reserves
for liabilities and obligations reflected in the Interim
Statements are adequate, appropriate and reasonable and have been
calculated in accordance with GAAP.
4.7 ABSENCE OF CERTAIN CHANGES. Since the date of the
Interim Statements:
(a) there has not been any material adverse change in
the business, properties, results of operations or financial
condition of the Company and its Subsidiaries taken as a whole,
except for any change resulting from weather conditions and
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seasonal variations affecting the business of the Company and its
Subsidiaries; and
(b) the Company and its Subsidiaries have conducted
their businesses in the ordinary course and in substantially the
same manner as presently conducted and have made all reasonable
efforts consistent with past practices to preserve the Company's
and its Subsidiaries' relationships with customers, suppliers and
others with whom the Company or any of its Subsidiaries deals,
and without limiting the generality of the foregoing, neither the
Company nor any of its Subsidiaries has taken any action that, if
taken after the date hereof, would constitute a breach of any of
the covenants set forth in Section 6.1 hereof.
4.8 REAL PROPERTY.
(a) Owned Real Property. Section 4.8(a) of the
Disclosure Schedule lists, as of the date hereof, all real
property owned by the Company and its Subsidiaries (the "Real
Property"). The Company and its Subsidiaries have good and
marketable title to the Real Property, free and clear of all
mortgages, pledges, security interests, liens, charges, options,
easements, rights-of-way or other encumbrances of any kind
(collectively, "Liens"), except for Permitted Liens. The term
"Permitted Liens" shall mean (i) those Liens set forth in Section
4.8 of the Disclosure Schedule, (ii) Liens for water and sewer
charges and current taxes not yet due and payable or being
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contested in good faith, (iii) 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 (A) are
reflected or reserved against in the Financial Statements, or (B)
have arisen since the date of the Interim Statements and are not
yet due and payable, (iv) such other easements, rights of way,
imperfections of title and zoning restrictions as would not
materially adversely affect the value of, or materially adversely
interfere with the use of, the affected properties and assets of
the Company and its Subsidiaries, and (v) Liens arising or
resulting from any action taken by Buyer or any of its
affiliates. The Permitted Liens do not individually, or in the
aggregate, impair the ability of the Company and its Subsidiaries
to conduct the activities and business of the Company and its
Subsidiaries as currently conducted.
(b) Leased Real Property. Section 4.8(b) of the
Disclosure Schedule lists, as of the date hereof, all real
property under lease by which the Company or any of its
Subsidiaries is lessee or lessor. All such leases are valid,
binding and enforceable in accordance with their terms against
the Company or its Subsidiaries and there exists no default under
such leases by the Company or its Subsidiaries thereunder which
is not capable of being cured without penalty.
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4.9 PERSONAL PROPERTY.
(a) Section 4.9(a) of the Disclosure Schedule lists
the number of consumer propane tanks by size owned by the Company
or any of its Subsidiaries as of February 2, 1995. Sellers have
also delivered to Buyer a list of the number of consumer propane
tanks by size and branch location owned by the Company or any of
its Subsidiaries as of April 17, 1995. Section 4.9(a) of the
Disclosure Schedule also sets forth by size and location a list
of all bulk storage tanks owned by the Company or any of its
Subsidiaries. The total number of consumer propane tanks set
forth in Section 4.9(a) of the Disclosure Schedule is no more
than 5% greater than the actual number of consumer propane tanks
owned by the Company and/or any of its Subsidiaries; provided,
however, Buyer hereby acknowledges for purposes of this
representation and warranty, that the Stockholders shall be given
a credit for the number of consumer propane tanks owned by the
Company and/or any of its Subsidiaries which exceeds the number
set forth in Section 4.9(a) of the Disclosure Schedule 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 the Company and/or any of its Subsidiaries for a
size category is less than the number of consumer propane tanks
set forth in such size category on Section 4.9(a) Disclosure
Schedule. Buyer shall calculate such credit based on 66-2/3% of
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the American Tank and Welding new tank price for such types and
sizes of tanks, plus shipping costs, and by multiplying such
prices by the excess and deficit numbers of tanks in each size
category. The Company or one of its Subsidiaries has good title
to each of the consumer propane tanks set forth in Section 4.9(a)
of the Disclosure Schedule. For purposes of this representation
and warranty good title to each such tank shall be evidenced by
any one of the following: (i) such tank being in inventory on
the lot of a branch location of the Company or any of its
Subsidiaries as of the First Closing Date; or (ii) the Company or
any one of its Subsidiaries producing a previously executed tank
contract; or customer supply agreement executed by the customer
relating to tanks with a capacity of 100 pounds or less which
states that the Company or the Subsidiary is providing the tank
for use by the customer (such agreement shall not be required to
list a serial number for the tank); or work order executed by the
customer (such work order shall include the serial number of the
tank); or a bill of sale; or 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;
or (iii) the customer acknowledging, in writing to Buyer or
otherwise to Buyer's reasonable satisfaction, that the Company or
any one of its Subsidiaries owns the tank; or (iv) the Buyer or
any one of its subsidiaries securing a newly executed tank
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<PAGE>
contract with the customer; or (v) the Company, any of its
Subsidiaries, Buyer or any respective affiliate being able to
gain physical possession of such tank.
(b) The Company and its Subsidiaries have good title
to, or rights by lease or other agreement to use, all the
vehicles used in their business. S&J has good title to the S&J
Assets and, as of the First Closing Date, such assets will be
free and clear of all Liens. As of the First Closing Date, the
Company and its Subsidiaries shall have good title to all the
computer equipment used in their business. S&J has no liens on
the assets of the Company other than liens securing loan
indebtedness under the Credit Agreement.
(c) The Company and its Subsidiaries have good title
to, or rights by license, lease or other agreements to use, all
other tangible personal property material to their businesses
taken as a whole.
(d) Substantially all the consumer propane tanks, bulk
storage tanks and vehicles owned or leased by the Company or any
of its Subsidiaries 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 equipped with
appropriate data plates.
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4.10 INTELLECTUAL PROPERTY. Section 4.10 of the Disclosure
Schedule contains a brief description of all trade names and
trademarks owned by or registered in the name of the Company or
any of its Subsidiaries or used by any of them in their
businesses (the "Intellectual Property"). The Company or one of
its Subsidiaries owns or possesses adequate and enforceable long-
term licenses or other rights to use (without payment) all such
Intellectual Property and has not received any notice which
asserts the rights of others with respect thereto. The Company
and its Subsidiaries have in all respects performed all the
obligations required to be performed by them, and are not in
default in any respect, under any agreement relating to any
Intellectual Property. The Company and its Subsidiaries are
protected, with respect to Intellectual Property currently being
used by any of them, against the use of such Intellectual
Property by other persons to the extent and in a manner customary
in the industry in which they operate.
4.11 LABOR MATTERS. Except as set forth in Section 4.11 of
the Disclosure Schedule, (a) the Company and its Subsidiaries are
not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance
or regulation; (b) there is no unfair labor practice charge or
complaint against the Company or any of its Subsidiaries pending
or, to the knowledge of the Stockholders, threatened before the
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National Labor Relations Board nor is there any grievance or any
arbitration proceeding arising out of or under collective
bargaining agreements pending and, to the knowledge of the
Stockholders, no such grievance or arbitration proceeding is
threatened, and to the knowledge of the Stockholders there is no
basis for any such charge, complaint or grievance; (c) there is
no labor strike, lockout, slow-down or work stoppage pending or,
to the knowledge of the Stockholders, threatened against the
Company or any of its Subsidiaries; (d) since January 1, 1994,
neither the Company nor any of its Subsidiaries has experienced
any significant work stoppages or been a party to any proceedings
before the National Labor Relations Board or been a party to any
arbitration proceeding arising out of or under collective
bargaining agreements; (e) there is no charge or complaint
actually pending or, to the knowledge of the Stockholders,
threatened against the Company or any of its Subsidiaries before
the Equal Employment Opportunity Commission or any state or local
agency responsible for the prevention of unlawful employment
practices; and (f) neither the Company nor any of its
Subsidiaries has any written personnel policy or severance policy
or is bound by any employment contracts except as set forth in
Section 4.13 of the Disclosure Schedule. Neither the Company nor
any of its Subsidiaries has received notice of the intent of any
federal, state or local agency responsible for the enforcement of
labor or employ-
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ment laws to conduct an investigation, and no such investigation
is in progress. Except as set forth in Section 4.11 of the
Disclosure Schedule, the employees of the Company and its
Subsidiaries are not represented by any labor union nor are there
any collective bargaining agreements or any other types of
agreements with labor unions otherwise in effect with respect to
such employees. No union organizational campaign is in progress
with respect to any employees of the Company or any of its
Subsidiaries and no question concerning representation exists
respecting such employees.
4.12 TAXES. The Company and its Subsidiaries are members,
and are all of the members, of the same affiliated group within
the meaning of Section 1504(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The Company has (i) filed with
the appropriate federal, state and local taxing authorities all
Tax Returns required to be filed by or with respect to the
Company and its Subsidiaries prior to the Second Closing Date,
and (ii) paid in full or made adequate provision for the payment
of all Taxes due for the periods covered by Tax Returns due
through the Second Closing Date (excluding Taxes due with respect
to the transactions contemplated by this Agreement). Except as
set forth in Section 4.12 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries have executed waivers of the
statute of limitations with respect to any Tax Return or any
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period with respect to which a taxing authority is alleging a Tax
Return is due. As of the First Closing, after giving effect to
the purchase of the Series B Notes by the Company at the First
Closing, but not giving effect to any other transaction
contemplated by this Agreement, the Company's net operating loss
as determined under Section 172 of the Code, will not be less
than $75 million. For purposes of this representation and
warranty, Damages with respect to the net operating loss shall be
based upon an assumed combined federal and state tax rate of 38%.
For purposes of this Agreement, the term "Taxes" shall mean all
taxes, levies or other like assessments, charges or fees,
including, without limitation, income, gross receipts, transfer,
excise, property, sales, license, payroll, withholding, social
security and franchise or other governmental taxes, imposed by
the United States, or any state, county, local or foreign
government or subdivision or agency thereof; and such term shall
include any interest, penalties or additions to tax attributable
to such taxes; and the term "Tax Return" shall mean any report,
return, statement or other information (whether written or
electronic) required to be filed with or supplied to a taxing
authority in connection with Taxes.
4.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 4.13(a) of the Disclosure Schedule lists
each "employee benefit plan" (as defined in Section 3(3) of the
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Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all other employee benefit, stock option,
deferred compensation, bonus and fringe benefit plans maintained
for the benefit of or contributed to by the Company or any ERISA
Affiliate for any present or former employees (the "Plans"). For
purposes of this Section 4.13, the term ERISA Affiliate means a
controlled group of corporations of which the Company is a member
within the meaning of Section 414(b) of the Code, any group of
corporations or entities under common control with the Company
within the meaning of Section 414(c) of the Code or any
affiliated service group of which the Company is a member within
the meaning of Section 414(m) of the Code.
(b) With respect to each of the Plans, Sellers have
heretofore delivered to Buyer true and complete copies of each of
the following documents: (i) a copy of each of the Plans
(including all amendments thereto); (ii) a copy of the annual
report, if required under ERISA, with respect to each such Plan
for the last two years; (iii) a copy of the actuarial report, if
required under ERISA, with respect to each such Plan for the last
two years; (iv) if the Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding
agreement (including all amendments thereto) and the latest
financial statements thereof; (v) the most recent determination
letter received from the Internal Revenue Service with respect to
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each Plan that is intended to be qualified under Section 401 of
the Code; (vi) a copy of the most recent summary plan description
(within the meaning of Section 104 of ERISA) for each Plan; (vii)
copies of any investment manager and advisor contracts for each
Plan; and (viii) copies of any other filings with governmental
agencies for any Plan within the last two years (other than
routine distribution or withholding filings).
(c) Except as set forth in Section 4.13(c) of the
Disclosure Schedule, (i) none of the Plans that is not a
Multiemployer Pension Plan is subject to Title IV of ERISA, (ii)
there is no outstanding or contingent liability under Title IV of
ERISA with respect to any "employee pension benefit plan," as
defined in Section 3(2) of ERISA, at any time within the last six
years maintained or contributed to by the Company or any ERISA
Affiliate; (iii) full payment has been made of all amounts that
the Company or any ERISA Affiliate is required to pay as a
contribution to the Plans as of the last day of the most recent
fiscal year of each of the Plans ended prior to the date of this
Agreement, and all such amounts properly accrued in the balance
sheet included in the Interim Statements with respect to the
current plan year thereof will be paid by the Company on or prior
to the date of the balance sheet included in the Interim
Statements or will be properly recorded on the March 31, 1995
audited balance sheet; (iv) each of the Plans has been operated
and
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administered in all material respects in accordance with all
their terms and applicable laws and regulations; (v) each of the
Plans that is intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified; (vi) there are no
pending or, to the knowledge of the Stockholders, threatened
claims involving any of the Plans (other than routine claims for
benefits); (vii) no amounts payable under the Plans will fail to
be deductible for federal income tax purposes by virtue of
Section 280G of the Code; (viii) no Plan provides benefits,
including without limitation, death or medical benefits (whether
or not insured), with respect to current or former employees of
the Company beyond their retirement or other termination of
service (other than (1) coverage mandated by applicable law, (2)
death benefits or retirement benefits under any "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA,
(3) deferred compensation benefits accrued as liabilities on the
books of the Company, or (4) benefits the full cost of which are
borne by the current or former employee (or his or her
beneficiary)); (ix) neither the Company, nor any ERISA Affiliate,
nor any of their respective employees or directors, has engaged
in any transaction, including the execution and delivery of this
Agreement and other agreements, instruments and documents for
which execution and delivery by Sellers is contemplated herein,
in violation of Section 406(a) or (b) of ERISA or which is a
"pro-
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hibited transaction" (as defined in Section 4975(c)(1) of the
Code); and (x) no matter is pending before any court or
governmental agency with respect to any Plan (other than
determination letters, rulings or similar requests).
(d) Neither the Company nor any ERISA Affiliate has
during the six years prior to the date of this Agreement,
contributed to a Multiemployer Pension Plan as defined in Section
3(37) of ERISA.
(e) Neither the Company nor any ERISA Affiliate has
any commitment to create any additional Plan or to contribute to
any Multiemployer Pension Plan, or to materially modify any
existing Plan, covering employees engaged in its businesses.
4.14 CERTAIN CONTRACTS AND ARRANGEMENTS. Except as set
forth in Section 4.14 of the Disclosure Schedule, as of the date
hereof, neither the Company nor any of its Subsidiaries is a
party to any written (a) employment agreement or severance
agreement; (b) indenture, mortgage, note, installment obligation,
agreement or other instrument relating to the borrowing of money
by the Company or its Subsidiaries in excess of $25,000, or the
guaranty by the Company or any of its Subsidiaries of any
obligation for the borrowing of money; or (c) other agreement
which (i) is not terminable by the Company or any of its
Subsidiaries on ninety or fewer days' notice at any time without
penalty and (ii) involves the receipt or payment after the date
hereof of more
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than $25,000. All such agreements are valid, binding and
enforceable against the Company and its Subsidiaries in
accordance with their terms, and there exists no default under
any of the aforesaid agreements by the Company or its
Subsidiaries which is not capable of being cured without penalty.
The Company and its Subsidiaries do not have in effect firm or
fixed price sales contracts (as such terms are understood in the
business of the Company and its Subsidiaries) that represent more
than 5% of total gallons of propane committed to be sold after
the date of this Agreement under all sales contracts to which
either the Company or one of its Subsidiaries is a party.
4.15 COMPLIANCE WITH APPLICABLE LAW. The Company and its
Subsidiaries are currently conducting, and since January 1, 1994,
have conducted, their businesses in substantial compliance with
all applicable laws (whether statutory or otherwise), rules,
regulations, orders, ordinances, judgments, decrees, writs and
injunctions of all governmental authorities (federal, state,
local, foreign or otherwise) (collectively, "Laws"), including,
but not limited to (a) those promulgated by the United States
Department of Transportation and the Occupational Safety and
Health Administration with respect to: (i) random drug testing
of certain employees, (ii) training requirements with respect to
handling of hazardous materials, (iii) SARA Title II filings,
(iv) MSPS mailings to consumers, (v) recertifications of Depart-
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ment of Transportation cylinders, and (vi) annual inspections and
hydrostatic tests of trucks and any other motor vehicles, where
applicable, and (b) those respecting employment and employment
practices, terms and conditions of employment, wages and hours of
work. Neither the Company nor any of its Subsidiaries has
received written notification from any governmental authority in
the last three years with respect to any substantial
noncompliance which has not been cured or otherwise satisfied.
The Company and its Subsidiaries have all governmental approvals,
consents, licenses, registrations, and permits necessary to carry
on their businesses as presently conducted, and no event has
occurred which would allow revocation or termination of, or would
result in the impairment of its rights with respect to, such
approvals, consents, licenses, registrations or permits.
4.16 ENVIRONMENTAL MATTERS. Except as set forth in
Schedule 4.16 of the Disclosure Schedule:
(a) The Company and its Subsidiaries are in
substantial compliance with all applicable federal, state and
local laws and regulations, court orders and administrative
orders (subject to the Company's right to contest such orders in
good faith), permits and approvals relating to environmental
protection and pollution control (collectively, "Environmental
Laws"). Environmental Laws include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act
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("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"),
the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Emergency Planning and Community Right-to-Know
Act of 1986, and the Safe Drinking Water Act.
(b) Neither the Company nor any of its Subsidiaries
has received any written claim, notice, complaint, court order,
administrative order, or request for information from any
governmental authority or private party, alleging any violation
of any Environmental Laws by it.
(c) The Company and its Subsidiaries possess all
governmental permits, licenses, orders, consents and approvals
required under the Environmental Laws and necessary to the
ownership of their respective properties and to the conduct of
the current business, of the Company and its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries
has received from any governmental authority any (i) formal
complaint or notice asserting potential liability under the
Environmental Laws (which has not been cured to the satisfaction
of the governmental authority), (ii) written request for
information under Section 104(e) of CERCLA or any similar law, or
(iii) written request to investigate or cleanup any site under
the Environmental Laws; and neither the Company nor any of its
Subsidiaries has received formal written demand or suit by a
private party responsible for cleanup of such a site alleging
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that the Company or any of its Subsidiaries should share such
responsibility (which has not been resolved).
(e) To the knowledge of the Stockholders, neither the
Company nor any of its Subsidiaries has transported, or arranged
for the transportation of, any Hazardous Materials to any site
which is the subject of federal, state, or local enforcement
actions, or other governmental or private investigations. For
the purposes of this Section 4.16, "Hazardous Materials" are any
materials containing any (i) "hazardous substances" as defined by
CERCLA or any similar state law, (ii) petroleum, including crude
oil or any fraction thereof, (iii) natural gas, natural gas
liquids or synthetic gas usable fuel and (iv) friable asbestos.
(f) There has not been any release as defined in
CERCLA of Hazardous Materials at or from any facility or real
property owned, operated or leased by the Company or any of its
Subsidiaries, which release was required to be reported to a
governmental agency under Environmental Laws.
(g) Except as disclosed in Section 4.16 of the
Disclosure Schedule, there are no Underground Storage Tanks, as
defined in RCRA and under applicable state law, located on any
real property owned or leased by the Company or any of its
Subsidiaries. The Underground Storage Tanks set forth on Section
4.16 of the Disclosure Schedule are in compliance with the
Environmental Laws.
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(h) There are no friable asbestos containing materials
in a condition that requires remediation under the Environmental
Laws located at any facility or on any real property owned,
operated or leased by the Company or any of its Subsidiaries.
(i) There are no environmental audits, assessments or
studies within the possession of the Company or any of its
Subsidiaries with respect to the facilities or real property
owned or leased by the Company or any of its Subsidiaries.
4.17 AGREEMENTS WITH AFFILIATES. Except as set forth in
Section 4.17 of the Disclosure Schedule, neither the Company nor
any of its Subsidiaries has any outstanding contractual
obligations or agreements with any of the Stockholders, or S&J or
their respective affiliates (excluding any contractual
obligations or agreements between the Company and its
Subsidiaries or between any of the Subsidiaries).
4.18 SECURITIES AND EXCHANGE COMMISSION DOCUMENTS. Sellers
have heretofore made available to Buyer complete and correct
copies of each statement, report and final registration statement
in the form declared effective by the Securities and Exchange
Commission (the "SEC") filed by the Company with the SEC since
January 1, 1994 (the "SEC Documents"), which are all of the
documents in final form that the Company was required to file
with the SEC during such time period. As of their respective
filing dates, none of the SEC Documents contained any untrue
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statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under
which they were made, not misleading.
