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) October 7, 1996
Northwestern Public Service Company
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(Exact name of registrant as specified in its charter)
Delaware 0-692 46-0172280
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
33 Third Street S.E.
P. O. Box 1318
Huron, South Dakota 57350-1318
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(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code 605-352-8411
<PAGE>
Item 2. Acquisition Disposition of Assets.
The merger (the "Merger") of a wholly-owned subsidiary of the
Registrant with Empire Energy Corporation ("Empire) previously
reported in the Registrant's Current Report on Form 8-K, was
consummated on October 7, 1996. Empire, which was the surviving
corporation in the Merger, is now an indirect wholly-owned subsidiary
of the Registrant. The total consideration payable for the
outstanding shares of Empire common stock was approximately $15
million. Of the funds used to effect the Merger, $14 million were
borrowed under the Registrant's Credit Agreement with The Bank of
Boston and $1 million were issued in the form of a note of Empire.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statement of Business Acquired. Empire
accountants' report, consolidated financial statements and notes to
consolidated financial statements.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
Empire Energy Corporation
Lebanon, Missouri
We have audited the accompanying consolidated balance sheets of
EMPIRE ENERGY CORPORATION as of June 30, 1995 and 1996, and the
related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended June 30,
1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of EMPIRE ENERGY CORPORATION as of June 30, 1995 and 1996,
and the results of its operations and its cash flows for each of the
three years in the period ended June 30, 1996, in conformity with
generally accepted accounting principles.
Baird, Kurtz & Dobson
Springfield, Missouri
August 14, 1996 (except with respect
to the matter discussed in Note 14
as to which the date is October 7, 1996)
<PAGE>
EMPIRE ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1996
(Dollars In Thousands, Except Per Share Amounts)
1995 1996
---- ----
ASSETS
------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . $-- $2,064
Trade receivables, less allowance for doubtful
accounts; 1995 -- $905 and 1996 -- $1,262 . 3,302 5,724
Inventories . . . . . . . . . . . . . . . . . 4,831 6,702
Prepaid expenses . . . . . . . . . . . . . . . 103 103
Refundable income taxes . . . . . . . . . . . 727 457
Deferred income taxes . . . . . . . . . . . . 652 996
------- -------
Total Current Assets . . . . . . . . . . . 9,615 16,046
======= =======
DUE FROM SYN INC. . . . . . . . . . . . . . . . . 7,978
-------
PROPERTY AND EQUIPMENT, At Cost:
Land and buildings . . . . . . . . . . . . . . 7,329 8,903
Storage and consumer service facilities . . . 56,827 80,615
Transportation, office and other equipment . . 16,804 18,702
------- -------
80,960 108,220
Less accumulated depreciation . . . . . . . . (25,037) (28,686)
------- -------
55,923 79,534
======= =======
OTHER ASSETS:
Excess of cost over fair value of net
assets acquired, at amortized cost . . . . . 3,285 3,033
Other . . . . . . . . . . . . . . . . . . . . 252 511
------- -------
3,537 3,544
------- -------
$69,075 $107,102
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Checks in process of collection . . . . . . . $158 $--
Current maturities of long-term debt . . . . . 163 6,019
Accounts payable . . . . . . . . . . . . . . . 2,048 3,368
Accrued salaries . . . . . . . . . . . . . . . 767 1,063
Accrued expenses . . . . . . . . . . . . . . . 1,141 1,676
------- -------
Total Current Liabilities . . . . . . . . . 4,277 12,126
------- -------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . 1,701 25,442
------- -------
<PAGE>
DEFERRED INCOME TAXES . . . . . . . . . . . . . . 15,458 16,877
------- -------
ACCRUED SELF-INSURANCE LIABILITY 1,104 2,424
------- -------
STOCKHOLDERS' EQUITY:
Common stock; $.001 par value; authorized
17,500,000 shares; issued at June 30, 1995
and 1996 -- 12,004,430 shares . . . . . . . 12 12
Additional paid-in capital . . . . . . . . . . 46,099 46,099
Retained earnings . . . . . . . . . . . . . . 445 4,143
------- -------
46,556 50,254
Treasury stock, at cost -- 3,000 shares . . . (21) (21)
------- -------
46,535 50,233
------- -------
$69,075 $107,102
======= =======
See Notes to Consolidated Financial Statements EMPIRE ENERGY
CORPORATION CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED JUNE 30,
1994, 1995 AND 1996 (In Thousands)
1994 1995 1996
---- ---- ----
OPERATING REVENUE . . . . . . . . . . . . $60,216 $56,689 $98,821
COST OF PRODUCT SOLD . . . . . . . . . . 28,029 26,848 50,080
------- ------- -------
GROSS PROFIT . . . . . . . . . . . . . . 32,187 29,841 48,741
------- ------- -------
OPERATING COSTS AND EXPENSES:
Provision for doubtful accounts . . . 537 983 1,450
General and administrative . . . . . . 20,983 23,452 31,570
Depreciation and amortization . . . . 4,652 4,322 5,875
------- ------- -------
26,172 28,757 38,895
------- ------- -------
OPERATING INCOME . . . . . . . . . . . . 6,015 1,084 9,846
INTEREST EXPENSE (Net) . . . . . . . . . 118 39 2,598
------- ------- -------
INCOME BEFORE INCOME TAXES . . . . . . . 5,897 1,045 7,248
PROVISION FOR INCOME TAXES . . . . . . . 2,400 600 3,550
------- ------- -------
NET INCOME . . . . . . . . . . . . . . . $3,497 $445 $3,698
======= ======= =======
See Notes to Consolidated Financial Statements
<PAGE>
EMPIRE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1994, 1995 AND 1996
(In Thousands)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Treasury Stockholders'
Stock Stock Earnings Stock Equity
------ ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1993 . . . . . . . . . . . . . . . $-- $-- $42,614 $-- $42,614
NET INCOME . . . . . . . . . . . . . . . . . . . . . -- -- 3,497 -- 3,497
EFFECT OF CORPORATE RESTRUCTURING . . . . . . . . . . 12 46,099 (46,111) -- --
------- ------- ------- ------- -------
BALANCE, JUNE 30, 1994 . . . . . . . . . . . . . . . 12 46,099 -- -- 46,111
PURCHASE OF TREASURY STOCK . . . . . . . . . . . . . -- -- -- (21) (21)
NET INCOME . . . . . . . . . . . . . . . . . . . . . -- -- 445 -- 445
------- ------- ------- ------- -------
BALANCE, JUNE 30, 1995 . . . . . . . . . . . . . . . 12 46,099 445 (21) 46,535
NET INCOME . . . . . . . . . . . . . . . . . . . . . -- -- 3,698 -- 3,698
------- ------- ------- ------- -------
BALANCE, JUNE 30, 1996 . . . . . . . . . . . . . . . $12 $46,099 $4,143 $(21) $50,233
======= ======= ======= ======= =======
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
EMPIRE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1994, 1995 AND 1996
(In Thousands)
1994 1995 1996
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . $3,497 $445 $3,698
Items not requiring (providing)
cash:
Depreciation . . . . . . . . . . 4,336 4,084 5,593
Amortization . . . . . . . . . . 316 238 282
Gain on sale of assets . . . . . (31) (145) (67)
Deferred income taxes . . . . . (849) 194 1,075
Changes in:
Trade receivables . . . . . . . . . (522) 388 (1,799)
Inventories . . . . . . . . . . . . 952 (985) (348)
Accounts payable . . . . . . . . . (821) 1,444 1,301
Accrued expenses and self insurance 229 325 2,124
Prepaid expenses and other . . . . (7) 72 (279)
Income taxes payable (refundable) . (53) (702) 270
------- ------- -------
Net cash provided by operating
activities . . . . . . . . . 7,047 5,358 11,850
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets . . . . . 125 295 162
Purchases of property and equipment . (4,058) (8,365) (3,184)
Purchase of assets from SYN Inc. . . . -- -- (35,980)
------- ------- -------
Net cash used in investing
activities . . . . . . . . . (3,933) (8,070) (39,002)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in credit
facilities . . . . . . . . . . . . (2,051) 1,600 (5,500)
Principal payments on purchase
obligations . . . . . . . . . . . . (109) (132) (126)
Checks in process of collection . . . -- 158 (158)
Purchase of treasury stock . . . . . . -- (21) --
Proceeds from acquisition credit
facility . . . . . . . . . . . . . -- -- 35,000
------- ------- -------
Net cash provided by (used in)
financing activities . . . . (2,160) 1,605 29,216
------- ------- -------
<PAGE>
INCREASE (DECREASE) IN CASH . . . . . . . 954 (1,107) 2,064
CASH, BEGINNING OF PERIOD . . . . . . . . 153 1,107 (0)
------- ------- -------
CASH, END OF PERIOD . . . . . . . . . . . $1,107 $(0) $2,064
======= ======= =======
See Notes to Consolidated Financial Statements
<PAGE>
EMPIRE ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations
--------------------
The Company's principal operations are the retail sale of LP gas.
Most of the Company's customers are owners of residential single or
multi-family dwellings who make periodic purchases on credit. Such
customers are located in the Southeast and Midwest regions of the
United States. At June 30, 1994, the Company was separated from
Empire Gas Corporation (Empire Gas). The financial statements for the
year ended June 30, 1994, reflect the operations of the subsidiaries
of Empire Gas which the Company received in the restructuring
transaction. See Note 2 for a description of the restructuring
transaction.
Estimates
---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
Empire Energy Corporation and its subsidiaries. All significant
intercompany balances have been eliminated in consolidation.
Revenue Recognition Policy
--------------------------
Sales and related cost of product sold are recognized upon
delivery of the product or service.
Inventories
-----------
Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out method for retail operations
and specific identification method for wholesale operations. The
inventories consist of the following:
<PAGE>
1995 1996
---- ----
(In Thousands)
Gas and other petroleum products . . . . . . . . . $1,679 $2,727
Gas distribution parts, appliances and equipment . 3,152 3,975
------ -----
$4,831 $6,702
====== ======
Property and Equipment
----------------------
Depreciation is provided on all property and equipment on the
straight-line method over estimated useful lives of 5 to 33 years.
Fair Value of Financial Instruments
-----------------------------------
At June 30, 1996, the Company's only financial instruments are
cash, long-term debt and related accrued interest for which their
carrying amounts approximate fair value.
Income Taxes
------------
Deferred tax liabilities and assets are recognized for the tax
effects of differences between the financial statement and tax bases
of assets and liabilities. A valuation allowance is established to
reduce deferred tax assets if it is more likely than not that a
deferred tax asset will not be realized.
Amortization
------------
The excess of cost over fair value of net assets acquired
(originally $4,850,000) is being amortized on the straight-line basis
over 20 years.
NOTE 2: RESTRUCTURING TRANSACTION On June 30, 1994, the Company
was separated from Empire Gas in an exchange of the majority
ownership of Empire Gas for all of the shares of the Company (a
subsidiary of Empire Gas) (the "Split-off Transaction"). The Company
received locations principally in the Southeast plus certain home
office assets and liabilities.
In connection with this transaction, the principal shareholder of
Empire Gas terminated his employment with Empire Gas as well as
terminated certain lease and use agreements. This shareholder was the
principal shareholder and chairman of the board of the Company prior
to the management buy out (See Note 3).
<PAGE>
NOTE 3: MANAGEMENT BUY OUT Prior to year end, professional and
other fees amounting to $1,926,000 were incurred in connection with
an effort to sell the Company and are included in general and
administrative expense during the year ended June 30, 1996. The
Company abandoned these efforts.
On August 1, 1996, subsequent to year end, the principal
shareholder of the Company since its inception and certain other
shareholders sold their interest in the Company to a new entity
formed by the remaining shareholders of the Company, all of which are
members of management of the Company.
In connection with this transaction, the principal shareholder of
the Company terminated employment with the Company as well as
terminated certain lease and use agreements. The new entity is
principally owned by the son of the former principal shareholder. All
references in these financial statements to the principal shareholder
relate to the former principal shareholder.
The new entity paid approximately $59,000,000 cash, distributed
certain home office assets and a portion of the SYN Inc. receivable
in exchange for the shares of Company stock purchased. In addition to
the above consideration, the new entity issued a $5,000,000 note
payable to the principal shareholder. The amount paid to the selling
shareholders was financed with proceeds from a new credit agreement
with the Company's current lender.
The new credit facility provides for a $42,000,000 term loan, a
$52,000,000 second term loan, a $20,000,000 working capital facility
and a $10,000,000 acquisition credit facility. The new credit
facility includes working capital, capital expenditures, cash flow
and net worth requirements as well as dividend restrictions. The
principal payment requirements on the two term loans will be
$3,400,000 in the year ended June 30, 1997.
NOTE 4: SYNERGY ACQUISITION On August 15, 1995, the Company
acquired the assets of 38 retail locations previously operated by
Synergy Group, Inc. These locations were purchased from SYN Inc., a
company formed for the purpose of acquiring Synergy Group, Inc. SYN
Inc. is majority owned by Northwestern Growth Corporation, a
wholly-owned subsidiary of Northwestern Public Service Company, and
minority owned and managed by Empire Gas. The purchase price of the
38 retail locations was approximately $38 million. The total
consideration for the purchase was approximately $36 million in cash
financed by the new acquisition credit facility (see Note 6) plus the
assets of nine retail locations principally in Mississippi valued at
approximately $2 million. The results of operations for the period
after August 15, 1995, of the Synergy locations are included in the
financial statements for the period ended June 30, 1996.
Unaudited pro forma operations assuming the acquisition was made
at the beginning of the year ended June 30, 1994 and 1995, are
presented below. Pro forma results for the year ended June 30, 1996,
<PAGE>
are not presented since they would not differ materially from the
audited results of operations presented in the statement of income.
1994 1995
---- ----
(In Thousands)
Operating revenue . . . . . . . . . . . . . . . . . $88,620 $82,222
Cost of product sold . . . . . . . . . . . . . . . 42,589 40,724
------ ------
Gross profit . . . . . . . . . . . . . . . . . . . $46,031 $41,498
====== ======
The purchase price of the assets acquired from SYN Inc. is subject
to adjustment based on the amount of working capital acquired by the
Company. A receivable has been recorded in the amount of $3,978,000,
which reflects the reduction in purchase price of the assets based on
the amount of working capital acquired. On August 1, 1996, this
receivable has been assigned to the former principal shareholder in
connection with the management buy out.
The purchase price of the assets acquired from SYN Inc. is also
subject to adjustment based on the value of consumer tanks which
cannot be located within a specified period of time. The Company has
made a claim to SYN Inc. for approximately $4,000,000 which
represents the value of unlocated tanks at June 30, 1996. A
receivable for these tanks has been recorded on the balance sheet at
June 30, 1996. On August 1, 1996, one-half of this receivable has
been assigned to the former principal shareholder in connection with
the management buy out.
These amounts receivable in connection with the purchase from SYN
Inc. are management's best estimate of amounts which will be
ultimately collected. However, the parties are still negotiating
final settlement, and the final amounts received could differ
materially.