4.19 CERTAIN FEES. Except for the engagement of Morgan
Stanley & Co. Incorporated, none of the Stockholders, the
Company, any of its Subsidiaries or S&J has employed any
financial advisor or finder or incurred any liability for any
financial advisory or finders' fees in connection with this
Agreement or the transactions contemplated hereby.
4.20 INSURANCE. Section 4.20 of the Disclosure Schedule
contains a description of all insurance policies maintained by
the Company or its Subsidiaries on the Assets, the S&J Assets and
on their respective businesses and personnel. Such description
includes the insurance carrier, the amount of premiums
thereunder, the type of coverage and limits of coverage of such
policies and the expiration dates of the current premium periods
thereunder. No notice of cancellation or denial of renewal of
existing coverage exists with respect to such insurance policies.
4.21 SAFETY WARNINGS. The Company and/or its Subsidiaries
have periodically provided their customers with such safety
warnings and information as are customary in the business.
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4.22 ACQUISITION FOR INVESTMENT. The Stockholders have
such knowledge and experience in financial and business matters
that they are capable of evaluating the merits and risks of their
purchase of the Buyer Common Stock and the Buyer Preferred Stock.
The Stockholders are acquiring the Buyer Common Stock and the
Buyer Preferred Stock for investment and not with a view toward
or for sale in connection with any distribution thereof, or with
any intention of distributing or selling the Buyer Common Stock
or the Buyer Preferred Stock, and the Stockholders will not sell
or offer to sell or otherwise transfer the Buyer Common Stock or
the Buyer Preferred Stock in violation of the Securities Act of
1933, as amended.
4.23 DISCLOSURE. No representation or warranty by any of
the Stockholders or the Company in this Agreement, the Seller
Documents, the Disclosure Schedule, or the certificates described
in Section 7.2(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. Notwithstanding the foregoing, Buyer
acknowledges that none of Sellers or S&J make or have made any
representations or warranties other than those expressly set
forth in this Agreement, the Seller Documents, the Disclosure
Schedule and the certificates described in Section 7.2(c) hereof.
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Any written information provided by Sellers to Buyer in
connection with requests made by Buyer pursuant to Section
6.13(b) hereof, will not, on the date thereof, include any untrue
statement of material fact or omit to state a material fact
necessary to make the statements contained therein, in light of
the circumstances in which they were made, not misleading.
V. REPRESENTATIONS AND WARRANTIES OF BUYER AND NGC
Buyer, as to itself, and NGC, as to itself and Buyer, hereby
represent and warrant to Sellers as follows:
5.1 ORGANIZATION AND AUTHORITY. Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite
corporate power and corporate authority to execute and deliver
this Agreement, the Contract Escrow Agreement, the C&L Matters
Escrow Agreement, the Non-Competition Agreements, the
Stockholders' Agreement and the Promissory Note (collectively,
the "Buyer Documents") and to consummate the transactions
contemplated hereby or thereby. Buyer has delivered to Sellers
complete and correct copies of Buyer's Certificate of
Incorporation and By-Laws, as currently in effect. NGC is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all
requisite corporate power and corporate authority to execute and
deliver
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this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of the Buyer Documents and
the consummation of the transactions contemplated hereby and
thereby 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 the Buyer Documents or the
consummation of the transactions so contemplated. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of NGC and no other
corporate proceedings on the part of NGC are necessary to
authorize this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly
executed by Buyer and NGC, and at the Second Closing the Buyer
Documents will be, duly and validly executed and delivered by
Buyer and, assuming the due and valid execution and delivery by
each of the Sellers as appropriate, and by the Contract Escrow
Agent of the Contract Escrow Agreement and by the C&L Matters
Escrow Agent of the C&L Matters Escrow Agreement, each
constitutes, and when executed and delivered will constitute, a
valid and binding agreement of Buyer and NGC, enforceable against
them 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)
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as such enforceability may be limited by general principles of
equity, regardless of whether asserted in a proceeding in equity
or law.
5.2 CONSENTS AND APPROVALS; NO VIOLATION. Except for
applicable requirements of the HSR Act and Section 204 of the
Federal Power Act (the "FPA") and the regulations of the Federal
Energy Regulatory Commission ("FERC") thereunder, neither the
execution and delivery of this Agreement by NGC or the Buyer
Documents by Buyer nor the consummation by Buyer and NGC of the
transactions contemplated hereby or thereby, including
capitalizing and funding Buyer, nor compliance by Buyer and/or
NGC 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 NGC or Buyer or any of
their 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 NGC or any of their
respective subsidiaries is a party or by which any of their
respective assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which
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requisite waivers or consents have been obtained, or (d) assuming
compliance with the HSR Act, the FPA and the FERC regulations,
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer and/or NGC or any of their
respective affiliates.
5.3 LITIGATION.
(a) No claim, action, suit, proceeding or
investigation is pending or, to the best knowledge of Buyer,
threatened against Buyer or any of its subsidiaries, by or before
any court or governmental or regulatory authority.
(b) No claim, action, suit, proceeding or
investigation is pending or, to the best knowledge of Buyer or
NGC, threatened against NGC, or its subsidiaries or affiliates,
by or before any court or governmental or regulatory authority
which challenges the validity of this Agreement or the Buyer
Documents or which, if adversely determined, would have a
material adverse effect on the ability of Buyer or NGC to
consummate the transactions contemplated by this Agreement or the
Buyer Documents.
5.4 FINANCING. Section 5.4 of a disclosure schedule being
delivered by Buyer and NGC to Sellers concurrently herewith (the
"Buyer Disclosure Schedule") sets forth the terms of temporary
financing (including executed bank loan commitments) (such
financing on such terms, the "Temporary Financing") and the terms
of the planned permanent financing (such financing on such terms,
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the "Permanent Financing"), pursuant to which Buyer and NGC
intend to obtain the funds necessary to consummate the
transactions contemplated hereby.
5.5 FINANCIAL STATEMENTS. NGC has delivered to Sellers a
consolidated balance sheet of NGC and its subsidiaries as of
March 31, 1995 which presents fairly the consolidated financial
position of NGC and its subsidiaries as of such date. Since such
date, there has been no material adverse change in the
consolidated financial position of NGC and its subsidiaries,
except as may be caused by execution and performance of this
Agreement and consummation of the transactions contemplated
hereby. NGC has, and at all times through the Second Closing
Date shall have, a net worth of at least $50 million.
5.6 ACQUISITION FOR INVESTMENT. Buyer has such knowledge
and experience in financial and business matters that it is
capable of evaluating the merits and risks of its purchase of the
Shares and the Series B Shares. Buyer is acquiring the Shares
and the Series B Shares for investment and not with a view toward
or for sale in connection with any distribution thereof, or with
any intention of distributing or selling the Shares or the Series
B Shares, and Buyer will not sell or offer to sell or otherwise
transfer the Shares or the Series B Shares in violation of the
Securities Act of 1933, as amended.
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5.7 BROKERS AND FINDERS. None of Buyer, NGC or any of
their respective 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 Sellers or S&J or any
of their affiliates to pay any finder's fee, brokerage commission
or similar payment in connection with the transactions
contemplated hereby.
5.8 CAPITALIZATION OF BUYER.
The authorized capital stock of Buyer consists of (i)
100,000 shares of common stock, par value $.01 per share ("Buyer
Common Stock"), of which 1,000 shares are issued and outstanding
and held by NGC, 71,500 shares are reserved for issuance to NGC
and 10,000 shares are reserved for issuance to Empire, each for
the consideration set forth in Section 5.8 of the Buyer
Disclosure Schedule, and 17,500 shares are reserved for issuance
to the Stockholders pursuant to, and for the consideration
included in, this Agreement, (ii) 100,000 shares of preferred
stock, par value $.01 per share, of which no shares are issued or
outstanding, but of which 70,500 shares are reserved for issuance
as Series A 15% Cumulative Preferred Stock of Buyer ("Buyer
Series A Preferred Stock"), of which 68,000 shares of such series
are reserved for issuance to NGC or its parent corporation,
Northwestern Public Service Company ("NWPS"), for a cash price of
$68,000,000 immediately prior to the First Closing (based on an
aggregate cash
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purchase price of $137,500,000, but subject to adjustment in the
event of a Working Capital adjustment to such cash purchase price
and in accordance with Section 6.24 hereof) and 2,500 of such
shares are reserved for issuance to the Contract Escrow Agent
pursuant to, and for the consideration included in, this
Agreement. The 1,000 shares of Buyer Common Stock that are
issued and outstanding are validly issued, fully paid and non-
assessable and are not subject to preemptive rights; and the
remaining shares of Buyer Common Stock, and the shares of Buyer
Series A Preferred Stock, reserved for issuance as aforesaid,
when issued for the purposes, and at the prices, for which
reserved as aforesaid, will be validly issued, fully paid and
nonassessable and will not be subject to preemptive rights.
5.9 DISCLOSURE. No representation or warranty by Buyer or
NGC in this Agreement, the Buyer Documents, the Buyer Disclosure
Schedule or the certificates described in Section 7.1(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.
Notwithstanding the foregoing, Sellers acknowledge that neither
Buyer nor NGC has made any representations or warranties other
than those expressly set forth in this Agreement, the Buyer
Documents, the Buyer Disclosure Schedule and the certificates
described in Section 7.1(c) hereof.
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5.10 CONTRACTS, AGREEMENTS AND ARRANGEMENTS. Except for
this Agreement and the Buyer Documents and except as set forth in
Section 5.10 of the Buyer Disclosure Schedule, there is no
contract, deed of trust, mortgage, lease, indenture, or other
agreement or arrangement, oral or written, to or by which Buyer
is a party or bound or between holders of equity interests in
Buyer. Section 5.10 of the Buyer Disclosure Schedule also sets
forth any such contract, agreement or arrangement not currently
in existence but which Buyer intends, or is aware of parties
intending, to enter into prior to or as of the Second Closing
Date. Buyer has delivered to Sellers all such contracts,
agreements and arrangements currently in existence. Buyer will
notify Sellers if Buyer intends, or becomes aware of parties
intending, to modify, amend or terminate such contracts,
agreements or arrangements.
5.11 SUBSIDIARIES. As of the date of this Agreement, Buyer
does not own, directly or indirectly, any shares of capital
stock, partnership interests, or other participation, rights or
other interests in the nature of an equity interest in any
corporation, partnership, company, trust or other entity, or any
option, warrant, or other security convertible into any of the
foregoing. As of the First Closing Date Buyer will not own any
of the foregoing, except for shares of capital stock in wholly
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owned subsidiaries, newly formed for the purpose of the
consummation of the transactions contemplated hereby.
5.12 ASSETS AND LIABILITIES. Except for the assets and
capital stock to be acquired and liabilities to be incurred or
assumed pursuant to the terms of this Agreement or in connection
with the transactions contemplated hereby, Buyer does not have,
and at the First Closing Date and the Second Closing Date will
not have, any tangible or intangible assets, real, personal or
mixed, tangible or intangible, or liabilities, contingent or
otherwise.
5.13 COMPLIANCE WITH LAWS. Buyer is in substantial
compliance with all applicable Laws.
VI. COVENANTS OF THE PARTIES
6.1 CONDUCT OF BUSINESS. From the date hereof through the
Second Closing Date, except as provided for in, or contemplated
by, this Agreement, and, except as otherwise consented to or
approved by Buyer in writing, the Stockholders covenant and agree
that:
(a) The Company and each of its Subsidiaries shall
operate their businesses in the ordinary course consistent with
past practices;
(b) Neither the Company nor any of its Subsidiaries
shall issue, sell or agree to issue or sell (i) any shares of its
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capital stock, or (ii) any securities convertible into, or
options with respect to, or warrants to purchase or rights to
subscribe for, any shares of its capital stock;
(c) The Company shall not declare, set aside or pay
any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital
stock, or redeem, repurchase or otherwise acquire any of its
securities;
(d) Neither the Company nor any of its Subsidiaries
shall incur or assume any indebtedness for borrowed money except
under the Credit Agreement in an amount not to exceed $25 million
or issue or sell any debt securities or warrants or rights to
acquire any debt securities;
(e) Except as required by applicable law, or
contractual obligations or other understandings or arrangements
existing on the date hereof which have been disclosed to Buyer in
this Agreement or in the Disclosure Schedule, neither the Company
nor any of its Subsidiaries shall (i) increase or agree to
increase in any manner the compensation of, or increase or agree
to increase the bonus or incentive compensation of, enter into
any new bonus or incentive agreement or arrangement with, any of
its directors, officers or other employees; provided, however,
the Company may increase the compensation of its and its
Subsidiaries' employees on an individual basis in connection with
annual
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performance reviews conducted in the ordinary course of business
consistent with past practice, which increase shall not be in
excess of 5% of each such employee's total annual compensation;
and provided, further, that such compensation increases for
employees at the Company's Farmingdale office in the aggregate
shall not be in excess of $50,000 on an annualized basis; (ii)
pay or agree to pay any pension, retirement allowance or other
employee benefit to any such director, officer or employee,
whether past or present; (iii) enter into any new employment,
severance, consulting, or other compensation agreement with any
existing director, officer or employee or amend or commit itself
to amend any such agreement or similar arrangement in existence
on the date hereof; (iv) commit itself to any additional pension,
profit-sharing, deferred compensation, group insurance, severance
pay, retirement or other employee benefit plan, fund or similar
arrangement or amend or commit itself to amend any of such plans,
funds or similar arrangements in existence on the date hereof; or
(v) enter into any new collective bargaining agreement or amend
any existing collective bargaining agreement;
(f) 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, and except as permitted in Section
6.1(o) hereof, neither the Company nor any of its Subsidiaries
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shall (i) sell, transfer or otherwise dispose of any assets or
purchase, lease or acquire the use of any assets, (ii) create or
permit to exist any new security interest, lien or encumbrance on
its properties or assets, or (iii) purchase any securities of any
person;
(g) The Company and its Subsidiaries shall maintain
their owned and leased properties including but not limited to
the S&J 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;
(h) The Company and its Subsidiaries shall not enter
into any contract or commitment or engage in any transaction not
in the ordinary course of business and consistent with their past
business practices;
(i) The Company and its Subsidiaries shall maintain in
effect adequate insurance coverages substantially similar to
those listed on Section 4.20 of the Disclosure Schedule;
(j) The Company and each of its Subsidiaries shall use
commercially reasonable efforts to preserve their business
organizations intact, to keep available to Buyer to the extent
requested by Buyer their present key officers and employees and
to preserve for Buyer the present relationships with their
suppliers and customers and others having business relations with
the Company and/or its Subsidiaries;
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(k) Neither the Company nor any of its Subsidiaries
shall 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;
(l) Neither the Company nor any of its Subsidiaries
shall do any act or omit to do any act, or permit any act or
omission to act if within their reasonable control, which will
cause a material breach of any of their respective contracts,
commitments or obligations;
(m) The Company and each of its Subsidiaries shall
substantially comply with all laws, regulations and orders
applicable to their business or the Assets or as may be required
for the valid and effective transfer of the Assets and the
Company or S&J shall substantially comply with all laws,
regulations and orders applicable to the S&J Assets or as may be
required for the valid and effective transfer of the S&J Assets;
(n) The Company and each of its Subsidiaries shall
maintain their books of account and financial records in the
usual, regular and ordinary manner in accordance with GAAP on a
basis consistent with prior years, and shall make no change in
any of their accounting methods or practices (except as required
by GAAP);
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(o) Neither the Company nor any of its Subsidiaries
shall expend, or agree or commit to expend, in excess of $50,000
in the aggregate for the purchase or lease of any capital assets;
(p) Neither the Company nor any of its Subsidiaries
shall amend their respective Certificates of Incorporation or
By-Laws, nor shall the shareholders or directors of any of them
have voted to approve any such amendment; and
(q) Neither the Company nor its Subsidiaries shall
agree to take any action prohibited by this Section 6.1.
6.2 ACCESS TO INFORMATION. The Stockholders will cause the
Company and its Subsidiaries to (i) give Buyer and its authorized
representatives reasonable access to all books and records (other
than customer lists and competitive price information) and
offices, other facilities and properties of the Company and its
Subsidiaries; (ii) permit Buyer and its authorized
representatives to make such inspections thereof as Buyer may
reasonably request; and (iii) cause their officers to furnish
Buyer and its authorized representatives with such financial and
operating data and other information with respect to the business
and properties of the Company and its Subsidiaries 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 business of the Company
and its Subsid-
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iaries; and provided, further that such investigation shall not
include visits to the retail branches of the Company or any of
its Subsidiaries until following receipt of the initial issuance
of the FERC order required for the transactions contemplated by
this Agreement. In addition to the foregoing, Buyer will have
such rights and privileges as set forth on Schedule III attached
hereto.
6.3 COMMERCIALLY REASONABLE EFFORTS. Subject to the
express terms and conditions of this Agreement, each of Sellers,
Buyer and NGC will use all commercially reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable
laws and regulations to satisfy the conditions set forth in
Article VII hereof and to consummate the transactions
contemplated by this Agreement without unnecessary delay.
6.4 REGULATORY APPROVALS. (a) HSR Act. Sellers, Buyer
and NGC 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 all commercially reasonable
efforts to respond promptly to any request for additional infor-
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mation, or other formal or informal request for information,
witnesses or documents which may be made by any governmental or
regulatory authority pertaining to the transactions contemplated
hereby, and shall prepare promptly all further applications and
instruments necessary or 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.
(b) FERC. Buyer and NGC shall, and shall cause NWPS,
to promptly make any and all filings which are required under
Section 204 of the FPA to enable NWPS, Buyer and NGC to obtain
the Temporary Financing and the Permanent Financing.
6.5 CONSENTS. Each of Sellers, Buyer and NGC shall
cooperate, and use all commercially reasonable efforts, to make
all filings and obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of
governmental authorities, including FERC, and other third parties
necessary to consummate the transactions contemplated by this
Agreement and to carry on the business of the Company and its
Subsidiaries substantially in the manner as heretofore conducted.
6.6 PUBLIC ANNOUNCEMENTS. Prior to the Second Closing
Date, the Stockholders, the Company, Buyer and NGC will consult
with each other before issuing any report, statement or press
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release 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 (except
as required by the HSR Act, and the rules and regulations of
FERC, the SEC, the New York Stock Exchange and the South Dakota
Public Utility Commission) approval of the other party (which
shall not be unreasonably withheld). Statements made to
employees, investment bankers, financing institutions and rating
agencies after the transactions contemplated by this Agreement
are publicly announced shall not be deemed public for this
purpose.
6.7 SUPPLEMENTAL DISCLOSURE. Sellers shall have the right
from time to time prior to the Second Closing to supplement the
Disclosure Schedule 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
Disclosure Schedule. However, no such supplement of the
Disclosure Schedule shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless Buyer
specifically agrees thereto in writing.
6.8 BOOKS AND RECORDS. Sellers and Buyer agree that, so
long as any books, records and files relating to the business,
properties, assets or operations of the Company and its Subsid-
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iaries, to the extent that they pertain to the operations of the
Company and its Subsidiaries prior to the Second Closing Date,
remain in existence and available, each party (at its expense)
shall (i) have the right to inspect and to make copies of the
same at any time during business hours for any proper purposes,
and (ii) give written notice to the other party within 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.
6.9 EMPLOYEES; EMPLOYEE BENEFITS. Buyer agrees that it
shall cause the Company and its Subsidiaries to offer employment
to each person who is an employee of the Company or any of its
Subsidiaries on the Second Closing Date upon substantially the
same terms and conditions (except as otherwise set forth in this
Section 6.9) as such employee was employed immediately prior to
the Second Closing, whether as an employee at will or pursuant to
contract. Buyer shall cause the Company and its Subsidiaries to
provide those persons who continue to be employed by the Company
and its Subsidiaries with salary and benefits that are
substantially equivalent in the aggregate to the salary (to the
extent such salaries have been established in accordance with
Section 6.1 of this Agreement) and benefits (to the extent such
benefits have been disclosed to Buyer on Section 4.13 of the
Disclosure
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Schedule) provided to them immediately prior to the Second
Closing Date; provided, however, that the Buyer shall have no
obligation to cause the Company and its Subsidiaries to maintain
any particular plan or form of benefit. Buyer shall cause the
Company to satisfy all obligations imposed by applicable law.
Buyer agrees that all periods of employment of each of the
employees with the Company or its Subsidiaries prior to the
Second Closing Date shall constitute service for eligibility and
vesting purposes under any plan offered to employees of the
Company and its Subsidiaries following the Second Closing Date.
Buyer agrees to provide, or cause the Company to provide, the
employees of the Company and its Subsidiaries on the Second
Closing Date with the severance benefits set forth in the
agreement between Buyer and the Company dated May 17, 1995.