NOTE 5: RELATED-PARTY TRANSACTIONS
The Company provides data processing, office rent and other
clerical services to two corporations owned by officers and
shareholders of the Company and is reimbursed $5,000 per month for
these services.
The Company leases a jet aircraft and an airport hangar from a
corporation owned by the principal shareholder of the Company. The
lease requires annual rent payments of $100,000 beginning July 1,
1994. In addition to direct lease payments, the Company is also
responsible for the operating costs of the aircraft and the hangar.
The lease agreement was terminated August 1, 1996, in connection with
the management buy out.
<PAGE>
The Company has an agreement with a corporation owned by the
principal shareholder of the Company which provides the Company the
right to use business guest facilities. The agreement requires annual
payments of $250,000 beginning July 1, 1994. In addition to direct
payments, the Company is also responsible for providing vehicles and
personnel to serve as security for the facilities. This agreement was
terminated August 1, 1996, in connection with the management buy out.
The Company leases the corporate home office, land, buildings and
certain equipment from a corporation owned principally by the
principal shareholder. The lease requires annual payments of $200,000
beginning July 1, 1994. The lease was terminated August 1, 1996, in
connection with the management buy out.
The Company leases a lodge from a corporation owned by the
principal shareholder of the Company. The lease requires annual rent
payments of $120,000 beginning July 1, 1994. The lease was terminated
August 1, 1996, in connection with the management buy out.
On August 1, 1996, the Company entered into a new lease agreement
with entities controlled by the former principal shareholder. The new
lease agreement provides for the payment of $600,000 per year for the
corporate home office, land, buildings and certain equipment, the use
of the airport hangar and the right to use land underlying the
Company's warehouse facility. The agreement expires June 30, 2005.
A subsidiary of the Company has entered into a seven-year services
agreement with Empire Gas to provide data processing and management
information services beginning July 1, 1994. The services agreement
provides for payments by Empire Gas to be based on an allocation of
the subsidiary's actual costs based on the gallons of LP gas sold by
Empire Gas as a percentage of the gallons of LP gas sold by the
Company and Empire Gas combined. For the years ended June 30, 1995,
and June 30, 1996, total amounts received related to this services
agreement were $1.1 million and $713,000, respectively. Such amounts
have been netted against related general and administrative expenses
in the accompanying statements of income.
NOTE 6: LONG-TERM DEBT Long-term debt consists of the following:
1995 1996
---- ----
(In Thousands)
Revolving credit facility (A) . . . . . . . . . $1,600 $--
Acquisition credit facility (B) . . . . . . . . -- 31,100
Purchase contract obligations (C) . . . . . . . 264 361
------ ------
1,864 31,461
Less current maturities . . . . . . . . . . . . 163 6,019
------ ------
$1,701 $25,442
====== =======
<PAGE>
(A) On September 30, 1994, the Company entered into an agreement
with a lender to provide a revolving credit facility. The facility
provides for borrowings up to $20 million, bears interest at either
1/2% over the lender's prime rate or 1-1/8% over the Eurodollar rate
and matures June 30, 2000. The facility includes working capital,
capital expenditure, cash flow and net worth requirements as well as
dividend restrictions which limit the payment of cash dividends to
50% of the preceding year's net income. The Company's unused
revolving credit line at June 30, 1996, amounted to $18,148,000 after
considering $1,852,000 of letters of credit. The credit facility was
terminated August 1, 1996, in connection with the management buy out.
(B) On August 15, 1995, the Company modified the above agreement to
include a $35 million acquisition credit facility which was used for
the purchase of assets from SYN Inc. The acquisition credit facility
bears interest at either 1/2% over the lender's prime rate or 1-1/8%
over the Eurodollar rate and matures June 30, 2000. The acquisition
credit facility requires quarterly principal payments of $1,944,000.
This credit facility was terminated August 1, 1996, in connection
with the management buy out.
(C) Purchase contract obligations arise from the purchase of
operating businesses and are collateralized by the equipment and real
estate acquired in the respective acquisitions. The Company has also
entered into purchase contract obligations for equipment used in
administrative activities. At June 30, 1996, these obligations
carried interest rates ranging from 7% to 10% and are due
periodically through 2001.
Based on the borrowing rates currently available to the
Corporation from bank loans with similar terms and average
maturities, the estimated fair value of long-term debt
approximates its carrying value at June 30, 1995, and June 30,
1996, respectively.
Aggregate annual maturities (in thousands) of the long-term debt
outstanding at June 30, 1996, are:
1997 . . . . . . . . . . . . . . . . . $6,019
1998 . . . . . . . . . . . . . . . . . 7,854
1999 . . . . . . . . . . . . . . . . . 7,807
2000 . . . . . . . . . . . . . . . . . 7,819
2001 . . . . . . . . . . . . . . . . . 1,962
------
$31,461
=======
NOTE 7: INCOME TAXES The provision for income taxes includes these
components (in thousands):
<PAGE>
1994 1995 1996
---- ---- ----
Taxes currently payable . . . . . . . . . . $3,249 $406 $2,475
Deferred income taxes . . . . . . . . . . . (849) 194 1,075
------- ------ ------
$2,400 $600 $3,550
====== ====== ======
The tax effects of temporary differences related to deferred taxes
shown on the balance sheets were (in thousands):
1995 1996
---- ----
Deferred Tax Assets
Allowance for doubtful accounts . . . . . . $335 $468
Accounts receivable advance collections . . 140 246
Self-insurance liabilities and contingencies 480 1,229
Accrued expenses . . . . . . . . . . . . 44 81
Alternative minimum tax credit carryover 39 --
------ ------
1,038 2,024
------ ------
Deferred Tax Liability
----------------------
Accumulated depreciation . . . . . . . . (15,844) (17,205)
Change in estimated taxes . . . . . . . . (700)
-------- --------
(15,844) (17,905)
-------- --------
Net deferred tax liability . . . . $(14,806) $(15,881)
======== ========
The above net deferred tax liability is presented on the balance
sheets as follows (in thousands):
1995 1996
---- ----
Deferred tax asset - current . . . . . . . . . $652 $996
Deferred tax liability - long-term . . . . . . (15,458) (16,877)
-------- --------
Net deferred tax liability . . . . . . . . . . $(14,806) $(15,881)
A reconciliation of income tax expense at the statutory rate to
the Company's actual income tax expense is shown below (in
thousands):
<PAGE>
1994 1995 1996
---- ---- ----
Computed at the statutory rate (34%) . . . . . $2,005 $355 $2,464
Increase resulting from:
Amortization of excess of cost over fair value
of net assets acquired . . . . . . . . . . . 107 77 79
State income taxes - net of federal tax benefit 258 116 248
Change in estimated taxes . . . . . . . . . . . -- -- 700
Other . . . . . . . . . . . . . . . . . . . . . 30 52 59
------ ---- ------
$2,400 $600 $3,550
===== ==== ======
NOTE 8: SELF-INSURANCE AND RELATED CONTINGENCIES Under the
Company's current insurance program, coverage for comprehensive
general liability and vehicle liability is obtained for catastrophic
exposures as well as those risks required to be insured by law or
contract. The Company retains a significant portion of certain
expected losses related primarily to comprehensive general liability
and vehicle liability. Under these current insurance programs, the
Company self insures the first $1 million of coverage (per incident)
on general liability and on vehicle liability. In addition, the
Company has a $100,000 deductible for each and every liability claim.
The Company obtains excess coverage from carriers for these programs
on claims-made basis policies. The excess coverage for comprehensive
general liability provides a loss limitation that limits the
Company's aggregate of self-insured losses to $1.5 million per policy
period.
The Company self insures the first $250,000 of workers'
compensation coverage (per incident). The Company purchased excess
coverage from carriers for workers' compensation claims in excess of
the self-insured coverage. Provisions for losses expected under this
program are recorded based upon the Company's estimates of the
aggregate liability for claims incurred. The Company provided letters
of credit aggregating approximately $1,852,000 in connection with
this program.
Provisions for self-insured losses are recorded based upon the
Company's estimates of the aggregate self-insured liability for
claims incurred. At June 30, 1995 and 1996, the self-insurance
liability, general, vehicle and workers' compensation liabilities
accrued in the balance sheets totaled $1,604,000 and $3,174,000,
respectively.
The accrued liability includes $500,000 for incurred but not
reported claims for both June 30, 1995 and 1996. The current portion
of the liability of $500,000 and $750,000 at June 30, 1995 and 1996,
respectively, is included in accrued expenses in the consolidated
balance sheets. The noncurrent portion is included in accrued
self-insurance liability.
<PAGE>
The Company currently self insures health benefits provided to the
employees of the Company and its subsidiaries. Provisions for losses
expected under this program are recorded based upon the Company's
estimate of the aggregate liability for claims incurred.
In conjunction with the restructuring that occurred in June 1994
between the Company and Empire Gas, the two companies agreed to share
on a percentage basis the self-insured liabilities prior to June 30,
1994. Under the agreement, the Company will assume 47.7% of the
liability with Empire Gas assuming the remaining 52.3%. The
self-insurance liability, which is included in the Company's
financial statements at June 30, 1996, includes 47.7% of the
estimated total shared liability.
The Company and its subsidiaries are presently defendants in
various lawsuits related to the self-insurance program and other
business-related lawsuits which are not expected to have a material,
adverse effect on the Company's financial position or results of
operations.
NOTE 9: INCOME TAX AUDITS The State of Missouri has assessed
Empire Gas approximately $1,400,000 for additional state income tax
for the years ended June 30, 1992 and 1993. An amount approximating
one-half of the above assessment could be at issue for the year ended
June 30, 1994. Empire Gas and Empire Energy have protested these
assessments and are currently waiting for a response from the
Missouri Department of Revenue. It is likely that this matter will
have to be settled in litigation. Empire Gas and Empire Energy
believe that they have a strong position on this matter and intend to
vigorously contest the assessment. It is not possible at this time to
conclude on the outcome of this matter.
The Internal Revenue has begun a federal income tax audit of
Empire Gas for the year ended June 30, 1994. While the audit is still
in process, the audit has principally focused on the deductibility of
certain professional fees and travel and entertainment expenses as
well as in the tax-free treatment of the Split-off Transaction.
As a former member of the Empire Gas controlled group and in
connection with a tax indemnity agreement with Empire Gas, the
Company will assume 47.7% of the total shared liabilities related to
these tax audits of the years ended June 30, 1994, and prior.
The Split-off Transaction was structured with the intent of
qualifying for tax-free treatment under Section 355 of the Internal
Revenue Code and the Company, and Empire Gas, obtained a private
letter ruling (the "Letter Ruling") from the Internal Revenue Service
confirming such treatment, subject to certain representations and
conditions specified in the Letter Ruling. The Internal Revenue
Service is currently conducting an audit of Empire Gas for the year
in which the Split-off Transaction occurred. If the Internal Revenue
Service were to reverse the position it took in the Letter Ruling and
prevail on a challenge to the tax-free treatment of the Split-off
<PAGE>
Transaction, the Company would be liable for a portion of any taxes,
interest and penalties due, both as a former member of the Empire Gas
controlled group and under a tax indemnity agreement with Empire Gas
that was executed in connection with the Split-off Transaction. The
Company's liability in such circumstances could exceed the percentage
under the tax indemnity agreement if Empire Gas were unable to fund
its percentage share under that agreement. If the Company were held
liable for any taxes, interest or penalties in connection with the
above Split-off Transaction, the amount of this liability could be
substantial and could adversely effect the Company's financial
position.
The Company and its subsidiaries are presently included in various
state tax audits which are not expected to have a material, adverse
effect on the Company's financial position or results of operation.
NOTE 10: STOCK OPTIONS The Company's current stock options
provide for a fixed option price of $7.00 per share for options
granted to officers and key employees. Options granted are
exercisable beginning one year after the date of grant at the rate of
20% per year and expire six years after the date of grant. Option
activity for each period was:
<TABLE>
<CAPTION>
Shares Price Shares Price
------ ----- ------ -----
1995 1996
-------------------- ----------------------
<S> <C> <C> <C> <C>
Beginning options outstanding . . . . . . . . . . . . 0 $0 1,145,000 $7.00
Options granted . . . . . . . . . . . . . . . . 1,170,000 7.00 25,000
Options canceled . . . . . . . . . . . . . . . (25,000) 7.00 (50,000) 7.00
Ending options outstanding . . . . . . . . . . . . . 1,145,000 7.00 1,120,000 7.00
</TABLE>
On August 1, 1996, in connection with the management buy out,
150,000 options of the selling shareholders were cancelled.
NOTE 11: ADDITIONAL CASH FLOW INFORMATION (In Thousands)
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ---
<S> <C> <C> <C>
Noncash Investing and Financing Activities
Purchase contract obligations incurred . . . . . . . . . . . . . . . . . . $-- $172 $222
Additional Cash Payment Information
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $155 $64 $2,432
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,302 $1,108 $2,995
</TABLE>
NOTE 12: FUTURE ACCOUNTING PRONOUNCEMENTS
<PAGE>
Impact of SFAS No. 121
----------------------
In 1995 the Financial Accounting Standards Board adopted Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for the Impairment of Long-Lived
Assets to be Disposed of." The Company must adopt this standard
effective July 1, 1996. The Company does not expect that the adoption
of this standard will have a material impact on its financial
position or results of operations.
NOTE 13: SIGNIFICANT ESTIMATES AND CONCENTRATIONS Generally
accepted accounting principles require disclosure of certain
significant estimates and current vulnerabilities due to certain
concentrations. Those matters include the following: Dependence on
Principal Suppliers Three suppliers, Conoco, Phillips and Texaco,
account for approximately 50% of Empire Energy's volume of propane
purchases.
Although the Company believes that alternative sources of propane
are readily available, in the event that the Company is unable to
purchase propane from one of these three suppliers, the failure to
obtain alternate sources of supply at competitive prices and on a
timely basis would have a material, adverse effect on the Company.
Estimates Significant estimates related to self-insurance,
litigation, collectibility of receivables and income tax assessments
are discussed in Notes 4, 8, and 9. Actual losses related to these
items could vary materially from amounts reflected in the financial
statements.
NOTE 14: SUBSEQUENT EVENTS On October 7, 1996, the new ownership
of the Company pursuant to the management buy out sold 100% of
Company common stock to Northwestern Growth Corporation (NGC).
(b) Pro Forma Financial Information. The Registrant will file
the required pro forma financial information as an amendment to this
Form 8-K as soon as practicable, but not later than 60 days after
this report on Form 8-K was required to be filed.
(c) Exhibits. The following exhibits are filed with this
report:
Exhibit 2. Agreement and Plan of Merger by and among
Northwestern Growth Corporation, EEC Co., Empire
Energy Corporation and the Stockholders of Empire
Energy Corporation dated as of September 6, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and 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 A. Dietrich
Vice President - Corporate Services
& Corporate Secretary
Date: October 18, 1996
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Description
------- -----------
2 Agreement and Plan of Merger by and among Northwestern
Growth Corporation, EEC Co., Empire Energy Corporation
and the Stockholders of Empire Energy Corporation dated
as of September 6, 1996.