Buyer and the Company agree that they will not modify or amend
such severance benefits in a manner that will be adverse to the
employees. Buyer further agrees that such severance plan shall
be deemed disclosed by the Sellers for all purposes under this
Agreement. Buyer agrees that the Company shall retain all
liability for salary and benefit matters occurring subsequent to
the Second Closing Date.
6.10 CERTAIN TAX MATTERS. (a) Buyer shall pay all sales,
use, transfer, filing, conveyance, recording, and other similar
taxes and fees, including, without limitation all applicable
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transfer taxes, recording fees, stock transfer taxes and the New
York State Real Property Transfer Gains Tax (New York
Consolidated Laws Service Tax Section 1441 (1994)) (collectively,
"Transfer Taxes"), arising out of or in connection with the
transactions effected pursuant to this Agreement. Buyer shall
(at its sole cost and expense) prepare and file all necessary Tax
Returns and other documents (other than those which S&J is
required by law to file) with respect to such Transfer Taxes. If
required by applicable law, Sellers will join in the execution of
any such Tax Returns or other documentation.
(b) The Stockholders shall prepare and file, or cause
to be prepared and filed, on a timely basis and at Stockholders'
sole cost and expense, all Tax Returns relating to the Company or
any of its Subsidiaries for the taxable period ending on March
31, 1995. Buyer shall prepare and file, or cause to be prepared
and filed, on a timely basis and at Buyer's sole cost and expense
all Tax Returns relating to the Company and/or its Subsidiaries
for the taxable period commencing April 1, 1995 and ending on the
Second Closing Date. Buyer shall pay, or cause to be paid,
subject to Article IX, on a timely basis all Taxes shown to be
due on the Tax Returns referred to in this paragraph (b), to the
extent such Taxes are accrued in the Statement of Working Capital
as of the Second Closing Date or are due with respect to the
transactions contemplated by this Agreement.
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(c) Buyer shall, or shall cause the Company to,
promptly notify the Stockholders' Agent of the receipt of any
notice from any taxing authority of an audit or other contest of
the Company's or any of its Subsidiaries' Tax Returns for any
taxable period for which the Stockholders are required to
indemnify Buyer under Section 9.2(b) hereto. The Stockholders'
Agent and Buyer shall act together in good faith and shall
jointly control, each at their own expense, any proceeding with
respect to such audit or other contest; provided, however, that
the Stockholders' Agent shall have primary responsibility and
sole authority, after consulting with Buyer, for communicating
with such taxing authority and taking all other actions deemed
necessary or desirable by such parties in connection with such
matters. Neither the Stockholders' Agent nor Buyer shall have
the right, without the prior written consent of the other, which
shall not be unreasonably withheld, to resolve or settle any
issue with any taxing authority in any such proceeding. With
respect to audits of the Company's federal Tax Returns for the
taxable period referred to in this Section 6.10(c), Buyer and the
Stockholder's Agent shall mutually agree as to the appropriate
site at which such audit shall be conducted.
(d) Buyer and Sellers shall provide the other party
with such assistance as may reasonably be requested by either of
them in connection with the preparation of any Tax Return of the
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Company and its Subsidiaries or 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 liability for Taxes of the Company and
its Subsidiaries or 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 6.10 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.
6.11 CONFIDENTIALITY AGREEMENT.
(a) Buyer and NGC shall at all times comply with all
terms and provisions of the Confidentiality Agreement between
NWPS and the Company, dated as of December 19, 1994, as if Buyer
and NGC were the signatories to such Confidentiality Agreement
(the "Confidentiality Agreement"), including, but not limited to,
the provisions restricting Buyer and NGC from hiring and
soliciting employees of the Company and its Subsidiaries.
(b) In addition to the foregoing, it is understood and
agreed that Buyer and NGC and any of their respective affiliates
or representatives shall not be provided with additional
information regarding the Company or any of its Subsidiaries or
the
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operation of their business, until such time that Buyer and NGC
each execute and deliver to the Company a new or supplemental
confidentiality agreement with the Company whereby such parties
agree to, and to cause their respective affiliates and
representatives to, keep such information confidential and not to
hire the employees of the Company or any of its Subsidiaries for
a period of eighteen months from the date thereof; provided, that
such agreement shall terminate upon consummation of the Second
Closing. Buyer and NGC will not provide any information or
access to information to Empire or its affiliates or
representatives until it has executed a similar agreement. The
agreements of Buyer, NGC and Empire shall also contain the
provision that they shall not provide any information or access
to information to any entity in direct or indirect competition
with the Company or such entity's affiliates or representatives
until such entity has executed a similar agreement.
6.12 THE SERIES A NOTES. Simultaneously with the First
Closing, the Stockholders and Buyer shall cause the Company to
(a) deliver the notice required for redemption of the Series A
Notes to the trustee under the Indenture (the "Trustee"), if not
previously delivered, and (b) instruct the Trustee to act on the
Company's behalf and issue the required notice of redemption to
the holders of all issued and outstanding Series A Notes.
Following the Second Closing, Buyer shall, and shall cause the
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Company, the Trustee and the Paying Agent to, do all things
necessary or desirable to enable the Company to consummate the
redemption in compliance with the terms of this Agreement and the
Indenture as soon as possible.
6.13 FINANCING. (a) Buyer and NGC will, and will cause
NWPS to, use all commercially reasonable efforts to obtain the
Temporary Financing as soon as practicable. Buyer and NGC will
provide Sellers with periodic updates of the status and progress
of such financing, as reasonably requested by Sellers. Buyer and
NGC shall provide Sellers with all loan agreements relating to
the Temporary Financing, as reasonably requested by Sellers.
Buyer and NGC will promptly advise Sellers of any material
changes in such financing or if there develops a reasonable
likelihood that such financing will not be obtained.
(b) Sellers agree to cooperate with Buyer and comply
with all reasonable requests for information with respect to the
Company made by Buyer in connection with NWPS, NGC and Buyer
obtaining the Temporary Financing, the Permanent Financing, and
any necessary authorization from FERC. NWPS intends to prepare
and file with the SEC one or more registration statements to
register for sale by underwritten public offerings the securities
of NWPS (the "Registration Statements"), and/or to prepare and
use one or more private placement memoranda for the private
placement offering and sale of all or some of such securities
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("Private Placement Memoranda"), each pursuant to the terms of
the Permanent Financing described in the Buyer Disclosure
Schedule, all as soon as reasonably practicable after the date of
this Agreement. In connection with such Registration Statements
and Private Placement Memoranda, the Sellers shall furnish to
NGC, for use by NWPS, such information relating to the Company
and its Subsidiaries, their businesses, properties and financial
condition and results of operations, as may be reasonably
requested by NGC to enable completion of such Registration
Statements and Private Placement Memoranda. Buyer agrees to
provide Sellers with copies of all documents containing
descriptions of, or information with respect to, Sellers, S&J, or
the transactions contemplated hereby, and the inclusion of such
descriptions and information in such documents shall be subject
to the Stockholders' Agent's approval (which shall not be
unreasonably withheld).
6.14 RESIGNATIONS. Simultaneously with the Second Closing,
each Stockholder shall resign from all positions held as of such
date as a director, officer or employee of the Company or its
Subsidiaries.
6.15 COVENANT NOT TO COMPETE. Simultaneously with the
Second Closing, the Stockholders' Agent shall deliver to Buyer
Non-Competition Agreements, substantially in the form of Exhibit
A attached hereto, executed by all of the Stockholders, which by
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their terms will take effect on the Second Closing Date and
terminate on the third anniversary of the Second Closing Date
(the "Non-Competition Agreements"). The parties hereto agree
that no portion of any purchase price paid pursuant to this
Agreement shall be allocated to the Non-Competition Agreements.
6.16 STOCKHOLDERS' AGREEMENT. Simultaneously with the
Second Closing, Buyer and the Stockholders' Agent, on behalf of
the Stockholders, shall enter into a Stockholders Agreement,
substantially in the form of Exhibit B attached hereto (the
"Stockholders' Agreement").
6.17 CONTRACT ESCROW AGREEMENT. Simultaneously with the
Second Closing, Buyer, the Stockholders' Agent, on behalf of the
Stockholders, and the escrow agent named therein, shall enter
into an Escrow Agreement, substantially in the form attached
hereto as Exhibit C (the "Contract Escrow Agreement").
6.18 COMPANY AUDIT. The Company shall cause its auditors
to conduct and complete their audit of the financial statements
of the Company and its Subsidiaries for the fiscal year ended
March 31, 1995 and, as soon as received by the Company, the
Company shall provide to Buyer the Company's audited financial
statements for the fiscal year ended March 31, 1995, together
with the notes thereto and the auditors report thereon (the
"March 1995 Financial Statements").
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6.19 SUBSIDIARY CORPORATE ACTION. Prior to the First
Closing, Sellers will cause all necessary corporate action to be
taken by the Subsidiaries as needed to duly authorize the
Subsidiaries to consummate the sale of the Assets at the First
Closing.
6.20 NGC GUARANTY. NGC hereby unconditionally and
irrevocably guarantees the full and punctual performance and
compliance by Buyer and its permitted assigns with respect to all
actions, commitments and obligations of Buyer set forth in this
Agreement (subject to the terms and conditions hereof). In the
event Buyer or its permitted assigns fail to perform or comply
with any such action, commitment or obligation, NGC shall fully
and punctually perform or comply with such action, commitment or
obligation. NGC hereby agrees that it shall not be necessary for
Sellers or S&J to give any notice to NGC, or make any request of
NGC, or institute any arbitration, suit or proceeding or obtain a
judgment or order or exhaust its legal remedies against Buyer in
order for NGC to perform under this Section 6.20. NGC hereby
waives (i) demand by Sellers or S&J for performance of, or
failure by Buyer to perform, its obligations under or arising out
of this Agreement (subject to the terms and conditions hereof),
and (ii) all other notices for which NGC might otherwise be
entitled in connection with this guaranty. If Buyer assigns any
rights under this Agreement, NGC's obligation to guaranty Buyer's
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full and punctual performance hereunder shall remain in full
force and effect and shall not be altered or affected thereby.
6.21 OTHER DOCUMENTS OF BUYER. From the date of this
Agreement through the Second Closing Date, Buyer shall not modify
or amend its certificate of incorporation or by-laws or amend the
terms of the Temporary Financing or the Permanent Financing in a
manner that would (i) adversely affect Buyer's and NGC's ability
to consummate the transactions contemplated hereby, or (ii) make
such financing more difficult to obtain.
6.22 TITLE EXAMINATION. Buyer shall have the right, at
Buyer's option and Buyer's sole cost and expense, to order title
insurance commitments for real estate owned by the Company or any
of its Subsidiaries and security interest, tax lien and judgment
searches at the state and county levels. Sellers shall cooperate
with Buyer and Sellers will use all commercially reasonable
efforts to comply with all reasonable requests of Buyer to assist
Buyer in the foregoing.
6.23 SENIOR SUBORDINATED NOTES. If, at any time prior to,
at, or after the Second Closing Date, Buyer, NGC or the Company
or any of their respective affiliates redeem or otherwise
purchase any of the Company's 11 % Senior Subordinated Notes due
November 1997 (the "Senior Subordinated Notes") at an amount less
than the principal amount (plus accrued interest thereon to the
date of redemption or purchase), Buyer shall pay to the
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Stockholders' Agent for the account of the Stockholders, as
additional purchase price for the Shares within ten days of such
redemption or purchase (but not earlier than the Second Closing
Date), the difference between the principal amount of such Senior
Subordinated Notes (plus accrued interest thereon to the date of
redemption or purchase) and the amount actually paid by such
person for such Senior Subordinated Notes. The issued and
outstanding principal amount of Senior Subordinated Notes as of
the Second Closing Date, together with interest accrued thereon
through such date, is referred to herein as the "Senior
Subordinated Note Amount."
6.24 CAPITALIZATION. Subject to the conditions hereof,
NGC hereby covenants to purchase from Buyer, or cause NWPS to
purchase from Buyer, and Buyer hereby covenants to issue to NGC
or NWPS, as the case may be, immediately prior to the First
Closing, for an aggregate cash purchase price equal to
approximately 50% of the aggregate cash purchase price to be paid
by Buyer at the First Closing and the Second Closing, the capital
stock of Buyer as set forth in Section 5.8 hereof.
6.25 TANK INVENTORY. (a) The Stockholders will deliver at
the First Closing, the results of a physical inventory of the
consumer propane tanks owned by the Company and its Subsidiaries
which are held in inventory and a verification of executed tank
contracts, customer supply agreements executed by the customer
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relating to tanks with a capacity of 100 pounds or less which
states that the Company or the Subsidiary is providing the tank
for use by the customer (such agreement shall not be required to
list a serial number for the tank), work orders executed by the
customer (such work order shall include the serial number of the
tank), bills of sale, and tank supplier invoices, as of the First
Closing Date (the "Tank Inventory"). Buyer will be given
adequate advance notice of the inventory being taken and the
verification being performed and be permitted to have Buyer's
authorized representatives observe such process.
(b) As soon as practicable, but not later than 180
days after the First Closing Date, Buyer shall have the right to
dispute the Tank Inventory based on its own physical inventory or
otherwise as of the Second Closing Date by delivering a notice of
Claim pursuant to Article IX hereof. In addition, Buyer shall
provide the Stockholders' Agent with periodic status reports with
respect to Buyer's verification of the Tank Inventory and within
90 days after the First Closing Date, Buyer shall provide the
Stockholders' Agent with a detailed report with respect to such
verification. If Buyer does not dispute the Tank Inventory, the
Tank Inventory shall be binding for purposes of determining a
breach of Section 4.9(a) hereof with respect to ownership of
consumer propane tanks or the Tank Overage Amount (as defined in
Section 6.25(c) hereof). The Stockholder's Agent shall have the
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opportunity to assist in establishing the Company's or any of its
Subsidiaries' good title as defined in Section 4.9(a) hereof to
such tank. Buyer shall reasonably cooperate with the
Stockholders' Agent in such effort. The final tank inventory
number, whether it be the Tank Inventory, an inventory agreed to
between Buyer and the Stockholders' Agent in writing, or an
inventory determined by an arbitrator, shall be the "Final Tank
Inventory".
(c) To the extent there exists a net deficiency (after
applying the credits referred to in Section 4.9(a) hereof) in the
number of consumer propane tanks on the Final Tank Inventory when
compared to the net number of tanks set forth on Section 4.9(a)
of the Disclosure Schedule (after applying the 5% "deductible"
referred to in Section 4.9(a) hereof), such deficiency shall be
reduced to an amount of Damages (as defined in Section 9.2(a)
hereof) determined by reference to the American Tank and Welding
new tank price for such types and sizes of tanks, plus shipping
costs, except that to the extent Buyer is able to acquire used
tanks of the same types and sizes which are in generally good
condition and fit for their intended use at a tank price plus
shipping costs that is less than the new tank price plus shipping
costs (from a source identified to Buyer by the Stockholders'
Agent), then such used tank price shall be used to determine
Damages. Buyer shall provide the Stockholders' Agent with
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written notice of a deficiency and the Stockholders' Agent shall
have 30 days from receipt of such notice to identify used tanks
for purchase by Buyer. To the extent the net number of tanks set
forth on the Final Tank Inventory is more than 5% greater than
the net number of tanks represented on Section 4.9(a) of the
Disclosure Schedule (after applying the credits referred to in
Section 4.9(a) hereof), then such overage shall be reduced to a
dollar amount by reference to 66-2/3% of the American Tank and
Welding new tank price, plus shipping costs, for such types and
sizes of tanks. The aggregate dollar amount of such overage
shall be referred to herein as the "Tank Overage Amount."
6.26 C&L MATTERS ESCROW AGREEMENT. Simultaneously with the
Second Closing, Buyer, the Stockholders' Agent, on behalf of the
Stockholders, and the escrow agent named therein, shall enter
into an Escrow Agreement, substantially in the form attached
hereto as Exhibit D (the "C&L Matters Escrow Agreement").
6.27 THE PROMISSORY NOTE. The Promissory Note shall be
payable in three successive equal annual installments one each on
the first three anniversaries of the Second Closing Date, plus
interest then accrued but previously unpaid thereon as part of
each such installment; provided, that the unpaid principal
balance shall not bear interest during the first 12 months after
the date of issuance of the Promissory Note and thereinafter
shall bear interest at a rate of 9 1/2% per annum. The Promis-
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sory Note shall be in a form mutually satisfactory to the
Stockholders' Agent and Buyer and shall have the typical
characteristics of an unsecured obligation of its kind and shall
be subject to acceleration of maturity on account of any default
thereunder and shall be subject to prepayment in whole at any
time or in part from time to time without penalty or premium of
any kind.
6.28 SECTION 351 OF THE CODE. Each of the Sellers and
Buyer agree to report, for federal and state income tax purposes,
the transfer of the Class A Common Stock, the Class B Common
Stock and the cash of Buyer in exchange for Buyer Common Stock,
Buyer Series A Preferred Stock and cash as a transaction governed
by Section 351 of the Code and agree to act in accordance
herewith (a) in the preparation of financial statements, (b) in
the filing of all tax returns and (c) except as otherwise
required by law, during the course of any tax audit, tax review
or tax litigation relating thereto. The parties hereto
acknowledge that references to purchase and sale of the Class A
and Class B Common Stock are for the convenience of the parties
and are not intended to effect treatment of the transaction under
the Code.
6.29 LEASE OF CERTAIN ASSETS. The Buyer agrees that it
will enter into an operating lease with each of the Operating
Subsidiaries concurrently with the First Closing pursuant to
which the Operating Subsidiaries will be permitted to use the
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Assets and the S&J Assets in the operation of their businesses.
The parties agree that the lease will be solely for the Buyer's
benefit and lease payments thereunder shall be based on the fair
market value and the term shall be for at least one year.
VII. CONDITIONS
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7.1 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND S&J AT THE
FIRST CLOSING. The obligations of the Company and S&J to
consummate the transactions contemplated by this Agreement to
occur at the First Closing are subject to the fulfillment at or
prior to the First Closing of each of the following conditions
(any or all of which, except for the condition set forth in
Section 7.1(f) hereof, may be waived in whole or in part by the
Company):
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by Buyer and NGC in this
Agreement shall be true and correct when made and at and as of
the First Closing Date as though such representations and
warranties were made at and as of the First Closing Date, except
for representations and warranties that speak as of a specific
date or time other than the First Closing Date (which need only
be true and correct as of such date or time).
(b) PERFORMANCE. Buyer and NGC shall have performed
and complied with all agreements, obligations, covenants and
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conditions required by this Agreement to be so performed or
complied with by Buyer at or prior to the First Closing.
(c) OFFICER'S CERTIFICATES. Buyer and NGC shall have
each delivered to Sellers a certificate, satisfactory in form to
Sellers, dated the First Closing Date and executed by an
executive officer of Buyer and NGC, respectively, to the effect
of paragraphs (a) and (b) above and to the effect that Buyer and
NGC each intend to consummate the Second Closing and is not aware
of any reason the Second 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 significant damages or other material remedies on any of
the Stockholders; provided that the Board of Directors of the
Company (in the case of clause (i)) or the Stockholders' Agent
(in the case of clause (ii)) shall have determined, after
consultation with counsel, that it is necessary to abandon the
transactions contemplated by this Agreement because of the
institution of such suit, action, investigation, inquiry or
proceeding.
(e) NO INJUNCTION. There shall not be in effect any
writ, judgment, order (including a preliminary restraining
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order), injunction or decree of any court or governmental agency
or body of competent jurisdiction enjoining, restraining or
prohibiting the consummation of the transactions contemplated
hereby.
(f) EXPIRATION OR TERMINATION OF HSR ACT PERIOD. Any
waiting periods applicable to the transactions contemplated by
this Agreement under the HSR Act shall have expired or been
terminated.
(g) RELEASE OF LIENS. The Liens on assets of the
Company and its Subsidiaries securing the Notes, the Indenture
and related documents shall be released at or prior to the First
Closing.
(h) EMPIRE INDEMNITY. The Stockholders' Agent shall
have received a written, enforceable commitment (in form and
substance satisfactory to the Stockholders' Agent) of Empire to
indemnify the Stockholders and S&J if the Stockholders or S&J
incur any liability or expense in any proceeding by a third party
(including a governmental authority) alleging that the
involvement of Empire (or any of its affiliates) in the
transactions contemplated by this Agreement (including its
investment in Buyer and its proposed operation of the business of
the Company and its Subsidiaries) (a) breaches a contractual or
other obligation owed by Empire (or any of its affiliates) to
such third party or (b) violates any law, regulation or judicial
or administrative
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order (assuming compliance with the applicable requirements of
the HSR Act) or (c) was not duly authorized by Empire as required
by corporate law or its charter or by-laws.