===============================================================================
=============================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NORTHWESTERN GROWTH CORPORATION,
EEC CO.,
EMPIRE ENERGY CORPORATION
AND
THE STOCKHOLDERS OF
EMPIRE ENERGY CORPORATION
DATED AS OF SEPTEMBER 6, 1996
===============================================================================
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS
AGREEMENTS
ARTICLE 1
THE MERGER AND RELATED MATTERS.................
Section 1.1 Merger; Surviving Corporation; Effective Time ......
Section 1.2 Articles of Incorporation and Bylaws of Surviving
Corporation.......................................
Section 1.3 Directors and Officers of the Surviving Corporation.
Section 1.4 Effect of the Merger ...............................
Section 1.5 Conversion of Shares ...............................
Section 1.6 Dissenting Shares ..................................
Section 1.7 Merger Price .......................................
ARTICLE 2
THE CLOSING
Section 2.1 Closing; Closing Date ..............................
Section 2.2 Action at Closing ..................................
Section 2.3 Surrender of Certificates; Exchange ................
Section 2.4 Action at Closing ..................................
ARTICLE 3
STATEMENT OF ESSENTIAL FACTS CONCERNING NGC AND EEC
Section 3.1 Organization .......................................
Section 3.2 Authority ..........................................
Section 3.3 Consents and Approvals .............................
Section 3.4 No Conflict or Violation ...........................
Section 3.5 Litigation .........................................
Section 3.6 Certain Fees .......................................
Section 3.7 Financial Statements ...............................
ARTICLE 4
STATEMENTS OF ESSENTIAL FACTS CONCERNING THE COMPANY,
ITS SUBSIDIARIES AND ITS STOCKHOLDERS
Section 4.1 Organization; Qualification ........................
Section 4.2 Authority ..........................................
Section 4.3 Capitalization .....................................
Section 4.4 Subsidiaries; Interests in Other Entities ..........
Section 4.5 No Conflict or Violation; Consents and Approvals....
Section 4.6 Litigation .........................................
Section 4.7 Absence of Undisclosed Liabilities .................
Section 4.8 No Default .........................................
Section 4.9 Taxes ..............................................
Section 4.10 Real Property ......................................
Section 4.11 Personal Property ..................................
Section 4.12 Legal Compliance ...................................
Section 4.13 Environmental Matters ..............................
<PAGE>
Section 4.14 Insurance ..........................................
Section 4.15 Labor Matters ......................................
Section 4.16 Employee Benefit Plans; ERISA ......................
Section 4.17 Financial Statements ...............................
Section 4.18 Absence of Certain Changes .........................
Section 4.19 Certain Fees .......................................
Section 4.20 Accounts Receivable ................................
Section 4.21 Suppliers ..........................................
Section 4.22 Customers ..........................................
Section 4.23 Intellectual Property ..............................
Section 4.24 Contracts ..........................................
Section 4.25 Compliance with Safety Standards ...................
Section 4.26 Sufficiency of Assets ..............................
Section 4.27 Related Parties ....................................
Section 4.28 Public Utility Holding Company Act .................
Section 4.29 Disclosure .........................................
ARTICLE 5
AGREEMENTS PENDING THE CLOSING
Section 5.1 Conduct of Business ................................
Section 5.2 Permitted Transactions .............................
Section 5.3 Access and Information .............................
Section 5.4 Confidentiality ....................................
Section 5.5 Company Stockholder Approval .......................
Section 5.6 Preservation of Business ...........................
Section 5.7 Acquisition Proposals ..............................
Section 5.8 Filings; Other Action ..............................
Section 5.9 Reasonable and Diligent Efforts ....................
Section 5.10 Public Announcement ................................
Section 5.11 Option Holders .....................................
Section 5.12 Employment Agreements ..............................
ARTICLE 6
ADDITIONAL AGREEMENTS
Section 6.1 Excluded Assets ....................................
Section 6.2 Right To Hire Certain Employees ....................
Section 6.3 Certain Tax Matters ................................
Section 6.4 NGC Guarantee ......................................
Section 6.5 Company Headquarters ...............................
Section 6.6 Robert W. Plaster Debt .............................
Section 6.7 Payment of Fees ....................................
ARTICLE 7
CONDITIONS TO BE SATISFIED FOR THE BENEFIT OF
NGC AND EEC IN CONNECTION WITH CLOSING
Section 7.1 Performance of Agreements ..........................
Section 7.2 HSR Act Waiting Period .............................
Section 7.3 Certification as to Stockholders ...................
Section 7.4 Closing Certificate ................................
Section 7.5 Stockholders' Approval .............................
<PAGE>
Section 7.6 Proceedings ........................................
Section 7.7 Opinion of Counsel .................................
Section 7.8 [Not Used] .........................................
Section 7.9 Escrow Agreement ...................................
Section 7.10 Standstill Agreements ..............................
Section 7.11 Certain Documents ..................................
ARTICLE 8
CONDITIONS TO BE SATISFIED FOR THE BENEFIT OF
THE COMPANY AND THE SELLING STOCKHOLDERS
IN CONNECTION WITH CLOSING
Section 8.1 Performance of Agreements ..........................
Section 8.2 HSR Act Waiting Period .............................
Section 8.3 Closing Certificate ................................
Section 8.4 Stockholders' Approval .............................
Section 8.5 Proceedings ........................................
Section 8.6 Opinion of Counsel .................................
Section 8.7 Escrow Agreement ...................................
Section 8.8 Warrants ...........................................
Section 8.9 Certain Documents ..................................
ARTICLE 9
TERMINATION
Section 9.1 Termination by Mutual Consent ......................
Section 9.2 Termination Date ...................................
Section 9.3 Termination Upon Order of Government Entity ........
Section 9.4 Effect of Termination ..............................
ARTICLE 10
REMEDIES; INDEMNIFICATION; ARBITRATION
Section 10.1 Remedies Allowed By Law ............................
Section 10.2 Indemnification; Escrow Claims .....................
Section 10.3 Third-Party Claims .................................
Section 10.4 Arbitration ........................................
Section 10.5 Access .............................................
ARTICLE 11
DEFINITIONS..........................
Section 11.1 Definitions ........................................
Section 11.2 Construction .......................................
ARTICLE 12
GENERAL PROVISIONS.......................
Section 12.1 Amendment ..........................................
Section 12.2 Books and Records ..................................
Section 12.3 Counterparty Effectiveness .........................
Section 12.4 Descriptive Headings ...............................
Section 12.5 Entire Agreement; No Assignment ....................
Section 12.6 Expenses ...........................................
Section 12.7 Governing Law ......................................
<PAGE>
Section 12.8 Definition of Knowledge ............................
Section 12.9 Notices ............................................
Section 12.10 Severability; No Third Party Beneficiaries .........
Section 12.11 Waiver .............................................
EXHIBITS AND SCHEDULES
Exhibit 7.9 Form of Escrow Agreement (including Form of Escrow
Note)
Exhibit 7.10 Form of Standstill Agreement
Exhibit 8.8(a) Form of Warrant Issuance and Exchange Agreement
Exhibit 8.8(b) Form of Warrant
Schedule 4.1 Foreign Qualification and Subsidiaries
Schedule 4.3(a) Stockholders of the Company
Schedule 4.3(b) Option Holders of the Company
Schedule 4.4(a) Liens on Company Group Stock
Schedule 4.4(b) Interests in Other Entities
Schedule 4.5(a) Conflicts or Violations
Schedule 4.5(b) Required Consents
Schedule 4.6 Litigation
Schedule 4.7 Liabilities
Schedule 4.9(b) Tax Proceedings
Schedule 4.10(a) Owned Real Property
Schedule 4.10(b) Leased Real Property
Schedule 4.10(c) Exceptions to Improvements
Schedule 4.10(d) Violations Related to Condition of Improvements
Schedule 4.11(a) Consumer Propane Tanks and Bulk Storage Tanks
Schedule 4.11(b) Other Owned Personal Property
Schedule 4.11(c) Leased Personal Property
Schedule 4.11(d) Exceptions to Condition of Personal Property
Schedule 4.13(b) Environmental Compliance
Schedule 4.13(c) Environmental Permits
Schedule 4.13(d) Environmental Claims
Schedule 4.13(f) Hazardous Materials
Schedule 4.13(g) Underground Storage Tanks
Schedule 4.14 Insurance
Schedule 4.15 Labor Matters
Schedule 4.16(a) Company Plans
Schedule 4.16(b) Title IV Plans
Schedule 4.16(c) Multiemployer Plans
Schedule 4.16(f) Reports for Company Plans
Schedule 4.16(i) Transactional Rights Under Company Plans
Schedule 4.16(k) Liabilities Under Company Plans
Schedule 4.18 Non-Ordinary Course Activities
Schedule 4.19 Certain Fees
Schedule 4.20 Accounts Receivable
Schedule 4.21 Suppliers
Schedule 4.22 Customers
Schedule 4.23 Intellectual Property
Schedule 4.24 Material Contracts (Including Empire Gas Contracts)
<PAGE>
Schedule 4.27 Related Party Transactions
Schedule 5.1(c) Value of Excluded Assets
Schedule 5.2(b) Designated Related Party Transactions
Schedule 5.12 List of Individuals for Whom Employment Agreement
Amendments are to be Sought
Schedule 6.1 List of Excluded Assets
Schedule 6.2 List of Certain Employees
Schedule 8.8 Description of Alternative to Warrants
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 6, 1996, is entered into among NORTHWESTERN GROWTH CORPORATION,
a South Dakota corporation ("NGC"), EEC CO., a Tennessee corporation
which is a wholly-owned subsidiary of NGC ("EEC"), EMPIRE ENERGY
CORPORATION, a Tennessee corporation (the "Company"), and the
stockholders of the Company named on the signature page hereof (the
"Selling Stockholders").
RECITALS
A. The Company is engaged primarily in the retail distribution and
sale of propane through a network of direct or indirect subsidiaries
listed in SCHEDULE 4.1 (the "Subsidiaries"; together with the Company,
the "Company Group").
B. The parties hereto desire to provide for the acquisition of the
Company by NGC by the merger of EEC into the Company, pursuant to which
the Company will be the surviving corporation and will become a
wholly-owned subsidiary of NGC, with the previously outstanding shares of
common stock, par value $.001 per share, of the Company, converted into
the consideration provided for in this Agreement, all in accordance with
the terms and conditions of this Agreement.
C. The Selling Stockholders and the respective Boards of Directors
of the corporate parties hereto deem the merger provided for in this
Agreement desirable and in the best interests of the parties and, in the
case of the corporate parties, their respective stockholders.
AGREEMENTS
NOW, THEREFORE, the parties hereto hereby covenant and agree as
follows:
ARTICLE 1
THE MERGER AND RELATED MATTERS
Section 1.1 MERGER; SURVIVING CORPORATION; EFFECTIVE TIME.
(a) In accordance with and subject to the terms and conditions of
this Agreement, at the Effective Time EEC shall be merged with and into
the Company and the separate corporate existence of EEC shall thereupon
cease (the "Merger"); and the Company shall be the surviving corporation
in the Merger (as such, the "Surviving Corporation") and shall continue
to be governed by the laws of the State of Tennessee.
(b) The time when the Merger becomes effective (the "Effective
Time") shall be the date and time on which appropriate articles of merger
for the Merger are filed with the Secretary of State of the State of
Tennessee in accordance with the Tennessee Business Corporation Act
("TBCA"). The parties hereto shall cause such articles of merger to be
delivered to the Secretary of State of the State of Tennessee on the
Closing Date in connection with the completion of the Closing.
(c) This Agreement constitutes the plan of merger to be submitted
as such with the articles of merger referred to in SECTION 1.1(b).
<PAGE>
Section 1.2 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING
CORPORATION. The articles of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the articles of
incorporation of the Surviving Corporation until thereafter changed in a
manner permitted by law; and the bylaws of EEC, as in effect immediately
prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter changed in a manner permitted by law.
Section 1.3 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
From and after the Effective Time, the persons who are the directors of
EEC immediately prior to the Effective Time shall be the directors of the
Surviving Corporation and the persons who are the officers of EEC
immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in both cases until their respective successors
shall have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the articles of
incorporation and bylaws of the Surviving Corporation.
Section 1.4 EFFECT OF THE MERGER. The Merger shall have the
effects set forth in the TBCA. Without limiting the generality of the
foregoing, at the Effective Time, all of the property, assets, rights,
privileges, powers, franchises and immunities of each of the Company and
EEC shall vest in the Surviving Corporation; all debts, liabilities and
obligations of the Company and EEC shall become the debts, liabilities
and obligations of the Surviving Corporation; and the Surviving
Corporation shall thenceforth be responsible for all the liabilities and
obligations of each of the Company and EEC, but the nature or amount of
the liabilities and obligations of the Company and EEC shall not be
affected, nor shall the rights of the creditors or any other persons who
theretofore had dealings with the Company or EEC be impaired by the
Merger, and any claim existing or action or proceeding pending by or
against either the Company or EEC may be prosecuted to judgment as if the
Merger had not taken place or the Surviving Corporation may be proceeded
against or substituted in its place.
Section 1.5 CONVERSION OF SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of
any shares of common stock, par value $1.00 per share, of EEC ("EEC
Stock"), or any shares of common stock, par value $.001 per share, of the
Company ("Company Common Stock"):
(a) Each share of EEC Stock that is issued and outstanding
immediately prior to the Effective Time shall be converted into a share
of common stock, par value $.001 per share, of the Surviving Corporation
("Surviving Corporation Common Stock"), and certificates which
immediately prior to the Effective Time evidenced outstanding shares of
EEC Stock shall thereupon be deemed to evidence the same number of
outstanding shares of Surviving Corporation Common Stock.
(b) Each share of Company Common Stock that is issued and
outstanding immediately prior to the Effective Time, other than any
Dissenting Shares, shall be converted into the right to receive (i) a Pro
Rata Share (Cash) of the Cash Component, and (ii) a Pro Rata Share
(Escrow) of the Escrow Distribution Component.
(c) Each share of Company Common Stock that is held by the Company
as treasury stock immediately prior to the Effective Time shall be
canceled, and no consideration shall be paid or delivered in exchange
therefor.
<PAGE>
(d) Any Dissenting Shares shall not be converted pursuant to this
Agreement, and the holders thereof shall be entitled only to such rights
as are granted by Chapter 23 of the TBCA, provided that if any such
holder shall fail to perfect his or her rights to payment pursuant to
Chapter 23 of the TBCA, each share of Company Common Stock held by such
holder as of the Effective Time as a Dissenting Share shall be then
converted into the right to receive a Pro Rata Share (Cash) of the Cash
Component and a Pro Rata Share (Escrow) of the Escrow Distribution
Component as if such share had not been one of the Dissenting Shares at
the Effective Time.