(i) CONSENTS. Sellers shall have obtained all
consents, waivers and approvals required for consummation of the
transactions contemplated by this Agreement to occur at the First
Closing not otherwise required by Section 7.1(f).
(j) DELIVERY OF DOCUMENTS AND OTHER ITEMS. Buyer and
NGC shall have delivered the documents and other items required
to be delivered to or for Sellers hereunder, including those to
be delivered at the First Closing pursuant to Section 3.3 of this
Agreement.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER AT THE FIRST
CLOSING. The obligations of Buyer to consummate the transactions
contemplated by this Agreement to occur at the First Closing are
subject to the fulfillment at or prior to the First Closing of
each of the following conditions (any or all of which, except for
the conditions set forth in Section 7.2(f) hereof, may be waived
in whole or in part by Buyer):
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Stockholders in this
Agreement shall be true when made and at and as of the First
Closing as though such representations and warranties were made
at and as of the First Closing, except for representations and
warranties that
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speak as of a specific date or time other than the First Closing
Date (which need only be true and correct as of such date or
time); provided, however, that for purposes of this Section
7.2(a), breaches of the representations and warranties made by
the Stockholders in this Agreement that result in aggregate
damages in an amount not in excess of $700,000 are hereby waived
solely for purposes of consummation of the transactions
contemplated by this Agreement and not for purposes of
calculating Damages under Article IX of this Agreement.
(b) PERFORMANCE. Each Seller shall have performed and
complied, in all respects, with all agreements, obligations,
covenants and conditions required by this Agreement to be so
performed or complied with by such Seller at or prior to the
First Closing.
(c) STOCKHOLDERS' CERTIFICATE. The Stockholders shall
have delivered to Buyer a certificate, satisfactory in form to
Buyer, dated the First Closing Date and executed by the Company
and the Stockholders, respectively, to the effect of paragraphs
(a) and (b) above and to the effect that each of the Stockholders
and the Company and S&J intends to consummate the Second Closing
and is not aware of any reason the Second Closing will not occur.
(d) NO PROCEEDING OR LITIGATION. There shall not be
instituted any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other
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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, (ii) would have a material adverse effect on Buyer's
ability to exercise control over or manage the business of the
Company and its Subsidiaries after the First Closing Date, (iii)
would have a material adverse effect on Buyer or any of its
affiliates or (iv) would have a material adverse effect on the
business, operations, condition (financial or otherwise),
liabilities, assets or earnings of the business of the Company
and its Subsidiaries; provided, that the Board of Directors of
NWPS shall have determined, after consultation with its counsel,
that it is necessary for Buyer and NGC to abandon the
transactions contemplated by this Agreement because of the
institution of such suit, action, investigations, inquiry or
proceeding.
(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 transactions contemplated
hereby.
(f) EXPIRATION OR TERMINATION OF HSR ACT PERIOD AND
FERC APPROVAL. Any waiting periods applicable to the
transactions contemplated by this Agreement under the HSR Act
shall
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have expired or been terminated; and FERC shall have issued one
or more orders, which have become final, granting NWPS all
necessary authority under the FPA to consummate the Temporary
Financing and the Permanent Financing.
(g) CONSENTS. Buyer shall have obtained all consents,
waivers and approvals required for consummation of the
transactions contemplated by this Agreement to occur at the First
Closing not otherwise required by Section 7.2(f).
(h) DELIVERY OF DOCUMENTS AND OTHER ITEMS. The
Stockholders shall have delivered the documents and other items
required to be delivered to Buyer hereunder, including those to
be delivered at the First Closing pursuant to Section 3.3 of this
Agreement.
(i) FINANCING. Buyer shall have obtained the funds
necessary to consummate the transactions contemplated hereby.
7.3 CONDITIONS TO OBLIGATIONS AT THE SECOND CLOSING. The
respective obligations of Sellers, S&J, Buyer and NGC to
consummate the transactions contemplated by this Agreement to
occur at the Second Closing are subject to (i) consummation of
the transactions contemplated by this Agreement to occur at the
First Closing, and (ii) delivery of the documents and other items
required to be delivered hereunder, including those to be
delivered at the Second Closing pursuant to Sections 3.4 and 3.5
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hereof, unless such delivery has been waived by the party to
receive such document or other item.
VIII. TERMINATION, AMENDMENT AND WAIVER
---------------------------------
8.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written agreement of each
of the Stockholders' Agent, Buyer and NGC;
(b) at any time after September 30, 1995 by any party
hereto, if the First Closing shall not have been consummated on
or prior to such date (unless the failure to consummate the First
Closing by such date shall be due to a breach of the Agreement by
the party or its affiliate seeking termination); or
(c) on the fifth business day after the date the
Company delivers to Buyer the March 1995 Financial Statements, by
Buyer, if the consolidated balance sheet of the Company and its
consolidated subsidiaries as of March 31, 1995 (which is a part
of the March 1995 Financial Statements) sets forth (i) Property,
plant and equipment (less accumulated depreciation and
amortization) in an amount less than $68,000,000, and (ii) Total
stockholders deficiency for the year then ended with a greater
deficiency than $(8,500,000) exclusive of any changes in the
Company's litigation reserve and non-recurring adjustments in
connection with the transactions contemplated by this Agreement
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and not reflecting any capital contributions paid since March 31,
1995.
8.2 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 8.1(b) or
8.1(c) hereof, written notice thereof shall forthwith be given by
the party so terminating to the other parties and this Agreement
shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any party hereto. If this
Agreement is terminated pursuant to Section 8.1 hereof: (a) each
party shall redeliver all documents, work papers and other
materials of the other parties relating to the transactions
contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same, and all
confidential information received by either party hereto with
respect to the other party shall be treated in accordance with
Section 6.11 hereof and the Confidentiality Agreement referred to
in said Section;
(b) all filings, applications and other submissions
made pursuant to Sections 6.4, 6.5 and 6.13(b) hereof shall, to
the extent practicable, be withdrawn from the agency or other
person to which made; and
(c) there shall be no liability or obligation
hereunder on the part of Sellers, S&J, NGC or Buyer or any of
their
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respective directors, officers, employees, affiliates, agents or
representatives, except that Sellers, S&J, NGC and Buyer, as the
case may be, may have liability to the others if the basis of
termination is a willful, material breach by such party or its
affiliates of one or more of the provisions of this Agreement,
and except that the obligations provided for in this Section 8.2
and Sections 6.11, 6.20 (to the extent Buyer's obligations in
Sections 8.2, 6.11 and 11.1 hereof survive) and 11.1 hereof shall
survive any such termination.
8.3 AMENDMENT, MODIFICATION AND WAIVER. This Agreement may
be amended, modified or supplemented at any time by written
agreement executed by the Stockholders' Agent, Buyer and NGC.
Any failure of Sellers and S&J, on the one hand, or Buyer and
NGC, 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.
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IX. SURVIVAL; INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in this Agreement and
the environmental indemnity set forth in this Article IX shall
survive the Second 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 the
Company and its subsidiaries has been signed by the Company's
accountants and delivered to the Company and (b) June 30, 1996;
provided, however, that (i) the representations and warranties
contained in Sections 4.1, 4.2, 4.3, 4.4, 4.19, 4.22, 5.1, 5.2,
5.6, 5.7, 5.8 and 5.11 hereof shall survive the Second Closing
Date indefinitely, (ii) the representations and warranties
contained in Section 4.12 hereof shall terminate at the
expiration of the applicable statute of limitations (giving
effect to any waiver or extension thereof by, or consented to by,
the Stockholders or a governmental Tax authority) and (iii) the
representations and warranties in Section 4.9(a) with respect to
ownership of consumer propane tanks shall survive 180 days after
the First Closing Date. Following the Second Closing Date,
neither the period of survival nor the liability of the
Stockholders, on the one hand, and Buyer and NGC, on the other
hand, with respect to their respective representations and
warranties shall be reduced by any investigation made at any time
by or on behalf of
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the other party. If written notice of a claim in accordance with
Section 9.4(a) has been given by an Indemnified Person prior to
the expiration of the applicable survival period, then such
indemnification obligation shall survive as to such claim until
such claim has been finally resolved.
9.2 INDEMNIFICATION BY THE STOCKHOLDERS. Subject to the
limitations set forth in this Article IX, the Stockholders 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 damage) 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:
(a) any breach of or noncompliance with any of
Sellers' representations, warranties, covenants or agreements
contained in this Agreement or in the certificate referred to in
Section 7.2(c) hereof, other than representations and warranties
contained in Section 4.12 hereof; and any environmental
remediation of any real property acquired by Buyer or a
subsidiary of Buyer at the First Closing, or owned or leased by
the Company or any of its Subsidiaries at the time of the Second
Closing, to correct conditions existing prior to the First
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Closing with respect to such property (i) to the extent
correction is required by Environmental Laws, unless (ii) such
correction is required solely to enable such property to be used
for the purpose used prior to the First Closing in compliance
with Environmental Laws; in which case, any remediation required
under this clause (ii) shall be included in the calculation of
Damages only if such remediation is reasonable from an economic
standpoint (determined by weighing the cost of the remediation
against the value of the property to the ongoing business); and
provided, further, that the Stockholders shall have no liability
for amounts otherwise indemnifiable under this paragraph (a)
until the total of such amounts exceed $700,000 plus the Tank
Overage Amount, if any, and then only to the extent that the
total of such amounts exceed $700,000 plus the Tank Overage
Amount, if any; and provided, further, that any amount payable to
Buyer under this paragraph (a) shall be payable solely out of the
Contract Escrow Funds and that the Stockholders' liability for
such indemnification shall not exceed the Contract Escrow Funds;
provided, however, that $4 million of the Contract Escrow Cash
shall be allocated solely to settle Claims for Damages with
respect to a breach of the representations and warranties in
Section 4.9(a) hereof with respect to ownership of consumer
propane tanks, and any amount remaining after 180 days after the
Second Closing and not in dispute with respect to such Claims
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shall be available to provide the Stockholders with a source to
fund the payment of Damages relating to the C&L Matters; or
(b) any breach of the representations and warranties
set forth in Section 4.12 hereof; provided, however, that the
Stockholders shall have no liability for amounts otherwise
indemnifiable for a breach of their representations and
warranties under this paragraph (b) until the total of such
amounts exceed $250,000, and then only to the extent that the
total of such amounts exceeds $250,000; provided, further, that
if a claim is indemnifiable under paragraph (a) above, it shall
not be indemnifiable under this paragraph (b).
(c) Notwithstanding the foregoing, (i) no claim shall
be asserted pursuant to Sections 9.2(a) or 9.2(b) hereof with
respect to any liability included in calculating the Statement
Working Capital pursuant to Section 1.6 hereof or if such claim
is a C&L Matter; (ii) no claim shall be asserted pursuant to
Section 9.2(b) hereof until the aggregate amount of such claims
exceeds the aggregate amount of any Tax Refunds (as defined
below); and (iii) no claim shall be asserted pursuant to Section
9.2(b) hereof until an amount equal to the lesser of (A) the
total amounts of the Company's and its Subsidiaries' net
operating losses as of the First Closing Date in excess of the
amounts applied to reduce their taxable gains on the sale of the
Assets to Buyer after giving effect to the purchase by the
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Company of the Series B Notes at the First Closing and (B)
$1,000,000 is applied to offset any increase in taxable income
for federal income tax purposes resulting from such Claim. A
"Tax Refund" shall mean any refund or recovery of Taxes with
respect to any period ending on or prior to the Second Closing
Date received by the Company and its Subsidiaries after the
Second Closing Date.
9.3 INDEMNIFICATION BY BUYER. Subject to the limitations
set forth in this Article IX, Buyer and NGC shall indemnify the
Stockholders and their respective affiliates, officers,
directors, employees, agents, successors and assigns, for, and
shall defend and hold them harmless from, against and with
respect to any Damages that result from any breach of or
noncompliance with any of Buyers' or NGC's representations,
warranties, covenants or agreements contained in this Agreement
or in the certificate referred to in Section 7.1(c) hereof.
9.4 GENERAL PROCEDURES. (a) Notice. A party that may be
entitled to indemnification under this Article IX (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 or proceeding, which such
party discovers or of which it receives notice which might give
rise to a claim under this Article IX ("Claim"). Such notice
shall specify (i) that a Claim is being made; (ii) the section or
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sections of this Agreement under which such Claim is made; (iii)
in reasonable detail, to the extent known, each individual item
of Damages and the basis therefor, and all items which offset any
Claim, and (iv) all items which in the aggregate comprise the
deductible (required until such deductible has been met). With
respect to a Claim pursuant to Section 9.2(a) hereof, all notices
shall be delivered contemporaneously to the Contract Escrow
Agent.
(b) Third Party Claims. The obligations and
liabilities of the Indemnifying Person under this Article IX with
respect to Damages arising from Claims of any third party which
are subject to the indemnification provided for in this Article
IX and except as otherwise provided in Section 6.10(c) hereof
("Third Party Claims") shall be 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 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 IX 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
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other than under this Article IX. 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 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 Indemni-
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fied 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 not be 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
non-exemplary 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.
(c) CLAIMS DISPUTE RESOLUTION. Upon receipt by an
Indemnifying Person of a notice of a Claim pursuant to Section
9.4(a), if the Indemnifying Person disagrees with the Claim or
the amount of Damages claimed, the Indemnifying Person shall
notify the Indemnified Person and the Contract Escrow Agent in
writing within 30 days after the Indemnifying Person's receipt
of such notice of Claim, and the Indemnifying Person and the
Indemnified Person shall attempt to resolve such disagreement.
If the Indemnifying Person does not notify the Indemnified
Person in writing of its disagreement with such notice of Claim
within 30
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days of receipt of such notice of Claim, Damages shall be the
amount set forth in such notice of Claim. If such parties are
unable to resolve such disagreement within 30 days after the
receipt by the Indemnified Person of the Indemnifying Person's
written disagreement with such Claim, then such parties shall
submit such dispute to binding arbitration in accordance with
the terms of this Agreement.
9.5 STOCKHOLDERS' AGENT. At all times after the date of
this Agreement until all the Stockholders' obligations under this
Agreement have been satisfied or expired, the Stockholders shall
have one or more persons duly appointed and authorized to act as
their attorney in fact with respect to all matters relating to
this Agreement and the transactions contemplated herein (the
"Agreement Matters"; the person or persons so appointed and
authorized to so act at any given time being referred to herein
as the "Stockholders' Agent"). Each of the Stockholders hereby
appoints Stephen A. Vogel as the Stockholders' Agent, and
authorizes him to act as his or her attorney in fact with respect
to all Agreement Matters (including receiving notice for
indemnification purposes). Any and all parties to this Agreement
shall be entitled to rely, and shall be fully protected in
relying, upon as fully binding upon all of the Stockholders, all
action taken by the Stockholders' Agent, including any instrument
or document executed in each of the Stockholders' names by the
Stockholders'
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Agent, prior to receiving notice of a successor being appointed
by the Stockholders to the person who took such action as the
Stockholder's Agent. The Stockholders' Agent shall not be liable
to the Stockholders for any action taken or omitted by him in
good faith and believed by him to be authorized hereby or within
the rights or power conferred upon him hereunder, nor for action
taken or omitted by him in good faith, nor for any mistake of
fact or error of judgment or for any acts or omissions of any
kind unless caused by willful misconduct or gross negligence.
9.6 INDEMNIFICATION OBLIGATIONS. Each of the Stockholders'
indemnification obligations under Article IX and Article X of
this Agreement shall be several and not joint; except, that with
respect to the indemnification obligations of Sherman C. Vogel
and Jeanette Vogel, such indemnification obligations shall be
joint and several as to each other.
X. C&L MATTERS
10.1 C&L MATTERS. Subject to the limitations set forth in
this Article X, the Stockholders shall indemnify Buyer and its
affiliates, officers, directors, employees, agents, successors
and assigns (each a "C&L Indemnified Person") for, and shall
defend and hold them harmless from, against and with respect to
all Damages that result from any claim, suit, action and other
proceeding by or before any court or governmental authority
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(each, a "Proceeding") arising out of, or relating to, the
operations of the Company and its Subsidiaries, and the condition
of their respective properties, up to and but not including the
Second Closing Date (the "C&L Period"), whenever asserted
(whether before or after the Second Closing Date), other than
those matters covered in Sections 4.9, 4.12 and 4.16 hereof and
their corresponding Sections of the Disclosure Schedule
(collectively, the "C&L Matters" and individually a "C&L
Matter"); provided, however that, with respect to a Proceeding
brought after the Second Closing Date, in order for such
Proceeding to be deemed a C&L Matter such Proceeding (i) must
have been commenced by the earlier of the third anniversary of
the Second Closing Date and the expiration of the statute of
limitations for such Proceeding, in the case of a Proceeding for
wrongful death, personal injury or property damage, and (ii) must
have been commenced by the first anniversary of the Second
Closing Date, in the case of all other Proceedings; provided
further, that, 180 days after the Second Closing Date, the $4
million of the Contract Escrow Cash allocated to cover Damages
for a breach of the consumer propane tank ownership
representation and warranty in Section 4.9(a) hereof, less (a)
any Damages paid for a breach of such tank ownership
representation and warranty, and (b) any amount in dispute with
respect to a claim for such Damages for a breach of such tank
representation and warranty, shall be available to
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provide the Stockholders with a source to fund the payment of
Damages relating to the C&L Matters.
10.2 ADJUSTMENTS TO THE C&L MATTERS ESCROW FUNDS.
(a) Upon the termination of the Contract Escrow
Agreement, the Contract Escrow Agent shall deliver to the C&L
Matters Escrow Agent any remaining shares of Buyer Series A
Preferred Stock. Such stock shall be endorsed to the C&L Matters
Escrow Agent and at such time shall be included in the term "C&L
Matters Escrow Fund".
(b) Buyer shall hire, or shall cause the Company to hire, a
firm to determine an appropriate litigation reserve for the
outstanding C&L Matters on the second and third anniversaries of
the Second Closing Date. Such determinations shall be delivered
by such firm directly to Buyer, the Stockholders' Agent and the
C&L Matters Escrow Agent. The selected firm shall be mutually
agreed to by Buyer and the Stockholders' Agent and shall be in
the business of performing such types of determinations. The
cost of such firm for the two determinations referred to above
shall be borne equally by Buyer and the Stockholders. The
Stockholders shall have the right to hire a firm (that has been
approved in writing by Buyer) at their sole cost to perform
determinations in addition to the two determinations referred to
above at any time after such first determination is performed.
To the extent such firm's determination of the appropriate
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reserve is less than the C&L Matters Escrow Cash at the time of
such determination, such excess cash shall be released from
escrow by the C&L Matters Escrow Agent and delivered to the
Stockholders' Agent.
10.3 C&L MATTERS GOVERNANCE.
(a) When the Company or any of its affiliates receives
notice of the assertion of any C&L Matter, Buyer shall give the
Stockholders' Agent notice thereof not later than five business
days (but sooner, subject to Buyer's best efforts, to the extent
a temporary restraining order is involved) of the receipt by the
Company or any of its affiliates of such notice of assertion and
Buyer shall forward, or cause to be forwarded, to the
Stockholders' Agent all documents received by it or Buyer's
affiliates with respect to C&L Matters within five business days
after receipt of such documents; provided, however, that the
failure to provide such notice or other documents to the
Stockholders' Agent shall not release the Stockholders from any
of their obligations under this Article X except to the extent
the Stockholders are prejudiced by such failure and shall not
relieve the Stockholders from any other obligation or liability
that they may have to any of the Indemnified Persons other than
under this Article X. The Stockholders shall assume and control
the defense of each such C&L Matter and shall pay all Damages
relating to such C&L Matter. The Company and its affiliates
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shall cooperate with the Stockholders in the defense of the C&L
Matters and make available to the Stockholders, all personnel,
witnesses, pertinent records, materials and information in the
Company's or its affiliates' possession or under such person's
control relating thereto as is reasonably required by the
Stockholders. No C&L Matter may be settled by the Stockholders
without the prior written consent of Buyer (which consent shall
not be unreasonably withheld if the Company and its affiliates
would not be unduly prejudiced); except that a C&L Matter which
does not involve allegations of criminal or fraudulent conduct by
the Company and its affiliates and seeks only non-exemplary
damages against some or all of the named defendants may be
settled by the Stockholders if such settlement involves a
complete release of such defendants from liability.
(b) A C&L Indemnified Person shall give written notice
to the Stockholders' Agent, on behalf of the Stockholders, (the
"C&L Indemnifying Person") of the assertion of Damages under this
Article X. Such notice shall specify (i) that a claim is being
made for Damages that have not been paid by the Stockholders
pursuant to this Article X, and (ii) in reasonable detail, to the
extent known, each individual item of Damages and the basis
therefor. With respect to a claim pursuant to this Article X,
all notices shall be delivered contemporaneously to the C&L
Matters Escrow Agent.