(e) Each Option that is outstanding immediately prior to the
Effective Time shall be converted into the right to receive (i) the
difference between (x) a Pro Rata Share (Cash) of the Cash Component,
minus (y) $7.00, and (ii) a Pro Rata Share (Escrow) of the Escrow
Distribution Component.
(f) Beginning immediately after the Effective Time, each holder of
shares of Company Common Stock that were issued and outstanding
immediately prior to the Effective Date shall be entitled to receive the
Merger Price Components comprising part of the Merger Price into which
such holder's shares of Company Common Stock shall have been converted by
virtue of the Merger upon surrender to the Surviving Corporation of the
certificate or certificates representing such shares of Company Common
Stock. Until surrendered and exchanged in accordance with this
Agreement, each certificate representing such shares of Company Common
Stock outstanding immediately prior to the Effective Time (excluding
Dissenting Shares) shall for all purposes represent the right to receive
the Merger Price Components comprising a part of the Merger Price into
which such shares shall have been converted by the Merger. As of the
Effective Time, there shall be no further registration of transfers on
the stock transfer books of the Company of the shares of Company Common
Stock so converted. In the event any certificate theretofore
representing shares of Company Common Stock to be exchanged for the
Merger Price has been lost, stolen or destroyed, the Surviving
Corporation shall deliver to the person claiming that such certificate
has been lost, stolen or destroyed the Merger Price Components comprising
that part of the Merger Price into which the shares theretofore
represented by such certificate have been converted, upon receipt of
evidence of ownership of such certificate and appropriate
indemnification, in each case satisfactory to the Surviving Corporation.
(g) Beginning immediately after the Effective Time, each holder of
Options that were outstanding immediately prior to the Effective Date
shall be entitled to receive the Merger Price Components comprising part
of the Merger Price into which such holder's Options shall have been
converted upon delivery to the Surviving Corporation of an original copy
of the option agreement pursuant to which such Options were issued,
together with an amendment to such agreement by each holder providing
that the Option is cancelled in exchange for the right to receive the
Merger Price Components and that the Company's obligations to such holder
pursuant to such Options have been satisfied. As of the Effective Time,
there shall be no further registration of transfers by the Company of the
Options so converted.
<PAGE>
(h) As used herein, the term "Pro Rata Share (Cash)" means the
result obtained by dividing (i) the sum of (x) the Cash Component, plus
(y) $6,615,000, by (ii) the sum of (x) the total number of shares of
Company Common Stock that are issued and outstanding immediately prior to
the Effective Time, including all Dissenting Shares, plus (y) the number
of shares subject to Options outstanding immediately prior to the
Effective Time, and the term "Pro Rata Share (Escrow)" means the result
obtained by dividing (i) the amount distributable to the "Stockholders'
Representative" (as defined in the Escrow Agreement) from the "Escrow
Amount" (as defined in the Escrow Agreement) by (ii) the sum of (x) the
total number of shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time, including all
Dissenting Shares, plus (y) the number of Options outstanding immediately
prior to the Effective Time.
Section 1.6 DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock which are
outstanding immediately prior to the Effective Time and which are held by
any stockholder who shall not have voted such shares in favor of the
Merger and who shall have delivered to the Company a written notice of
intent to demand payment for such shares pursuant to Chapter 23 of the
TBCA ("Dissenting Shares") shall not be included in the shares converted
pursuant to SECTION 1.5(b) of this Agreement into the right to receive a
Pro Rata Share (Cash) of the Cash Component and a Pro Rata Share (Escrow)
of the Escrow Distribution Component, but instead, such holder thereof
shall be entitled to payment of the value of such shares in accordance
with the provisions of Chapter 23 of the TBCA; PROVIDED, HOWEVER, that
(i) if any holder of Dissenting Shares shall subsequently deliver a
written withdrawal of his or her demand for payment of such shares and a
written acceptance of the Merger or (ii) if any holder of Dissenting
Shares fails to make his or her demand for payment provided in such
Chapter 23 of the TBCA within the time required by law or for any other
reason ceases to have the right to demand and receive payment for his or
her Dissenting Shares pursuant to Chapter 23 of the TBCA, then such
shares thereupon shall cease to be Dissenting Shares and such holder
thereupon shall become entitled to receive a Pro Rata Share (Cash) of the
Cash Component and a Pro Rata Share (Escrow) of the Escrow Distribution
Component in exchange for such shares as provided in SECTION 1.5(d) of
this Agreement.
Section 1.7 MERGER PRICE. As used in this Agreement:
(a) "Merger Price" means the total of its components (collectively,
the "Merger Price Components"), namely, the Cash Component and the Escrow
Distribution Component.
(b) "Cash Component" means cash in the aggregate amount of
$14,000,000.
(c) "Escrow Distribution Component" means the portion of the Escrow
Amount that is distributable to the holders of Company Common Stock and
Options converted pursuant to this Agreement by virtue of the Merger, or
their respective assignees, in accordance with the terms of the Escrow
Agreement.
<PAGE>
ARTICLE 2
THE CLOSING
Section 2.1 CLOSING; CLOSING DATE. The consummation of the
Merger provided for in this Agreement (the "Closing") shall take place at
the office of Schiff Hardin & Waite, 7200 Sears Tower, Chicago, Illinois,
at 9:00 a.m., local time, on September 30, 1996, or, if later, on the
fifth business day after the condition set forth in SECTION 7.2 and
SECTION 8.2 hereof is satisfied (provided that the condition set forth in
SECTION 7.6 and SECTION 8.5 hereof is then satisfied), or on such other
date or at such other place or time as the parties hereafter may agree
upon in writing (the "Closing Date").
Section 2.2 ACTION AT CLOSING. At the Closing, the parties to
this Agreement shall effect the filing of the articles of merger provided
for in SECTION 1.1(b) of this Agreement as needed to make the Merger
effective, and the Closing thereafter will be completed by the immediate
completion of the transactions provided for in SECTIONS 2.3 and 2.4 of
this Agreement.
Section 2.3 SURRENDER OF CERTIFICATES; EXCHANGE. At the place of
the Closing immediately following the Effective Time, the Surviving
Corporation shall effect the physical exchange of the Pro Rata Share
(Cash) of the Cash Component provided for in SECTION 1.5(f) and SECTION
1.5(g) of this Agreement with (a) each holder of shares of Company Common
Stock that were issued and outstanding immediately prior to the Effective
Time (excluding Dissenting Shares) who then and there surrenders to the
Surviving Corporation for cancellation the certificates that evidenced
such shares, endorsed by the holders thereof in blank with their
signatures guaranteed, and (b) each holder of Options that were
outstanding immediately prior to the Effective Time who then and there
submits the agreements referred to in SECTION 1.5(g); and those of such
holders who do not then and there surrender their certificates for their
shares of Company Common Stock that were issued and outstanding
immediately prior to the Effective Time (excluding Dissenting Shares) or
their written acknowledgements (as applicable), thereafter may obtain
such exchange, within the time limitations imposed by law, (i) in the
case of holders of Company Common Stock, by surrendering the certificates
that evidenced their shares, endorsed by such holders in blank with their
signatures guaranteed, and (ii) in the case of holders of Options, by
submitting the written acknowledgement, at the principal place of
business of NGC at 33 Third Street SE, P.O. Box 1318, Huron, SD 57350-
1318, or at such other office of which the Surviving Corporation shall
have given notice to each such holder after the date of this Agreement.
Section 2.4 ACTION AT CLOSING. At the Closing, NGC shall deposit
with the Escrow Agent a promissory note, dated the Closing Date, executed
by the Company as the maker, and by NGC as to the guarantee of payment
thereof, payable to the order of the Escrow Agent in the aggregate
principal amount of $1,000,000 in substantially the form attached to the
Escrow Agreement (the "Escrow Note").