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(c) Upon receipt by a C&L Indemnifying Person of a
notice of a claim for Damages pursuant to Article X, if the C&L
Indemnifying Person disagrees with the claim or the amount of
Damages claimed, the Indemnifying Person shall notify the C&L
Indemnified Person and the C&L Matters Escrow Agent in writing
within 30 days after the C&L Indemnifying Person's receipt of
such notice of claim, and the C&L Indemnifying Person and the C&L
Indemnified Person shall attempt to resolve such disagreement.
If the C&L Indemnifying Person does not notify the C&L
Indemnified Person in writing of its disagreement with such
notice of claim within 30 days of receipt of such notice of
claim, Damages shall be the amount set forth in such notice of
claim. If such parties are unable to resolve such disagreement
within 30 days after the receipt by the C&L Indemnified Person of
the C&L Indemnifying Person's written disagreement with such
claim, then such parties shall submit such dispute to binding
arbitration in accordance with the terms of this Agreement.
(d) With respect to all C&L Matters, the Stockholders
shall be subrogated to all rights of the Company and its
affiliates with respect to all third parties relating to C&L
Matters. Buyer shall cause the Company to maintain appropriate
insurance for the Company's business as determined in Buyer's
sole discretion. In the event that Buyer or the Company
determines to terminate any insurance policy set forth in Section
4.20 of the
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Disclosure Schedule which covers C&L Matters, the Stockholders'
Agent shall have the right at its sole expense, to continue such
policies. Buyer shall provide the Stockholders' Agent with 30
days written notice of any such proposed termination.
XI. MISCELLANEOUS
11.1 FEES AND EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, Buyer shall pay
all fees and expenses incurred by (or on behalf of) Buyer, NGC,
or their respective affiliates, and the Stockholders shall pay
all fees and expenses incurred by (or on behalf of) the
Stockholders, the Company or their respective affiliates, in
connection with, or in anticipation of, this Agreement and the
consummation of the transactions contemplated hereby.
11.2 FURTHER ASSURANCES. From time to time after the
Second Closing Date, at the request of Sellers and S&J on the one
hand, and Buyer or NGC, on the other hand, and at the expense of
the party so requesting, Sellers and S&J or Buyer and NGC, 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.
11.3 NOTICES. All notices, requests, demands, waivers and
other communications required or permitted to be given under this
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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 Buyer, to:
Syn Inc.
c/o Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8586
Attention: Richard R. Hylland, Vice Chairman
with copies to:
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606
Fax No. (312) 258-5600
Attention: Linda Jeffries Wight, Esq.
Empire Gas Company
P.O. Box 303
1700 South Jefferson
Lebanon, Missouri 65536
Attention: Paul S. Lindsey, Jr., President
Guilfoil Petzall & Shoemake
Suite 2000
100 North Broadway
St. Louis, Missouri 63102
Fax No. (314) 241-2389
Attention: Jim J. Shoemake, Esq.
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If to NGC, to:
Northwestern Growth Corporation
33 Third Street S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8586
Attention: Richard R. Hylland, President
(c) If to Sellers,
prior to the Second Closing to:
Synergy Group Incorporated
175 Price Parkway
Farmingdale, New York 11735
Fax No. (516) 454-6911
Attention: Stephen A. Vogel, Vice Chairman
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022-9931
Fax No. (212) 735-2000
Attention: Blaine V. Fogg, Esq.
after the Second Closing, to:
the Stockholders' Agent
c/o Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022-9931
Fax No. (212) 735-2000
Attention: Blaine V. Fogg, Esq.
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
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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.
11.4 ENTIRE AGREEMENT. This Agreement and the exhibits
hereto, the Disclosure Schedule and the Buyer Disclosure Schedule
and schedules and other documents and certificates to be
delivered pursuant hereto or referred to herein which form a part
hereof (including, without limitation, the Confidentiality
Agreement referred to in Section 6.11 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.
11.5 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 provi-
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sions 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 enforced to the fullest
extent permitted by law.
11.6 BINDING EFFECT; ASSIGNMENT. This Agreement and all of
the provisions hereof shall be binding upon and shall inure to
the benefit of Sellers, S&J, Buyer and NGC 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 Sellers and S&J, on
the one hand, or Buyer or NGC, on the other hand, without the
prior written consent of the other parties; 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 stock and assets under this
Agreement, but such assignment shall not relieve Buyer or NGC of
any of its obligations under this Agreement or alter or affect
any such obligation.
11.7 NO THIRD PARTY BENEFICIARIES. This Agreement is
solely for the benefit of Sellers and S&J and their respective
successors and permitted assigns, with respect to the obligations
of Buyer and NGC under this Agreement, and for the benefit of NGC
and Buyer and its successors and permitted assigns (and after the
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Second Closing the Company and its Subsidiaries), with respect to
the obligations of Sellers and S&J under this Agreement, 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.
11.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which collectively shall constitute one and the same
instrument.
11.9 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
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Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
(e) As used in this Agreement, the term "signatures
guaranteed" shall mean a signature guaranteed by a firm which is
a member of a registered national securities exchange or the
National Association of Securities Dealers, Inc., or by a
commercial bank or trust company having an office in the United
States.
11.10 ARBITRATION. Any dispute arising under this
Agreement shall be resolved by arbitration. The Stockholders'
Agent, the Company, NGC, Buyer and S&J agree: (a) to observe and
be bound by the procedures of the American Arbitration
Association ("AAA"), (b) to submit all such disputes to the
office of the AAA in the city of Philadelphia in the State of
Pennsylvania or such other mutually agreed office which has
jurisdiction in the state of Delaware, and (c) to be subject to
the jurisdiction of the arbitrators in the State of Delaware,
upon notice, in accordance with the provisions of this Agreement,
that a dispute has been submitted to the office of the AAA.
11.11 GOVERNING LAW. This Agreement shall be governed by
the laws of the State of Delaware (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.
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IN WITNESS WHEREOF, the parties hereto have duly executed
and delivered this Agreement as of the date first above written.
THE STOCKHOLDERS
/s/ Sherman C. Vogel
----------------------------------------
Sherman C. Vogel
/s/ Stephen A. Vogel
----------------------------------------
Stephen A. Vogel
/s/ Jeffrey K. Vogel
----------------------------------------
Jeffrey K. Vogel
/s/ Jon M. Vogel
----------------------------------------
Jon M. Vogel
/s/ Jeanette Vogel
----------------------------------------
Jeanette Vogel
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SYNERGY GROUP INCORPORATED
By:/s/ Stephen A. Vogel
-------------------------------------
Name: Stephen A. Vogel
Title: Executive Vice President
S&J INVESTMENTS
By:/s/ Sherman C. Vogel
-------------------------------------
Name: Sherman C. Vogel
Title: General Partner
By:/s/ Stephen A. Vogel
-------------------------------------
Name: Stephen A. Vogel
Title: General Partner
By:/s/ Jeffrey K. Vogel
-------------------------------------
Name: Jeffrey K. Vogel
Title: General Partner
By:/s/ Jon M. Vogel
-------------------------------------
Name: Jon M. Vogel
Title: General Partner
SYN INC.
By:/s/ Richard R. Hylland
-------------------------------------
Name: Richard R. Hylland
Title: President
NORTHWESTERN GROWTH CORPORATION
By:/s/ Richard R. Hylland
-------------------------------------
Name: Richard R. Hylland
Title: President
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EXHIBIT B
AGREEMENT AMONG SYN INC. AND ITS STOCKHOLDERS
THIS AGREEMENT, dated ___________ _____, 1995, is made and entered
into by and among SYN Inc., a Delaware corporation (the "Company"), Northwestern
Growth Corporation, a South Dakota corporation ("NGC"), Empire Gas Corporation,
a Missouri corporation (Empire"), and the persons hereinafter sometimes called
the "Vogels," namely, Sherman C. Vogel, Stephen A. Vogel, Jeffrey K. Vogel, Jon
M. Vogel and Jeannette Vogel (NGC, Empire and the Vogels being hereinafter
sometimes collectively called the "Stockholders" and individually called a
"Stockholder"), with respect to the following circumstances:
A. The Company has been incorporated for the purposes of entering into
the Purchase and Sale Agreement, dated May 17, 1995, by and among the Vogels,
Synergy Group Incorporated ("Synergy"), S&J Investments, the Company and NGC
(the "Synergy Agreement"), consummating the closing thereunder by which the
Company and its subsidiaries are to acquire substantially all of the business
and various assets of, and stock interests in, Synergy and its subsidiaries (the
"Synergy Acquisition"), and operating the acquired business on an ongoing basis.
B. NGC owns beneficially and of record 82,500 of the 100,000 authorized
shares of Common Stock of the Company, par value $.01 per share (the "Common
Stock").
C. The Vogels, as part of the consideration for the Synergy
Acquisition, have been issued, and own beneficially and of record, the remaining
17,500 shares of the authorized shares of Common Stock (which will be 17.5% of
the issued and outstanding Common Stock before and after the exercise of the
Empire Option (defined in paragraph D below)), as follows:
NUMBER OF SHARES
----------------
Sherman C. Vogel
Stephen A. Vogel
Jeffrey K. Vogel
Jon M. Vogel
Jeannette Vogel
D. Empire has an option to acquire from NGC up to 30,000 of the shares
of Common Stock owned by NGC (such 30,000 shares constituting 30% of the issued
and outstanding Common Stock), as provided in the Agreement Among Initial
Stockholders and SYN Inc., dated May 17, 1995, among the Company, NGC and Empire
(the "Empire Option").
E. The parties hereto are entering into this Agreement pursuant to the
Synergy Agreement and to satisfy an essential condition to the Vogels'
acceptance of the 17,500 shares of Common Stock as part of the consideration for
the Synergy Acquisition.
NOW THEREFORE, in consideration of the foregoing premises and the
agreements herein, the parties hereto agree as follows:
<PAGE>
ARTICLE 1: REGISTRATION RIGHTS
SECTION 1.01 DEFINITIONS. For purposes of this Agreement: (i) the term
"1933 Act" means the Federal Securities Act of 1933, as amended; (ii) the terms
"register," "registered" and "registration" refer to a registration effected by
filing a registration statement in compliance with the 1933 Act (a "registration
statement") and such registration statement becoming effective under the 1933
Act; (iii) the term "Registrable Securities" means the outstanding shares of
Common Stock of the Company held by the Stockholders from time to time or any
securities issued in exchange therefor in the event of a recapitalization, stock
split, merger, consolidation or other combination or exchange of shares; and
(iv) the term "Holder" means any Stockholder who owns of record Registrable
Securities.
SECTION 1.02 COMPANY REGISTRATION. Subject to Section 1.06 hereof, if
at any time the Company determines to register any shares of Common Stock under
the 1933 Act in connection with the public offering of such securities solely
for cash on a form that would also permit the registration for public
distribution of any of the Registrable Securities, the Company shall, each such
time, promptly give each Holder written notice of such determination. Upon the
written request of any Holder received by the Company within 30 days after the
giving of any such notice by the Company to such Holder, the Company shall use
its best efforts to cause to be registered under the 1933 Act all of the
Registrable Securities that each such Holder has requested be registered,
together with the registration of the Common Stock otherwise being registered by
the Company. The Company may elect to either not file or withdraw the filing of
any registration statement relating to a registration described in this Section
1.02 at any time prior to the effectiveness thereof.
SECTION 1.03 OBLIGATIONS OF THE COMPANY. Whenever under Section 1.02 or
1.08 hereof the Company is to use its best efforts to effect the registration of
any Registrable Securities, that shall require the Company to do the following:
(a) As expeditiously as reasonably possible, prepare and file with
the Securities and Exchange Commission ("SEC," which term includes any
successor agency) a registration statement with respect to such
Registrable Securities, together with the Common Stock otherwise being
registered by the Company, and use its best efforts to cause such
registration statement to become and remain effective under the 1933 Act,
except that the Company shall in no event be obligated to cause any such
registration to remain effective for more than nine months.
(b) As expeditiously as reasonably possible, prepare and file with
the SEC such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement as may
be necessary to comply with the provisions of the 1933 Act with respect to
the disposition of all securities covered by such registration statement.
(c) As expeditiously as reasonably possible, furnish to the
Holders such numbers of the copies of the prospectus used in connection
with such registration statement (including all preliminary prospectuses
and the final prospectus), and all amendments and supplements thereto, and
such other documents as they may reasonably request in order to facilitate
the distribution of the Registrable Securities owned by them.
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(d) As expeditiously as reasonably possible, make a commercially
reasonable effort to register and qualify the securities covered by such
registration statement under such securities or Blue Sky laws of such
jurisdictions as shall be reasonably appropriate or requested by the
Holders or by the underwriter for the distribution of the securities
covered by the registration statement, except that the Company shall not
be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any
such jurisdiction, and except that (anything in this Agreement to the
contrary notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the registration or qualification of
the securities in that jurisdiction be borne by those selling the
securities, then such expenses shall be payable by selling Holders pro
rata, to the extent required by such jurisdiction.
(e) Advise each Holder promptly after the Company shall receive
notice or obtain knowledge thereof of (i) the issuance of any stop order
by the SEC suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose, (ii) any
similar action by any regulatory agency of competent jurisdiction under
the securities or Blue Sky laws of any jurisdiction, and in any such case
promptly make a commercially reasonable effort to prevent the issuance of
any stop order or the taking of any such similar action or to obtain its
withdrawal if such stop order shall be issued or any such similar action
shall be taken, and (iii) the happening of any event as a result of which
the prospectus included in such registration statement contains an untrue
statement of material fact or omits to state any fact necessary to make
the statements therein not misleading.
(f) Furnish to each Holder of Registrable Securities covered by
such registration statement copies of all documents proposed to be filed
with respect to any amendment or supplement to such registration statement
or prospectus at a reasonable time prior to such filing, and not file any
such amendment or supplement to which the Holders of a majority of the
Registrable Securities covered by such registration statement shall have
reasonably objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the 1933 Act
or the rules and regulations thereunder, unless in the opinion of counsel
for the Company the filing of such amendment or supplement is reasonably
necessary to protect the Company from any liabilities under any applicable
federal or state law and such filing will not violate applicable law.
(g) Furnish on the effective date of the registration statement
and, if such registration includes an underwritten public offering, at the
closing provided for in the underwriting agreement: (i) an opinion, dated
each such date, of the counsel representing the Company for the purposes
of such registration, addressed to the underwriters, if any, and to the
Holders participating in such registration, stating that such registration
statement has become effective under the 1933 Act and that (A) to the best
of such counsel's knowledge, no stop order suspending the effectiveness
thereof has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the 1933 Act, (B) the
registration statement, related prospectus and each amendment or
supplement thereto comply as to form in all material respects with the
requirements of the 1933 Act and the applicable rules and regulations of
the SEC thereunder (except that such counsel need express no opinion as to
financial statements and financial data contained
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<PAGE>
therein), (C) such counsel have no reason to believe that the registration
statement, the prospectus or any amendment or supplement thereto contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of circumstances under which they were made, not misleading
(except that such counsel need express no belief as to the financial
statements and financial data contained therein), (D) the description in
the registration statement or prospectus or any amendment or supplement
thereto of all legal and governmental proceedings and all contracts and
other legal documents or instruments filed as exhibits to the registration
statement are accurate and fairly present the information required to be
shown, and (ii) a letter dated each such date, from the independent
certified public accountants of the Company, addressed to the
underwriters, if any, and to the Holders participating in such
registration, covering such matters as such underwriters and such Holders
may reasonably request, in which letter such accountants shall state
(without limiting the generality of the foregoing) that they are
independent certified public accountants within the meaning of the 1933
Act and that in the opinion of such accountants the financial statements
and other financial data of the Company included in the registration
statement or the prospectus or any amendment or supplement thereto comply
in all material respects with the applicable accounting requirements of
the 1933 Act and applicable rules and regulations thereunder.
(h) Enter into such customary agreements and take all such other
actions as the holders of a majority of the Registrable Securities covered
by such registration statement or the managing underwriters for such
registration may reasonably request in order to facilitate the
distribution of such Registrable Securities (including, without
limitation, to cause such Registrable Securities to be listed on such
securities exchange on which similar securities issued by the Company are
then listed, to cause such Registrable Securities to be eligible for
quotation and transaction reporting through an automated inter-dealer
quotation system operated by a national securities association, and to
provide a transfer agent and registrar).
(i) Make available for inspection by, and cause the Company's
officers, directors, employees and independent accountants to supply to,
any Holder of Registrable Securities covered by such registration
statement, any underwriter participating in the distribution pursuant to
such registration statement, and any attorney, accountant or other agent
for any thereof, all financial and other records of the Company and all
information reasonable requested in connection with such registration
statement.
SECTION 1.04 FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Article 1
that the Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company.
SECTION 1.05 EXPENSES OF REGISTRATION. All expenses incurred in
connection with a registration pursuant to Section 1.02 hereof (excluding
underwriters' discounts and commissions and expenses expressly required by
Section 1.03(d) hereof to be paid by the selling Holders), including without
limitation all registration and qualification fees, printers' and accounting
fees, fees and
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disbursements of counsel for the Company, internal expenses of the Company
(including, without limitation, salaries of officers and employees) and listing
fees shall be borne by the Company.
SECTION 1.06 UNDERWRITING REQUIREMENTS. In connection with any
registration requested by any Holder pursuant to Section 1.02 hereof, the
Company shall not be required hereunder to include any of the Holders'
Registrable Securities in such registration unless the Holders accept the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it, and then only in such quantity as will not, when added to the
securities otherwise being registered by the Company, in the written opinion of
the managing underwriters, exceed the Maximum Feasible Quantity for such
registration. If the total number of Registrable Securities requested pursuant
to this Agreement to be included in such registration, when added to the
securities otherwise being registered by the Company, exceeds the Maximum
Feasible Quantity for such registration, then the Registrable Securities of the
Holders to be included in such registration shall be apportioned among the
selling Holders, based on the total number of Registrable Securities requested
to be registered by each. All shares sold to cover any over-allotment shall be
apportioned among the selling Holders and the Company in proportion to the total
number of shares being sold by each; provided, however, that any such
over-allotment shall first be allocated to the selling Holders to the extent any
of the Registrable Securities requested to be included in such registration by
all Holders, when added to the securities otherwise being registered by the
Company, exceeded the Maximum Feasible Quantity. For purposes of this Agreement,
Maximum Feasible Quantity shall be the amount of securities which the managing
underwriter for the underwritten public offering of the Common Stock reasonably
believes to be the maximum number that should be included in the public offering
because the inclusion of shares in excess of such maximum number would likely
have a material adverse effect on the offering.
SECTION 1.07 HOLDBACK AGREEMENT.
(a) Each Stockholder agrees not to effect any public sale or
distribution of any equity securities of the Company, or any securities
convertible into or exchangeable for any equity securities of the Company,
during the 30 days prior to and the 90-day period beginning on the
effective date of the registration of the Registrable Securities pursuant
to Section 1.02 hereof, except, in either case, as a part of such
underwritten public offering covered by such registration statement,
unless the managing underwriters for such offering otherwise agree.
(b) The Company agrees not to effect any public sale or
distribution of any of its equity securities, or any securities
convertible into or exchangeable for any of its equity securities, during
the 30 days prior to and the 90-day period beginning on the effective date
of the registration of Registrable Securities pursuant to Section 1.02
hereof (except, in either case, pursuant to a registration on Form S-8 or
a similar successor form), unless the managing underwriters for the public
offering pursuant to Section 1.02 hereof otherwise agree that such public
sale or distribution will not adversely affect the public offering
pursuant to Section 1.02 hereof.
SECTION 1.08 REQUEST FOR REGISTRATION. If, after the Company has
concluded the sale of shares of Common Stock in an initial underwritten public
offering thereof for which the shares were registered under the 1933 Act, and
while this Agreement remains in effect, any one of the Vogels gives written
notice to the Company (specifying that it is being given pursuant to this
Section 1.08)
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requesting the Company to file a registration statement to register under the
1933 Act a specified amount of Registrable Securities owned by the requesting
person, then the Company shall promptly notify all of the other Vogels who are
Holders of such request. Within 30 days after receipt by such other Vogels of
notice of such request, each of them may notify the Company that as such a
Holder he or she requests that all or a portion of such Holder's Registerable
Securities be included in such registration (all of the Vogels who at that point
have requested the Company to include some or all of their Registrable
Securities in the registration being hereinafter referred to as the "Sellers").
The Company shall then use its best efforts to cause to be registered under the
1933 Act all Registrable Securities that the Sellers have so requested to be
registered. Notwithstanding the foregoing, the Company shall not be obligated
to effect a registration pursuant to this Section 1.08 during the period
starting with the date forty-five (45) days prior to the Company's estimated
date of filing of, a registration statement pertaining to an underwritten public
offering of Common Stock for the account of the Company, provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith. The
Company shall be obligated to effect one registration pursuant to this Section
1.08. Any request for registration under this Section 1.08 must be for a firm
underwritten public offering in accordance with terms agreed upon between the
underwriter or underwriters and the Holders of a majority of the Registrable
Securities being sold for the Sellers under the registration, to be managed by
an underwriter or underwriters of recognized national standing designated by the
Sellers and reasonably acceptable to the Company. At any time prior to the
effectiveness of the registration statement, any request for registration under
this Section 1.08 may be withdrawn by the Sellers, whereupon the Company shall
either not file or withdraw the filing of the registration statement, as
applicable, and such withdrawal of the request for registration will not be
deemed to have been the exercise of the registration right granted in this
Section 1.08. The provisions of Sections 1.03, 1.04 and 1.05 herein shall apply
to any registration, or attempts to effect registration, which the Company is
required to make under this Section 1.08, including any registration statement
that is withdrawn or not filed as provided in this Section 1.08, except that the
expenses which the Company would otherwise be required to bear under Section
1.05 herein shall be paid in equal shares by the Company as one party and by the
Sellers as the other party.
ARTICLE 2: RESTRICTIONS ON TRANSFER
SECTION 2.01 GENERAL RESTRICTIONS. Each Stockholder agrees not to
sell, transfer, pledge or otherwise dispose of any of the Stockholder's shares
of Common Stock except in a transaction for which the shares have been
registered under the 1933 Act, or in a transaction which is exempt from such
registration under the 1933 Act. Without limiting the Vogels' rights under the
preceding sentence, in each case in which any of the Vogels transfers his or her
shares of Common Stock to his or her parents, siblings, descendants and/or
descendants of siblings, or to a trust for the benefit of any of them, and such
transferee joins in this Agreement as a Stockholder (which it is agreed that
each such transferee may do), then such transferee shall thereupon be deemed to
be included in the term "Vogels," and thereafter will be one of the Vogels for
all purposes of this Agreement.
SECTION 2.02 PARALLEL EXIT.
(a) No Stockholder, alone or in connection with any other
Stockholders, in a single transaction or series of related transactions,
shall directly or indirectly sell, transfer
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or otherwise dispose of, shares of Common Stock which in the aggregate
entitle the holder thereof to cast a majority of the votes entitled to be
cast for the election of directors of the Company in a general election of
such directors, unless (i) prior to such sale, transfer or other
disposition each of the Stockholders (other than those proposing such
sale, transfer or other disposition, who are hereinafter referred to as
the "Selling Stockholders") has been notified of the proposed transaction
and has been provided a firm, irrevocable right, exercisable within 30
days after the date such notice is given to the Stockholders, to sell to
the proposed transferee at the same time and upon the same terms and
conditions offered to the Selling Stockholders that percentage of the
shares of Common Stock then owned by such Stockholder as is at least equal
to the percentage of the total shares of Common Stock owned by the Selling
Stockholders which are proposed to be sold, transferred or otherwise
disposed of by the Selling Stockholders in such transaction, and (ii) the
transferee in such transaction enters into a binding assumption agreement
by which it assumes and agrees to be bound by all of the obligations of
Stockholders under this Agreement with respect to the shares of Common
Stock to be acquired by such transferee in such transaction. For purposes
of this Agreement, the sale, transfer or other disposition of any stock
option, warrant, convertible security or other right entitling the holder
thereof to acquire shares of Common Stock shall be deemed to be a sale,
transfer or other disposition of the shares of Common Stock obtainable by
the exercise thereof, whether or not exercisable at the time, and votes
entitled to be cast in the election of directors of the Company shall be
calculated as if all rights to acquire securities that would be entitled
to vote in a general election of directors of the Company at the time
outstanding, whether or not then exercisable, have been exercised so as to
entitle the securities derived from such exercise to be voted in such
election.
(b) Notwithstanding the provisions of Section 2.02(a) above, those
provisions shall not apply to the following:
(i) any transfer from NGC to Empire of shares of Common
Stock pursuant to the exercise of the Empire Option or any
retransfer thereof from Empire to NGC pursuant to Section 1.04 of
the Agreement Among Initial Stockholders and SYN Inc., dated May 17,
1995, among the Company, NGC and Empire;
(ii) any disposition of shares of Common Stock in connection
with any merger, consolidation or liquidation of the Company;
(iii) any transfer of shares of Common Stock from NGC to
Northwestern Public Service Company ("NWPS"), or any successor to
substantially all of the business and assets of NWPS, or to any
wholly owned subsidiary of NWPS or such successor, provided that
such transferee enters into a binding assumption agreement by which
it assumes and agrees to be bound by the obligations of NGC under
this Agreement;
(iv) any sale of shares of Common Stock in an underwritten
public offering for which such shares are registered under the 1933
Act; or
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(v) any pledge or granting of a security interest in shares
of Common Stock owned by NGC (or its transferee under clause (iii)
above) to secure loan financing obtained by NWPS, NGC, or such
transferee, or any sale thereof by foreclosure of such pledge or
security interest, or any sale in lieu of such foreclosure.
ARTICLE 4: BOARD MEETINGS
So long as this Agreement remains in effect, or until the Vogels
have disposed of their Registrable Securities, whichever first occurs, a
representative of the Vogels (designated in writing in a notice to the Company)
shall be given the same notice as is given to the directors of the Company of
all regularly scheduled meetings of the Board of Directors of the Company
("Board") (which will be scheduled according to the needs of the business and
affairs of the Company, but which are presently expected to be held at least
quarterly), as well as all written information provided to such directors for
each such meeting, and shall be allowed to attend (in person or by telephone)
each such meeting.
ARTICLE 5: PUTS AND CALLS
SECTION 5.01 PUTS AND CALLS. At all times after the seventh
anniversary of the Second Closing Date under the Synergy Agreement while this
Agreement remains in effect, each of the Vogels shall have a put right to sell
to the Company his or her Registrable Securities at a price equal to 90% of the
fair market value thereof, determined as provided in Section 5.02, provided the
Company has adequate liquidity to make that purchase (combining for this purpose
all of the Registrable Securities for which such put rights at the time have
been exercised), as reasonably determined by the Board; and the Company shall
have a call right to purchase all of the Vogels' Registrable Securities at a
price equal to 110% of the fair market value thereof, determined as provided in
Section 5.02 herein. Such put and call rights may be exercised by the giving of
written notice thereof to the Company (in the case of a put right) or to the
Vogels (in the case of a call right).
SECTION 5.02 APPRAISAL AND CLOSING PROCEDURE. Promptly after the
exercise of a put or call right granted under Section 5.01 herein, the parties
involved in the put or call transaction shall attempt to reach agreement as to
the fair market value of the Registrable Securities to be sold and purchased
(which shall be the proportionate share of the fair market value of the Company
as a whole, determined on a private company basis, allocated to the securities
involved in the exercised put or call without any discount for minority
interests), but if such agreement is not reached within 30 days after such
notice of exercise is given, then the fair market value of the Registrable
Securities to be sold and purchased as aforesaid shall be determined by an
appraiser or investment banker with recognized expertise in such matters, agreed
upon by the parties involved or if they cannot agree upon such an appraiser or
investment banker within 30 days, then each of the parties (the Company on one
side and the Vogels involved in the exercised put or call on the other) shall
select such an appraiser or investment banker, and those selected shall select a
third such appraiser or investment banker to determine such value. The fees and
expenses of each such appraiser and investment banker shall be borne in equal
shares by the Company on one side and the Vogels involved in the exercised put
or call on the other. As soon as the fair market value of the Registrable
Securities involved in the exercised put or call is determined, the parties
shall promptly consummate the sale and purchase of the Registrable Securities by
the Company making a payment
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in an amount equal to such fair market value of such Registrable Securities,
determined as aforesaid, in exchange for delivery of clear title to such
Registrable Securities. In the event the Company sells shares of Common Stock
in an initial underwritten public offering of its Common Stock within nine
months after the Company exercises a call right to purchase granted under
Section 5.01 herein, the Company will, upon closing such sale of shares in such
initial underwritten public offering, pay to each of the Vogels the difference
(if any) between the price paid to him or her for the shares purchased from him
or her by the exercise of the call purchase right and (if greater) the price
that would have resulted if the initial price to the public in such public
offering had been the fair market value of the Registrable Securities purchased
by the exercise of the call.
ARTICLE 6: MISCELLANEOUS
SECTION 6.01 RESTRICTIVE LEGEND. Each certificate issued by the
Company to evidence shares of Common Stock held by a Stockholder shall be
endorsed with the following legend:
"The shares represented by this certificate are subject to the
Agreement among SYN Inc. and its Stockholders, dated as of [insert
the date of this Agreement], as the same may be amended, on file
with SYN Inc. at its principal business office and may be
transferred or otherwise disposed of only in accordance therewith."
SECTION 6.02 AGREEMENTS RE ESCROW.
(a) Each of the Vogels hereby agrees that the portion of claims
paid from the Contract Escrow Funds (as defined in the Synergy Agreement)
that are properly allocated to the Promissory Note (as defined in the
Synergy Agreement) in accordance with the terms of the Synergy Agreement
and the Contract Escrow Agreement (as defined in the Synergy Agreement)
shall be deemed to be offsets against the payments of principal due under
the Promissory Note.
(b) Each of the Vogels hereby agrees that all dividends and
distributions on the Buyer Common Stock, and the Series A Preferred Stock
(as those terms are defined in the Synergy Agreement) while such stock is
held in escrow under the aforesaid Contract Escrow Agreement, other than
cash dividends that are not liquidating dividends, shall, promptly upon
receipt by him or her, be transferred to the escrowee under such Contract
Escrow Agreement to be held in the escrow under such agreement as part of
the Contract Escrow Funds.
SECTION 6.03 DURATION OF AGREEMENT. This Agreement shall expire and be
of no further force and effect at such time as the total shares of Registrable
Securities owned by all of the Vogels constitute less than 5% of the total
outstanding Registrable Securities solely as a result of transactions by the
Vogels.
SECTION 6.04 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given (a) when delivered in
person, (b) one business day after deposit with a nationally recognized
overnight courier service, (c) two business days after being
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deposited in the United States mail, postage prepaid, first class, registered or
certified mail, or (d) the business day on which it is sent and received by
facsimile, as follows:
(i) If to the Company, to:
SYN Inc.
c/o Empire Gas Corporation
P.O. Box 303
1700 South Jefferson
Lebanon, Missouri 65536
Fax No. (417) 532-8529
Attention: Paul S. Lindsey Jr., President
with a copy to NGC, directed to it at the place required under
this Agreement for giving notice to NGC;
(ii) If to Empire, to:
Empire Gas Corporation
P.O. Box 303
1700 South Jefferson
Lebanon, Missouri 65536
Fax No. (417) 532-8529
Attention: Paul S. Lindsey Jr., President;
(iii) If to NGC, to:
Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8586
Attention: Richard R. Hylland, President;
(iv) If to any of the Stockholders other than Empire or NGC, to
such Stockholder at his or her address and/or telecopy number
(if any) on file with the Company;
provided, however, than any party to this Agreement may change the person,
address, or telecopy number for purposes of giving notice under this Agreement
by giving notice to the other parties hereto.
SECTION 6.05 CAPTIONS. The captions in this Agreement are included for
convenience of reference only and shall be ignored in the construction and
interpretation of this Agreement.
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SECTION 6.06 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Delaware
without regard to the choice of law principles thereof.
SECTION 6.07 COUNTERPARTS. Execution of separate copies of this
Agreement by each or some of the several parties thereto shall have the same
force and effect as though all such parties had executed the original of this
Agreement. Further, the parties hereto may execute several counterparts of this
Agreement, all of which shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SYN INC.
By
-----------------------------------
Title:
---------------------------------
EMPIRE GAS CORPORATION
By
------------------------------------
President
NORTHWESTERN GROWTH CORPORATION
By
-----------------------------------
President
---------------------------------------
Sherman C. Vogel
---------------------------------------
Stephen A. Vogel
---------------------------------------
Jeffrey K. Vogel
---------------------------------------
Jon M. Vogel
---------------------------------------
Jeanette Vogel
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5/17/95(C)
MANAGEMENT AGREEMENT
THIS AGREEMENT, dated May 17, 1995, is made and entered into among
Empire Gas Corporation, a Missouri corporation ("Empire"), Northwestern Growth
Corporation, a South Dakota corporation ("NGC"), and SYN Inc., a Delaware
corporation ("SYN"), with respect to the following facts:
A. Empire, NGC and Syn have entered into that certain Agreement Among
Initial Stockholders and SYN Inc., dated May 17, 1995 (the "Stock Agreement"),
which, among other things, requires this Agreement to be made for the reasons
recited in the Stock Agreement (such recitals being incorporated herein by this
reference).
B. SYN and NGC, immediately following the execution of this Agreement,
will be entering into that certain Purchase and Sale Agreement, dated as of May
17, 1995, with Sherman C. Vogel, Stephen A. Vogel, Jeffrey K. Vogel, Jon M.
Vogel, Jeanette Vogel, Synergy Group Incorporated (with its subsidiaries,
"Synergy"), and S&J Investments (the "Synergy Acquisition Agreement"), providing
for the acquisition by SYN of Synergy (the "Synergy Acquisition").
C. This Agreement is essential to the ability of SYN to finance and
consummate the Synergy Acquisition, and to manage the assets and business to be
acquired by the Synergy Acquisition.
NOW, THEREFORE, in consideration of the premises and the agreements
exchanged herein, the parties hereto agree as follows:
ARTICLE 1: ENGAGEMENT TO PLAN AND MANAGE
SYN, on behalf of itself and its subsidiaries, and for the benefit
of its stockholders (of which NGC is a principal one), hereby engages Empire to
perform the planning and management of the assets and business operations of SYN
and its subsidiaries (the "Management Services"), and Empire hereby accepts such
engagement and agrees to perform the Management Services, subject to the
direction of the Board of Directors of SYN (the "Board") and in accordance with
the terms of this Agreement.
ARTICLE 2: BUSINESS PLAN; BUDGET
SECTION 2.01 INITIAL BUSINESS PLAN. The parties hereto have developed a
business plan, a copy of which is attached as Exhibit A to this Agreement
("Initial Plan"), for the conduct of business operations of SYN and its
subsidiaries after the completion of the Synergy Acquisition (the "SYN
Operations"), showing:
(a) The general longer-term objectives (to be accomplished in a
three to five year period of time);
(b) The preliminary detailed plans for conducting the SYN
Operations through the end of SYN's fiscal year ending June 30, 1996
("fiscal 1996"), including the plant,
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facilities and equipment (at various locations), and the personnel
staffing at the locations, needed to carry on the SYN Operations for the
balance of fiscal 1996 following the Synergy Acquisition and during the
longer term of the plan; and
(c) Capitalized reserves for (i) transition costs including such
items as costs of meetings with personnel at the outlets and branches
acquired in the Synergy Acquisition, retail mailings and other items, not
to exceed $500,000 in the aggregate, and (ii) costs of shutting down
Synergy's facility at Farmingdale, New York, offering severance to Synergy
employees and incorporating Synergy's operations into Empire's facilities
in Lebanon. Missouri.
SECTION 2.02 INITIAL BUDGET. The parties hereto have developed a budget
("Initial Budget") for the conduct of the SYN Operations for the balance of
fiscal 1996 following the Synergy Acquisition in accordance with the Initial
Plan. A copy of the Initial Budget is attached as Exhibit B to this Agreement.
SECTION 2.03 UPDATED AND AMENDED BUSINESS PLANS AND BUDGETS. At least 30
days prior to June 30, 1996 and at least 30 days prior to each June 30
thereafter until the term of this Agreement expires or is terminated
(hereinafter sometimes referred to as the "end of the term of this Agreement"),
Empire will develop, in consultation with NGC, and obtain the approval of the
Board of:
(a) An updated version of the Initial Plan (or of the most recent
previously updated version thereof) to provide a detailed business plan
for the SYN Operations for the 18 months following such June 30 and a
longer-term business plan for the three- to five-year period following
such June 30 (the Initial Plan or updated version thereof in effect at a
given time, including all amendments thereto up to such time, is
hereinafter referred to as the "Applicable Plan"); and
(b) An updated version of the Initial Budget (or of the most
recent previously updated version thereof) to provide a budget for the
conduct of the SYN Operations for the 18 months following such June 30,
(the Initial Budget or updated version thereof in effect at a given time
for a particular period, including all amendments thereto up to such time,
is hereinafter referred to as the "Applicable Budget").
Empire may amend an Applicable Plan or an Applicable Budget, or both, at any
time and from time to time by preparing such amendment, submitting the same to
the Board with such supporting information as the Board may require, and
obtaining the Board's approval thereof, but no such amendment shall be effective
unless and until approved by the Board.
SECTION 2.04 ACTING WITHIN APPLICABLE PLAN AND BUDGET. Empire shall
manage the SYN Operations, commencing with the Synergy Acquisition and
continuing thereafter until the end of the term of this Agreement, in accordance
with the Applicable Plan and within the Applicable Budget, without obtaining
approval of the Board of the details of such management, but subject to
approvals by the Board required by law and to the requirements for approval by
the Board specified in Article 9 herein. Notwithstanding the foregoing:
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(a) Empire may take such management action with respect to the SYN
Operations as it may deem advisable to respond to, and attempt to curtail
or avoid material adverse consequences resulting from material unplanned
adverse developments when (reasonably) there is inadequate time in which
to secure advance approval of such action by the Board, but in such event
the situation and action taken shall be submitted with reasonable
promptness to the Board for such further action as the Board may then deem
advisable;
(b) In addition to action taken pursuant to preceding paragraph
(a), Empire may cause SYN to make maintenance capital expenditures which
individually exceed the Applicable Budget for such expenditures or
category of expenditures by not more than $10,000, but only if the Board
is notified prior to, or at, the time of such expenditures, while such
expenditures in excess of such $10,000 limit may not be made or committed
to unless authorized in advance by the Board; and
(c) If Empire becomes aware that aggregate operating or
administrative expenses likely will be 1% or more in excess of what is
provided for in the then Applicable Budget, Empire shall promptly notify
the Board of such expected excess.
SECTION 2.05 OTHER ACTION. Any action that needs to be taken in the
performance of the Management Services that is not provided for in an Applicable
Plan or Applicable Budget or otherwise provided for in this Agreement shall be
taken in accordance with Empire's good faith judgment as to what is in the best
interests of SYN and its subsidiaries.
ARTICLE 3: EMPIRE'S SERVICES; KEY MAN INSURANCE
SECTION 3.01 EFFORT REQUIRED. Empire, under the management of Paul S.
Lindsey, Jr. ("Lindsey") as the chief executive officer of Empire, shall devote
sufficient time and resources to reasonably assure successful performance by
Empire for SYN of the Management Services in accordance with this Agreement.
SECTION 3.02 KEY MAN INSURANCE. To compensate SYN for the loss of
services that would occur in the event of Lindsey's death, at all times while
this Agreement is in effect SYN may maintain in effect (at SYN's expense)
insurance on the life of Lindsey in an amount not less than $10,000,000, payable
to SYN, and Lindsey will cooperate by providing personal information and taking
physical examinations as required by the insurance carrier for issuing and
maintaining such insurance coverage. The cost of such insurance shall not be
charged, directly or indirectly, in any way to Empire or to any of the
compensation due Empire under this Agreement. At the end of the term of this
Agreement, or at such earlier time as the Board determines that SYN no longer
needs the insurance coverage provided for in this Section, Lindsey will have the
option to purchase ownership of such insurance policies from SYN for a price
equal to any cash surrender value of the insurance.
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ARTICLE 4: COMPENSATION OF EMPIRE
SECTION 4.01 COMPENSATION ENTITLEMENT. As compensation in full for
Empire's services under this Agreement, SYN shall pay Empire a Fixed Fee (as
defined in Section 4.02 hereof) per annum and a Management Fee (as defined in
Section 4.03 hereof).
SECTION 4.02 FIXED FEE. The Fixed Fee (the amount of which for each
fiscal year of SYN, or part thereof, will be included in the Applicable Budget
for such period), is intended to cover Empire's operating overhead in performing
its services under this Agreement. The Fixed Fee shall be paid by SYN to Empire
in equal monthly installments in advance, upon commencement of Empire's services
and thereafter on the first day of each month, and shall be at the initial
annual rate of $3,250,000 for the period commencing with the commencement of
Empire's services under this Agreement and ending June 30, 1996, and for each
12-month period or portion thereof thereafter until the end of the term of this
Agreement the annual rate of the Fixed Fee shall increase by the percentage
increase in the Consumer Price Index, All Items For All Urban Consumers, U.S.
City Average (1982-84 = 100), as of the start of such period as determined by
the index number for the month most recently published by the U.S. Department of
Labor or any successor governmental agency handling such publication, as of the
start of the period, compared to 151.4 (which is such index figure for the month
of March, 1995), but no reduction in the annual rates of the Fixed Fee shall be
made if a decrease in such Consumer Price Index figure shall occur. In addition
to the foregoing adjustments in the Fixed Fee related to changes in such
Consumer Price Index, the Fixed Fee shall be adjusted in an amount approved by
the Board to reflect Empire's increased fixed operating overhead reasonably
attributable to increases in SYN's business resulting from acquisitions and
start-ups of business locations after the Synergy Acquisition is completed. In
the event of changes in the basis for such Consumer Price Index, or such index
is discontinued, the parties shall amend this Section 4.02 to provide as closely
as possible for the same adjustment mechanism, using the changed basis or a
different published index, as appropriate.
SECTION 4.03 MANAGEMENT FEE. The Management Fee, an estimate of which
for each fiscal year shall be included in the Applicable Budget for such period,
shall be at the annual rate of $500,000 per annum, payable by SYN to Empire in
equal monthly instalments in advance upon commencement of Empire's services and
thereafter on the first day of each month, plus a sum (the "Additional Amount")
equal to 10% of the amount by which the EBITDA for SYN and its subsidiaries, on
a consolidated basis, exceeds the amount shown below for each period indicated,
with the Additional Amount for each such period to be paid by SYN to Empire
within 90 days after the end of such period or at such earlier time as the final
calculation of the Additional Amount for such period is completed:
$17,500,000 for the period ending June 30, 1996;
$18,000,000 for the 12 months ending June 30, 1997;
$18,300,000 for the 12 months ending June 30, 1998;
$18,600,000 for the 12 months ending June 30, 1999; and
$18,900,000 for the 12 months ending June 30, 2000;
For purposes of this Agreement, "EBITDA" means earnings before interest, taxes,
depreciation and amortization for a specified period for the specified
corporation, or the specified group of corporations on a consolidated basis, or
the specified business locations, determined from financial
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statements for such corporation or corporations or business locations prepared
on the basis of generally accepted accounting principles, consistently applied.
ARTICLE 5: COMPETITION BETWEEN EMPIRE AND SYN
SECTION 5.01 OVERLAPPING MARKET AREAS. As promptly as is reasonably
possible, Empire and SYN shall use their best efforts to exchange those outlets
of Empire and SYN that are designated in Exhibit C attached to this Agreement as
having overlapping, competing market areas, by having some of the SYN outlets
listed on such Exhibit C transferred to Empire and some of the Empire outlets
listed on such Exhibit C transferred to SYN, such that upon completion of these
transfers, the SYN outlets transferred to Empire will have EBITDA (as defined in
Section 4.03 herein) and assets equivalent (with immaterial exceptions) in
value to the Empire outlets transferred to SYN, and the overlapping, competing
nature of the market areas shown on Exhibit C will be eliminated by such
transfers. Any shortfall of EBITDA or asset value to either party from such
transfers shall be compensated by either a transfer of assets or a cash payment,
the amount of which is to be negotiated between NGC and SYN, as one party, and
Empire, as the other party.
SECTION 5.02 NON-COMPETITION; ACQUISITIONS.
(a) While this Agreement is in effect and for a period of one year
thereafter, Empire and SYN will not solicit customers and employees from
each other.
(b) Until the end of the term of this Agreement and for a period
of two years thereafter, Empire and SYN shall not compete in each others
area of interest for new customers within such area. Regarding individual
acquisitions of retail propane businesses greater than $7,500,000 which
any party hereto desires to make before the end of the term of this
Agreement, such acquisitions shall be owned jointly by Empire and SYN in
relation to the capital provided for such acquisition or such other
arrangements as can be negotiated by such parties on a case by case basis,
but acquisitions less than $7,500,000 shall be pursued first by the
individual entity with operations closest to the acquired property, or if
not successfully pursued by such party, then jointly by Empire and SYN
together, based on capital provided, and if not successfully pursued by
those two parties, then by whichever (Empire or SYN) was not such first
party.
ARTICLE 6: ACCOUNTING SYSTEM; ACCOUNTANTS
SECTION 6.01 ACCOUNTING SYSTEM. At all times until the end of term of
this Agreement, Empire will:
(a) Cause SYN and its subsidiaries to implement and maintain a
system of accounting for the assets, liabilities, operations and cash
flows of SYN and its subsidiaries, and internal controls over accounting
and financial matters for SYN and its subsidiaries, similar to the system
and controls maintained by Empire for itself, or, if requested by the
Board, as the Board shall reasonably require; and in connection with the
foregoing, Empire shall cause SYN to provide NGC with such financial
statements and reports with respect to assets, liabilities, operations and
developments affecting the business or assets of SYN and
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its subsidiaries , as NGC may require (taking into account the accounting
and reporting requirements of NGC's parent corporation, Northwestern
Public Service Company); and
(b) Cause SYN to engage a so-called "Big Six" firm of independent
public accountants (or whatever, at the time, is the equivalent of the
present Big Six) approved by the Board to make quarterly reviews and
annual audits of SYN and its subsidiaries; but to the most efficient
extent possible, Empire shall cause SYN to engage Baird, Kurtz & Dobson
("BK&D") to perform detailed compliance work to assist the designated firm
of independent accountants in completing the quarterly reviews and annual
audits.
SECTION 6.02 AUDIT OR REVIEW. At all times until the end of the term of
this Agreement, Empire will allow the Board and its authorized representatives,
upon at least seven-days' prior notice to, and in coordination with, the
President and Chief Executive Officer of SYN, to audit or review the books of
account and records of all kinds kept for SYN, inspect SYN's properties, consult
with SYN's personnel and with Empire's personnel involved in Empire's
performance of services under this Agreement, and generally to observe and
monitor the operation, management and accounting for SYN's business and assets;
provided, however, that such review and/or audit shall not last longer than five
business days unless Empire is in default under this Agreement. Such reviews
shall be restricted to no more than once a month at the home office of SYN, as
maintained by Empire, through June 30, 1996 and quarterly thereafter, and
unrestricted at all of SYN's retail locations. All reports resulting from these
audits or reviews shall be promptly furnished to the Board.
ARTICLE 7: INSURANCE FOR SYN
In addition to the key man insurance which SYN may maintain pursuant
to Section 3.02 herein, at all times while this Agreement is in effect insurance
covering liability exposures of SYN and its Board, with types and amounts of
coverages as shall be approved by the Board, shall be obtained and maintained
for SYN and its subsidiaries (at SYN's expense, and at no cost to Empire) by
Empire as part of the Management Services. Empire shall be named as a
co-insured under such coverages. The cost of such insurance shall be included
in each Applicable Budget.
ARTICLE 8: ATTENDANCE OF EMPIRE'S BOARD MEETINGS
At all times while this Agreement is in effect, NGC will designate a
representative who may, as invited, be allowed to attend quarterly meetings of
Empire's Board of Directors and to receive copies of all information supplied
by Empire to the members of its Board of Directors for such meetings.
ARTICLE 9: SYN BOARD APPROVAL REQUIRED
The assets and business of SYN and its subsidiaries shall be managed
as provided herein by Empire while this Agreement remains in effect, subject to
the overall direction and supervision by the Board. However, Empire shall not
take for SYN (such term at all times in this
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Article 9 includes SYN's subsidiaries), or cause SYN to take, any of the
following actions without having obtained the prior approval of the Board:
(a) Sell, lease, transfer or otherwise dispose of, or enter into
any agreement or arrangement for any sale, lease, transfer or other
disposition of assets of SYN, except for (i) a sale, lease, transfer or
other disposition specifically provided for in the Applicable Budget, or
(ii) the sale of services to customers and the sale or lease of products
in the ordinary course of business of SYN;
(b) Purchase any goods or services from, or sell any goods or
services to, or enter into or amend any agreement or other transaction
with, Empire or any affiliate of Empire that is not on an arm's-length
basis;
(c) Cause SYN to incur any indebtedness for borrowed money
(including, without limitation, any capitalized lease obligations) or to
enter into an agreement for such borrowing (or leasing) with the exception
of seller financing of the purchase of particular assets;
(d) Mortgage or otherwise grant a lien upon or security interest
in any assets of SYN except liens upon acquired assets to secure seller
financing for the acquisition of such assets;
(e) Cause SYN to become a surety or guarantor of, or an
accommodation party to, or otherwise become or be contingently liable for
any indebtedness or obligations of any other party, other than as a result
of endorsing to negotiate payment of instruments received from customers
in payment for goods and services in the ordinary course of business in
amounts less than $50,000;
(f) Cause SYN to enter into any joint venture or similar
relationship or acquire any stock, debt obligations or other securities
of, or loan to or make any investment in or capital contribution to any
other party which is not a wholly-owned subsidiary of SYN;
(g) Institute, defend, or settle any legal proceeding on behalf of
SYN, except legal proceedings against SYN shall be defended and if the
matter is partially or wholly covered by insurance, it may be settled if
the settlement payment to be made by SYN is an amount not exceeding the
deductible under such insurance coverage for such matter and all other
matters not partially or wholly covered by insurance may be settled if the
settlement payment to be made by SYN is an amount not exceeding $50,000
per matter;
(h) Enter into any new contract for the leasing, as lessee, of any
real or personal property, other than operating leases entered into in the
ordinary course of business involving a term of not more than one year
total or rental of not more than $50,000, and other than retail location
operating leases;
(i) File or consent to any petition in bankruptcy, reorganization,
liquidation or similar proceeding with respect to SYN, or seek, consent to
or acquiesce in the appointment of a trustee, receiver or liquidator of
SYN, or of all or any part of the assets of SYN, or make an assignment for
the benefit of SYN's creditors;
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(j) Confess a judgment against SYN greater than $50,000;
(k) Amend, modify, supplement or waive any provision of any
contract, the making of which was approved or required to be approved by
the Board;
(l) Make any employment, severance, consulting or similar
agreement, including any agreement with a labor union, or amend the same,
for SYN with any other party involving payments by SYN greater than
$50,000, or adopt any employee benefit plan for employees of SYN;
(m) Open or close a primary office, plant or other business
location for SYN, or make an agreement or commitment of any kind to do so
unless it results from the merger or consolidation with another SYN plant,
office or other business location; or
(n) Take any action in contravention of this Agreement.
ARTICLE 10: DIRECTORS AND OFFICERS
SECTION 10.01 DIRECTORS AND OFFICERS OF SYN. During the term of this
Agreement, the provisions of Section 5.02 of the Stock Agreement (which are
hereby incorporated herein by this reference) shall be carried out by Empire and
NGC even if the Stock Agreement ceases to be in effect for any reason.
SECTION 10.02 DIRECTORS AND OFFICERS OF SUBSIDIARIES. The directors
and officers of subsidiaries of SYN shall be designated by Empire to enable
Empire to achieve an efficient management and administration of the business and
affairs of the subsidiaries.
ARTICLE 11: TERM; TERMINATION
SECTION 11.01 TERM OF THIS AGREEMENT; TERMINATION. The term of this
Agreement shall be in effect until it expires on June 30, 2000, or at the end of
any fiscal year thereafter if preceded by at least six-months' written notice by
SYN or one-year's written notice by Empire of its desire to terminate as of such
date, unless sooner terminated at the election of the Board, and upon giving
notice to Empire of such election, on any earlier date in the event of any of
the following:
(a) Upon default by Empire under this Agreement which remains
uncured after 30 days written notice of such default has been given to
Empire by SYN or NGC;
(b) Upon any change in ownership of Empire which results in
Lindsey having less than voting control (as a stockholder) of Empire;
(c) Upon the filing or consent to any petition in bankruptcy,
reorganization, liquidation or similar proceeding with respect to Empire,
or the appointment of a trustee, receiver or liquidator for Empire for all
or a substantial part of its assets, or the making of an assignment by
Empire for the benefit of its creditors;
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(d) Upon the failure of SYN and its subsidiaries to achieve the
following cumulative (consolidated) EBITDA results for the periods
beginning with the Synergy Acquisition and ending on the dates indicated
below, as follows:
(i) for the period ended June 30, 1996, cumulative EBITDA of
at least $14 million;
(ii) for the period ended June 30, 1997, cumulative EBITDA of
at least $29 million;
(iii) for the period ended June 30, 1998, cumulative EBITDA of
at least $45 million;
(iv) for the period ended June 30, 1999, cumulative EBITDA of
at least $62 million;
(v) for the period ended June 30, 2000, cumulative EBITDA of
at least $80 million; and
(vi) for periods (if any) subsequent to June 30, 2000,
cumulative EBITDA at the end of each fiscal year of SYN
shall be at least $20,000,000 higher than at the end of
the previous fiscal year;
(e) If SYN at any time is in default with respect to more than
$1,000,000 of its borrowings;
(f) If Empire at any time is in default with respect to its
outstanding publicly-held bonds;
(g) By mutual agreement of the parties or when required by final
court order or final award of arbitrators; or
(h) If the stock of SYN, or stock entitling the holder or holders
thereof to cast a majority of the votes in the general election of
directors of SYN, or substantially all of the assets of SYN, is sold,
directly or by merger or consolidation.
The term of this Agreement also may be terminated at the election of Empire and
upon giving notice to NGC and SYN of such election in the event of any of the
following:
(i) Upon default by SYN resulting from non-payment of the Fixed
Fee or the Management Fee to Empire which remains uncured after 30 days
written notice of such default has been given by Empire to SYN or NGC; or
(ii) If the stock of SYN, or stock entitling the holder or holders
thereof to cast a majority of the votes in the general election of
directors of SYN, or substantially all of the assets of SYN is sold,
directly or by merger or consolidation; or
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(iii) If any of the terms of this Agreement are changed without the
consent of Empire.
SECTION 11.02 TRANSITION UPON TERMINATION.
(a) Upon expiration or earlier termination of this Agreement, the
parties hereto will cooperate to the fullest extent possible to facilitate
the creation of a staff of management personnel, and the establishment of
facilities owned or leased by SYN or otherwise available for use by SYN on
terms acceptable to SYN, to enable SYN to plan and manage its business
operations and assets without the services that would have been provided
by Empire under this Agreement had this Agreement remained in effect; and
until that is accomplished (and the parties hereto shall make a good faith
effort to accomplish it promptly), SYN shall have the use of the personnel
and facilities of Empire that had been devoted in whole or in part to such
planning and management at a cost not to exceed the amount most recently
budgeted therefor in the last Applicable Budget, or at Empire's cost in
the absence of such budgeted amount.
(b) Notwithstanding the foregoing, in the event this Agreement is
terminated by Empire, SYN shall have up to 18 months (including the
12-months' notice period) to plan and execute an operational and
transition plan for achieving what is provided for in preceding subsection
(a).
SECTION 11.03 PUTS AND CALLS.
(a) In the event this Agreement is terminated by Empire, SYN shall
have a call right to purchase Empire's shares of common stock of SYN at a
price equal to 100% of fair market value, determined by appraisal, and
Empire shall have a put right to sell to SYN Empire's shares of common
stock of SYN at a price equal to 90% of fair market value, determined by
appraisal, provided that, in case of a put by Empire, SYN has adequate
liquidity, as reasonably determined by its Board, to make such purchase.
(b) In the event this Agreement is terminated by SYN, SYN shall
have a call right to purchase Empire's shares of common stock of SYN at a
price equal to 110% of fair market value, determined by appraisal, and
Empire shall have a put right to sell to SYN Empire's shares of common
stock of SYN at a price equal to 100% of fair market value, determined by
appraisal, provided that in the case of a put by Empire, SYN has adequate
liquidity, as reasonably determined by its Board, to make such purchase.
(c) For these purposes, fair market value of the shares of common
stock of SYN to be sold and purchased shall be determined by an appraiser
or investment banker selected as provided in Section 1.04(a)(ii) of the
Stock Agreement, with the appraisal made in accordance with such Section.
ARTICLE 12: RIGHT OF FIRST REFUSAL
So long as this Agreement is in effect, Empire will require Lindsey not to
sell or otherwise dispose of the shares of stock of Empire which he owns (other
than to an affiliated entity or related
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party or to Empire management personnel, provided that Lindsey retains voting
control of Empire), and Empire will not sell or otherwise dispose of all or
substantially all of its business and assets, whether such transactions are to
be done directly or indirectly by means of a merger or consolidation of Empire
with the acquiring entity, without first offering the same for sale to NGC, on
the same terms as are offered by the other party (with full disclosure of such
terms to NGC), and allowing not less than 30 days after its receipt of the offer
for NGC to accept the offer, and if such offer is accepted by NGC, NGC shall
have 90 days in which to complete the purchase on such terms.
ARTICLE 13: MISCELLANEOUS
SECTION 13.01 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given (a) when delivered in
person, (b) one business day after deposit with a nationally recognized
overnight courier service, (c) two business days after being deposited in the
United States mail, postage prepaid, first class, registered or certified mail,
or (d) the business day on which it is sent and received by facsimile, as
follows:
If to SYN, to: SYN Inc.
c/o Northwestern Growth Corporation
33 Third Street, S.E.
Huron SD 57350
Fax No. (605) 353-8286
Attn: Richard R. Hylland, President and Chief Operating
Officer
and to SYN Inc.
c/o Empire Gas Corporation
1700 South Jefferson Street
Lebanon, MO 65536
Fax No. (417) 532-8529
Attn: Paul S. Lindsey, Jr., Chief Executive Officer
If to NGC: Northwestern Growth Corporation
33 Third Street, S.E.
Huron SD 57350
Fax No. (605) 353-8286
Attn: Richard R. Hylland, President
If to Empire: Empire Gas Corporation
PO Box 303
1700 South Jefferson
Lebanon MO 65536
Fax No. (417) 532-8529
Attn: Paul S. Lindsey, Jr., President
11
<PAGE>
or to such other person or address as any party hereto shall specify in notice
in writing given to the other parties hereto.
SECTION 13.02 ASSIGNMENT RESTRICTED; SUCCESSORS AND ASSIGNS. No party
hereto may assign its interest in this Agreement without first obtaining the
written consent of the other parties hereto, except that this Agreement may be
assigned by SYN, without obtaining such consents, to (and in connection with the
closing of the acquisition by) an acquirer of substantially all of the business
and assets of SYN and its subsidiaries, provided that written notice of such
assignment is given to the other parties hereto, and except further that this
Agreement may be assigned by NGC (in connection with the assignment of NGC's
shares of common stock of SYN) to NWPS, or any wholly-owned subsidiary of NWPS,
without obtaining such consents, provided written notice of such assignment is
given to the other parties hereto.
SECTION 13.03 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 enforced to the fullest extent permitted by law.
SECTION 13.04 INTERPRETATION. 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.
SECTION 13.05 ARBITRATION. Any dispute arising under this Agreement
shall be resolved by arbitration. Each of the parties hereto agrees (a) that
each such arbitration shall be initiated and conducted in accordance with the
rules and procedures of the American Arbitration Association ("AAA"), (b) to
submit all such disputes to the office of the AAA in charge of arbitrations
conducted in the metropolitan area of the City of Minneapolis, Minnesota, and
(c) to have each such arbitration proceeding conducted in the metropolitan area
of the City of Minneapolis, Minnesota, and (d) to be subject to the jurisdiction
of the arbitrators in the City of Minneapolis, Minnesota upon notice given in
accordance with the provisions of this Agreement that a dispute has been
submitted to such office of the AAA.
SECTION 13.06 GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Delaware (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.
SECTION 13.07 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
collectively shall constitute one and the same agreement.
12
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed this Agreement
as of the date first above written.
Empire Gas Corporation SYN Inc.
By: /s/ Paul S. Lindsey, Jr. By: /s/ Paul S. Lindsey, Jr.
------------------------- ---------------------------
Its President Title: President
------------------------
Northwestern Growth Corporation
By: /s/ Richard R. Hylland
---------------------------
Its President
13
<PAGE>
EXHIBITS TO MANAGEMENT AGREEMENT
Exhibit A Initial Business Plan (Section 2.01)
Exhibit B Initial Budget (Section 2.02)
Exhibit C Listing of overlapping market areas of SYN (Synergy) and
Empire
<PAGE>
5/17/95(C)
AGREEMENT AMONG INITIAL STOCKHOLDERS AND SYN INC.
THIS AGREEMENT, dated May 17, 1995, is made and entered into among Empire
Gas Corporation, a Missouri corporation ("Empire"), Northwestern Growth
Corporation, a South Dakota corporation ("NGC"), and SYN Inc., a Delaware
corporation ("SYN"), with respect to the following facts:
A. Empire currently is engaged in the business of distributing and
selling at retail liquified petroleum ("LP") gas and appliances, and has a
management experienced in the operation of such business.
B. NGC is a wholly-owned subsidiary of Northwestern Public Service
Company ("NWPS") and has as one of its objectives the making of investments that
could benefit NWPS and its stockholders.
C. Empire and NGC, acting together, have made a successful bid to
acquire the LP gas distribution and appliance business of Synergy Group
Incorporated ("Synergy"; such acquisition being hereinafter called the "Synergy
Acquisition"), in what is planned to be the first step in the proposed
development by Empire and NGC, on a team basis, of a significant position in the
LP gas distribution industry. Empire and NGC have contemplated, in their
bidding for the Synergy Acquisition, that they will rely principally on Empire
for management expertise and on NGC to provide or arrange the financing for the
Synergy Acquisition, and that the success of the Synergy Acquisition will depend
in large measure upon the cost savings and operating improvements expected to be
achieved by having Empire do the planning and management of the business of
Synergy and its subsidiaries, under the direction of the Board of Directors of
SYN.
D. Empire and NGC have caused SYN to be incorporated to serve as the
vehicle (directly or through subsidiaries to be created) for making the Synergy
Acquisition.
E. Empire and NGC, on behalf of SYN, are concluding the negotiation of
the definitive agreement (the "Synergy Acquisition Agreement") for the Synergy
Acquisition, and need to provide for (i) the initial capitalization of SYN, (ii)
certain loan financing for SYN, (iii) the management of SYN and (iv) for certain
matters pertaining to the ownership of shares of stock of SYN.
NOW THEREFORE, in consideration of the premises and the agreements
exchanged herein, the parties hereto agree as follows:
ARTICLE 1: INITIAL CAPITALIZATION OF SYN;
STOCK SUBSCRIPTIONS AND RESERVATIONS OF STOCK
SECTION 1.01 INITIAL AUTHORIZED STOCK OF SYN. SYN has been
incorporated by Empire and NGC with an initial authorized capitalization (as set
forth in Article FOURTH of SYN's Certificate of Incorporation, a true and
complete copy of which is attached hereto as Exhibit A), consisting of 100,000
shares of common stock, par value 1E per share (the "Common Stock"; and the
100,000 shares of Common Stock referred to herein shall only be increased with
the prior written agreement of Empire and NGC unless such increased number of
shares is to be issued in an arm's length
<PAGE>
transaction to a party who is not affiliated with any of the parties to this
Agreement), and 100,000 shares of preferred stock, par value 1E per share,
issuable in one or more series (the "Preferred Stock"). Prior to the
consummation of the Synergy Acquisition, SYN shall, and Empire and NGC shall
cause SYN to, take all action necessary to create and authorize the issuance of
a series of the Preferred Stock, namely, the Series A Cumulative Preferred
Stock, consisting of 70,500 shares, the terms of which shall be as set forth in
Exhibit B attached hereto, with such changes therein as the parties hereto may
approve before such series is created (the "Series A Preferred Stock").
SECTION 1.02 SUBSCRIPTIONS AND OPTION FOR STOCK. NGC has previously
purchased, and hereby subscribes for, stock of SYN, and NGC has granted Empire
an option to purchase certain shares of stock from NGC, as follows:
(a) SYN and NGC acknowledge that NGC has purchased from SYN, and
SYN has sold and issued to NGC, 1,000 shares of Common Stock for a cash
purchase price of $1,000.00 which has been paid by NGC to SYN, and that
these shares are the only shares of stock of SYN that are currently
outstanding.
(b) NGC hereby subscribes for, and agrees to purchase from SYN,
and SYN hereby agrees to sell and issue to NGC, an additional 71,500
shares of Common Stock for a cash purchase price of $71,500.00 to be paid
at the time of such issuance, with this transaction to be consummated (the
"Subscription Closing") at the First Closing, as defined in the Synergy
Acquisition Agreement, unless an earlier time for the Subscription Closing
is agreed to by the parties hereto. The obligation of NGC under its
subscription in this paragraph (b) is subject to the condition (unless
waived by NGC) that NGC shall have been able to obtain the funds from the
Permanent Financing or the Temporary Financing, as those terms are defined
in the Synergy Acquisition Agreement, at or prior to the time of the
Subscription Closing.
(c) NGC hereby subscribes for, and agrees to purchase from SYN,
and SYN hereby agrees to sell and issue to NGC, 68,000 shares of Series A
Preferred Stock for a cash purchase price of $1,000 per share
($68,000,000.00 total), with this transaction to be consummated at the
Subscription Closing. The obligation of NGC under its subscription in
this paragraph (c) is subject to the condition (unless waived by NGC) that
NGC shall have been able to obtain the funds from the Permanent Financing
or the Temporary Financing, as those terms are defined in the Synergy
Acquisition Agreement, at or prior to the time of the Subscription Closing
and that, at the time of the Subscription Closing, the First Closing (as
defined in the Synergy Acquisition Agreement) is concurrently occurring or
is reasonably assured of being consummated immediately thereafter.
(d) Empire hereby subscribes for, and agrees to purchase from SYN,
and SYN hereby agrees to issue and sell to Empire, 10,000 shares of Common
Stock (which shall represent 10% of the issued and outstanding Common
Stock) for a cash purchase price of $10,000 to be paid at the time of such
issuance, with this transaction to be consummated at the Subscription
Closing. The obligation of Empire under its subscription in this
paragraph (d) is subject to the condition (unless waived by Empire) that
NGC consummates its purchase of shares of Common Stock under paragraph (b)
above in this Section 1.02 at the Subscription Closing.
2
<PAGE>
(e) NGC hereby grants to Empire an option to purchase from NGC, at
a price of $1.00 per share, up to 20,000 of the shares of Common Stock
which shall represent 20% of the issued and outstanding Common Stock,
subject to NGC acquiring such shares pursuant to paragraph (b) above in
this Section 1.02. Such option may be exercised at any time after
September 30, 1995 and prior to September 30, 1997, or the Determination
Date (as defined in Section 1.04 herein), whichever is earlier, by
Empire's giving written notice of such exercise to NGC. After the giving
of such notice, NGC shall assign and deliver to Empire the shares of
Common Stock for which the stock option was exercised, as promptly as
possible, but in any event within seven days, in exchange for Empire's
payment to NGC of the purchase price for such shares; and the shares so
assigned and delivered shall then be shares owned by Empire and shall be
held by Empire subject to the terms of this Agreement.
SECTION 1.03 RESERVATIONS OF STOCK FOR ISSUANCE. SYN shall, and
Empire and NGC shall cause SYN to, take all action necessary to reserve for
initial issuance, 17,500 shares of Common Stock and 2,500 shares of Series A
Preferred Stock to be issued to the Stockholders (as defined in the Synergy
Acquisition Agreement) at the Second Closing (also as defined in the Synergy
Acquisition Agreement), pursuant to the Synergy Acquisition Agreement.
Section 1.04 COMMON STOCK RETURN. The following provisions of this
Section 1.04 apply in the event Empire exercises the stock option granted to it
in Section 1.02(d) herein:
(a) The "Common Stock Return," as that term is used herein, shall
be the number of shares of Common Stock of SYN which Empire hereby agrees
to assign and deliver to NGC, without cost to NGC, in the event that the
common equity value at a Determination Date (as defined below) is below
levels specified for such date in subparagraph (iii) in this paragraph
(a). The Common Stock Return shall be set in accordance with the
following formula:
(i) The Determination Date shall be the date on which SYN is
sold (meaning a sale of substantially all of the assets of SYN and
its subsidiaries, the acquisition of SYN by another, non-affiliated
entity by merger or consolidation, or the sale of partnership units
or shares of stock of SYN which entitle the holder thereof to cast
at least a majority of the votes entitled to be cast in the general
election of directors of SYN or the date on which the sale of
partnership units or shares of SYN's Common Stock is closed in an
underwritten public offering, for which the partnership units or
shares are registered under the Securities Act of 1933, or the date
on which this Agreement expires or is terminated in accordance with
Section 7.02 herein, whichever of the foregoing first occurs).
(ii) The value of the total outstanding Common Stock of SYN
on the Determination Date (the "Value"), shall be determined by the
parties hereto on the basis of the sale price for SYN if the sale of
SYN is involved, or based upon the price to SYN (or the selling
stockholders if SYN is not the seller) in the event an underwritten
public offering of partnership units or Common Stock of SYN is
involved, or on the basis of the fair market value of the
outstanding Common Stock of SYN in every other event, as determined
by an appraisal firm or an investment banking firm selected by the
parties hereto, with such fair market value to be
3
<PAGE>
determined on the basis of the value of SYN and its subsidiaries as
a whole, if sold as a going concern. In the event there is a
combination of one or more entities with SYN, the value of SYN will
be determined by either (x) a fair market value appraisal or (y) in
the event there is a public offering within nine months after such
combination, the value shall be the initial price to the public of
the SYN shares of Common Stock or partnership units in such public
offering.
(iii) For these purposes, "deemed outstanding shares of Common
Stock" shall be the total of the number of shares of Common Stock
issued and outstanding, plus the number that would be issued and
outstanding if all outstanding stock options, warrants, conversion
rights and other rights to acquire shares of Common Stock were
exercised, whether or not exercisable at the time. The number of
shares of Common Stock of SYN constituting the Common Stock Return
shall be the percentage of the deemed outstanding shares of Common
Stock of SYN as of the Determination Date, determined on the basis
of the following table and paragraph (b) below, if applicable:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Column A Column B Column C
Percentage of deemed outstanding Percentage of deemed outstanding
Fiscal Year of shares of Common Stock of SYN shares of Common Stock of SYN
SYN in which shall be 0% if the Value as of shall be 7.5% if the Value as of
Determination the Determination Date is the Determination Date is
Date occurs: at least the following amount: less than the following amount:
- -------------- ------------------------------ -------------------------------
<S> <C> <C>
1996 $24,500,000 $22,250,000
1997 $30,000,000 $24,750,000
1998 $36,750,000 $27,500,000
1999 $45,000,000 $30,600,000
2000 $55,200,000 $34,000,000
After 2000 1.225 times the previous year's 1.1125 times the previous year's
amount amount
</TABLE>
(b) If the Value as of the Determination Date is more than the
amount in Column C in Section 1.04(a)(iii) above, but less than the amount
in Column B therein, the percentage used to determine the Common Stock
Return shall be a figure between 7.5% and 0% which is in proportion to
what the Value is to the amounts in the two columns for the particular
Determination Date.
SECTION 1.05 ACQUISITION FOR INVESTMENT. Empire and NGC each
represent and warrant to the other, and to SYN, as follows: It has (through its
management personnel) such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of its purchase of
securities of SYN as provided for in this Agreement; it is acquiring such
securities, and will acquire them, for investment and not with a view toward, or
with any intention of,
4
<PAGE>
distributing or selling any of the securities and it will not sell or offer to
sell or otherwise transfer any of the securities in violation of the Securities
Act of 1933, as amended.
ARTICLE 2: LOAN FINANCING FOR SYN
NGC shall make a commercially reasonable effort to arrange for SYN, or
provide SYN with, loan financing for SYN, on a fully secured basis, of up to
$70,000,000 principal amount needed by SYN for the Synergy Acquisition.
ARTICLE 3: LIMIT TO FINANCING OBLIGATIONS
Neither Empire nor NGC, nor any of their affiliates, shall have any
obligation to provide, or arrange, financing for SYN other than as expressly
provided for in Articles 1 and 2 herein.
ARTICLE 4: SYNERGY ACQUISITION
Each of the parties hereto will make a commercially reasonable effort in
cooperation with the other parties hereto, to do those things within its control
to consummate the Synergy Acquisition in accordance with the terms of, and
subject to the conditions in, the Synergy Acquisition Agreement. Nothing in
this Agreement or otherwise shall be construed to give anyone who is not a party
to this Agreement, whether under a third party beneficiary legal doctrine or
otherwise, a right to enforce the provisions of this Article or to obtain relief
for any failure to perform in accordance with the requirements of this Article.
ARTICLE 5: MANAGEMENT OF SYN
SECTION 5.01 At or before the First Closing (as defined in the Synergy
Acquisition Agreement), the parties hereto will enter into a management
agreement in substantially the form attached hereto as Exhibit C, or with such
changes therein as the parties hereto hereafter agree upon (the "Management
Agreement"), pursuant to which the planning and management of the business of
SYN subsequent to the Second Closing (as defined in the Synergy Acquisition
Agreement) will be conducted by Empire under the direction of the Board of
Directors of SYN, as provided therein.
SECTION 5.02 DIRECTORS AND OFFICERS OF SYN.
(a) For purposes of this Agreement, "Control Period" means the
period of time commencing on the date of this Agreement and continuing
either (i) until this Agreement is terminated pursuant to Section 7.02
herein because of the termination of the Synergy Acquisition Agreement
without the Synergy Acquisition having been completed or (ii) until a time
after the First Closing, as defined in the Synergy Acquisition Agreement,
when (A) the Control Period is terminated by agreement of the parties
hereto, (B) NGC no longer owns a majority of the shares of Common Stock of
SYN deemed to be outstanding (determined as provided in Section 1.04
herein), (C) Empire no longer owns at least 20%
5
<PAGE>
of the shares of Common Stock of SYN deemed to be outstanding or has an
option to acquire at least that amount of shares, or (d) when SYN
consummates an underwritten public offering of partnership units or shares
of its Common Stock, registered under the Securities Act of 1933,
whichever of (a), (b), (c) or (d) first occurs.
(b) Throughout the Control Period, NGC and Empire shall vote their
voting shares of stock of SYN that are capable of being voted, and will
otherwise use their respective commercially reasonable efforts, to carry
out the following:
(i) the Board of Directors of SYN shall consist of five
members, three of whom shall be nominees of NGC (the "NGC
Positions") and two of whom shall be nominees of Empire (the "Empire
Positions"); and any vacancies occurring in the NGC Positions will
be promptly filled with nominees of NGC and any vacancies occurring
in the Empire Positions will be promptly filled with nominees of
Empire.
(ii) The officers of SYN shall include at all times a
Chairman of the Board and a Vice Chairman of the Board, who will be
persons nominated by NGC, and a President and Chief Executive
Officer, who will be Paul S. Lindsey, Jr., and a Secretary, who will
be a person nominated by Empire. The authority and duties of such
officers shall be as set forth in the by-laws of SYN, a true and
complete copy of which as in effect on the date hereof is attached
hereto as Exhibit D.
(c) To initiate compliance with preceding paragraph (b), Empire
and NGC have caused the following persons to be elected to the positions
with SYN indicated by their names, to serve for the period provided in the
by-laws of SYN:
* Chairman of the Board and director -- Merle D. Lewis (an NGC
nominee for such positions);
* Vice Chairman of the Board and director -- Richard R. Hylland
(an NGC nominee for such positions);
* President and Chief Executive Officer and director -- Paul S.
Lindsey, Jr. (an Empire nominee as to the position of
director);
* Secretary and director -- Douglas A. Brown (an Empire nominee
for such positions);
with the fifth member of the Board of Directors of SYN (one of the NGC
Positions) to be nominated by NGC, and elected, at a future time when NGC
has selected the nominee for such position.
6
<PAGE>
ARTICLE 6: DISPOSITION OF SYN STOCK BY EMPIRE OR NGC
SECTION 6.01 PERMITTED DISPOSITIONS.
(a) NGC may at any time or from time to time transfer any of the
securities issued by SYN which NGC may own at any time to NWPS or any
wholly-owned subsidiary of NWPS, provided that notice of such transfer is
given to the other parties to this Agreement and that the transferee
becomes a party to this Agreement with respect to the securities so
transferred, but all of such transferees and NGC shall collectively act,
and be treated, as a single entity with NGC acting as their representative
for purposes of this Agreement.
(b) Empire may at any time and from time to time transfer any of
the securities issued by SYN which Empire may own at any time to any
affiliated party, provided that notice of such transfer is given to the
other parties to this Agreement and the transferee becomes a party to this
Agreement with respect to the securities so transferred, but all such
transferees and Empire shall collectively act, and be treated, as a single
entity with Empire acting as their representative for purposes of this
Agreement.
SECTION 6.02 RIGHTS OF FIRST REFUSAL.
(a) Except as permitted by Section 1.04 and Section 6.01(b)
herein, so long as the Management Agreement is in effect, Empire will not
sell or otherwise dispose of any shares of Common Stock of SYN, or any
other securities convertible into such shares, to any party without first
offering the same for sale to NGC in writing on the same terms as are
offered to or by the other party (with full disclosure of such terms to
NGC) and allowing not less than 30 days after its receipt of the offer for
NGC to accept the offer; and if such offer is accepted by NGC, NGC shall
have 90 days in which to complete the purchase on such terms.
(b) Except as permitted by Section 1.02(e) and Section 6.01(a)
herein, so long as the Management Agreement is in effect, NGC will not
sell or otherwise dispose of any shares of Common Stock of SYN, or any
other securities convertible into such shares, to any party without first
offering the same for sale to Empire in writing on the same terms as are
offered to or by the other party (with full disclosure of such terms to
Empire) and allowing Empire not less than 30 days after its receipt of the
offer for Empire to accept the offer, and if such offer is accepted by
Empire, Empire shall have 90 days in which to complete the purchase on
such terms, but if Empire declines such offer, then Empire shall have the
right to participate on a pro rata basis in the sale of such shares by
NGC.
ARTICLE 7: MISCELLANEOUS
SECTION 7.01 RESTRICTIVE LEGEND. Each certificate issued by SYN to
evidence shares of Common Stock, or securities convertible into such shares,
owned by either Empire or NGC shall be endorsed with the following legend:
7
<PAGE>
"The shares represented by this certificate are subject
to the Agreement among the Corporation and its Initial
Stockholders, dated as of May 17, 1995, as the same may
be amended, on file with the issuing Corporation at its
principal business office and may be transferred or
otherwise disposed of only in accordance therewith."
SECTION 7.02 TERM OF THIS AGREEMENT. This Agreement, if not sooner
terminated by agreement of the parties hereto or pursuant to the next sentence,
shall terminate when the Control Period terminates. In the event the Synergy
Acquisition Agreement is terminated without the Synergy Acquisition having been
completed, the parties hereto will liquidate and dissolve SYN as promptly as
possible when all obligations of SYN under, or with respect to, the Synergy
Acquisition Agreement have been discharged or provided for; and this Agreement
shall then automatically terminate.
SECTION 7.03 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given (a) when delivered in
person, (b) one business day after deposit with a nationally recognized
overnight courier service (c) two business days after being deposited in the
United States mail, postage prepaid, first class, registered or certified mail,
or (d) the business day on which it is sent and received by facsimile, as
follows:
(i) If to SYN, to:
SYN Inc.
c/o Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8286
Attention: Richard R. Hylland, President
with a copy to Empire, addressed and sent to it at the place
required under this Agreement for giving notice to Empire
(ii) If to Empire, to:
Empire Gas Corporation
P.O. Box 303
1700 South Jefferson
Lebanon, Missouri 65536
Fax No. (417) 532-8529
Attention: Paul S. Lindsey, Jr., President
8
<PAGE>
(iii) If to NGC, to:
Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8286
Attention: Richard R. Hylland, President
SECTION 7.04 SECTION 351 OF THE CODE. Each of the parties hereto
agrees to comply with the requirements of Section 6.28 of the Synergy
Acquisition Agreement, both with respect to the transaction referred to therein
and with respect to any transaction under this Agreement to the extent necessary
to assure the result under Section 351 of the Internal Revenue Code of 1986, as
amended, for the transaction referred to in such Section 6.28.
SECTION 7.05 CAPTIONS. The captions in this Agreement are included
for convenience of reference only and shall be ignored in the construction and
interpretation of this Agreement.
SECTION 7.06 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Delaware
without regard to the choice of law principles thereof.
SECTION 7.07 COUNTERPARTS. Execution of separate copies of this
Agreement by each or some of the several parties hereto shall have the same
force and effect as though all such parties had executed the original of this
Agreement. Further, the parties hereto may execute several counterparts of this
Agreement, all of which shall constitute but one and the same agreement.
9
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed in its name as of the date first above written.
EMPIRE GAS CORPORATION
By /s/ Paul S. Lindsey, Jr.
----------------------------------------
President
NORTHWESTERN GROWTH CORPORATION
By /s/ Richard R. Hylland
----------------------------------------
President
SYN INC.
By /s/ Paul S. Lindsey, Jr.
----------------------------------------
Title: President
-------------------------------------
10
<PAGE>
Exhibit Document
------- --------
A Syn Inc. Certificate of Incorporation
B Series A Preferred Stock
C Management Agreement
D Syn Inc. By-laws