ARTICLE 3
STATEMENT OF ESSENTIAL FACTS CONCERNING NGC AND EEC
This Agreement is entered into by the Company and the Selling
Stockholders upon the understanding that the statements of essential
facts in SECTIONS 3.1 through 3.8 of this Agreement are true and correct
on the date of this Agreement. NGC and EEC hereby jointly and severally
<PAGE>
represent and warrant to the Company and the Selling Stockholders that,
to the best knowledge of NGC and EEC, the statements in SECTIONS 3.1
THROUGH 3.8 of this Agreement are true and correct on the date of this
Agreement.
Section 3.1 ORGANIZATION. Each of NGC and EEC is a corporation
duly organized, validly existing and in good standing under the laws of
the state of its incorporation (which is South Dakota, in the case of
NGC, and Tennessee, in the case of EEC) and has the corporate power and
authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted or presently proposed to be conducted, except where the failure
to be so organized, existing, and in good standing or to have such power
and authority would not, individually or in aggregate, prevent or delay
the Closing.
Section 3.2 AUTHORITY. Each of NGC and EEC has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this
Agreement by NGC and EEC and the consummation by NGC and EEC of the
transactions contemplated hereby have been duly authorized by the Boards
of Directors of NGC and of EEC, and by the sole stockholder of EEC, and
no other corporate proceedings on the part of NGC or EEC are necessary to
authorize this Agreement or the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by NGC or EEC
and (assuming this Agreement constitutes a valid and binding agreement of
the other parties to this Agreement) constitutes a valid and binding
agreement of both NGC and EEC, enforceable against both of them in
accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally from time to time in effect and to general
equitable principles.
Section 3.3 CONSENTS AND APPROVALS. Except for (a) applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (b) applicable requirements under Section 204
of the Federal Power Act, as amended (the "Federal Power Act"), with
respect to the Warrants and the NWPS Common Stock issuable upon exercise
of the Warrants, or (c) the filing of articles of merger provided for in
SECTION 1.1(b) of this Agreement, no consent, approval, authorization or
order of, or filing, negotiation or qualification with ("Consent"), any
federal, state, local or foreign court or tribunal or administrative,
governmental or regulatory body, agency, commission, division, department
or other authority ("Government Entity"), or any individual corporation,
partnership, joint venture or trust is required to be made or obtained or
made by NGC or EEC for the execution, delivery and performance of this
Agreement by either NGC or EEC or the consummation by either of them of
the transactions contemplated hereby.
Section 3.4 NO CONFLICT OR VIOLATION. Neither the execution,
delivery or performance of this Agreement, nor the consummation of the
transactions contemplated hereby, will (a) conflict with or result in any
breach of any provision of the articles of incorporation or the bylaws of
either NGC or EEC, (b) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default or give
rise to any right of termination, cancellation, vesting, payment,
exercise, acceleration, suspension or revocation under any of the terms,
conditions or provisions of any note, bond, mortgage, deed of trust,
<PAGE>
security interest, indenture, license, agreement, plan, contract, lease,
commitment or other instrument or obligation to which either NGC or EEC
is a party or by which either NGC or EEC or any of their respective
properties or assets may be bound or affected, or (c) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to NGC
or EEC or any of their respective properties or assets.
Section 3.5 LITIGATION. There is no suit, action, proceeding or
investigation, whether at law or equity, before or by any federal, state,
local or foreign court, tribunal, commission, board, agency or
instrumentality, or before any arbitrator ("Action"), pending or
threatened against or affecting NGC or EEC, the outcome of which would in
any manner impair the ability of NGC or EEC to perform its obligations
hereunder.
Section 3.6 CERTAIN FEES. Except as expressly provided in this
Agreement, neither NGC nor EEC has entered into any agreement,
arrangement or understanding with any person or firm that will result in
any obligation of NGC or EEC to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions
contemplated by this Agreement.
Section 3.7 FINANCIAL STATEMENTS. NGC has delivered to Sellers a
consolidated balance sheet of NGC and its subsidiaries as of June 30,
1996 which presents fairly the consolidated financial position of NGC and
its subsidiaries as of such date and was prepared in accordance with
generally accepted accounting principles consistently applied throughout
the period ending on that 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 Closing Date shall have, a net
worth (computed in the manner reflected on the balance sheet referred to
above) of at least $100 million. NGC presently has all funds available
which are necessary to consummate the transactions contemplated by this
Agreement.
Section 3.8 DISCLOSURE. No representation or warranty by NGC or
EEC in this Agreement (which includes the Schedules hereto) contains an
untrue statement of material fact, or omits to state a material fact
necessary to make the statements contained herein, in light of the
circumstances in which they were made, not misleading.
ARTICLE 4
STATEMENTS OF ESSENTIAL FACTS CONCERNING THE COMPANY,
ITS SUBSIDIARIES AND ITS STOCKHOLDERS
This Agreement is entered into by NGC and EEC upon the understanding
that the statements of essential facts in SECTIONS 4.1 THROUGH 4.29 of
<PAGE>
this Agreement are true and correct on the date of this Agreement. The
Selling Stockholders hereby jointly and severally represent and warrant
to NGC and EEC that, to the Knowledge of the Selling Stockholders, the
statements in SECTIONS 4.1 THROUGH 4.29 of this Agreement are true and
correct on the date of this Agreement. Insofar as the statements in
SECTIONS 4.1 THROUGH 4.29 relate to the Members and the assets of any
Member of the Company Group acquired under the agreement dated July 25,
1995 between the Company and SYN Inc. or property purchased from lessors
whose leases were assigned to the Company pursuant to such agreement,
such statements shall be read to relate only to events, changes and
developments during the period after the date such assets were acquired
under such agreement or such leases were assigned to the Company pursuant
to such agreement.
Section 4.1 ORGANIZATION; QUALIFICATION. Each member of the
Company Group (each a "Member") is a corporation duly organized, valid
existing and in good standing under the laws of its state of
incorporation and has the corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted or presently proposed
to be conducted. Each Member is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of
its activities makes such qualification necessary. SCHEDULE 4.1
correctly (a) states the name, jurisdiction of incorporation and
jurisdictions where duly qualified to do business as a foreign
corporation for each Member; (b) identifies those Members which are
Subsidiaries; (c) states the outstanding shares of capital stock of each
Subsidiary, and the owner or owners of such outstanding shares; and (d)
states the names and titles of each of the directors of each of the
Subsidiaries.
Section 4.2 AUTHORITY.
(a) The Company has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder, subject, as to
its obligation to effect the Merger, to obtaining the approval of the
stockholders of the Company provided for in SECTION 5.5 of this
Agreement. The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by the Board of Directors
of the Company, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or the transactions
contemplated hereby, except, as to the Merger provided for herein, the
obtaining of the approval of the stockholders of the Company provided for
in SECTION 5.5 of this Agreement.
(b) Each of the Selling Stockholders has the requisite power and
authority to enter into this Agreement and to carry out its, his or her
obligations hereunder.
(c) This Agreement has been duly and validly executed by the
Company and each of the Selling Stockholders and (assuming this Agreement
constitutes a valid and binding agreement of the other parties to this
Agreement) constitutes a valid and binding agreement of the Company and
each of the Selling Stockholders, enforceable against each and all of
them in accordance with its terms, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting
creditors' rights generally from time to time in effect and to general
equitable principles.
<PAGE>
Section 4.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 879,346
shares of voting common stock (of which 879,346 shares are outstanding),
hereinbefore defined as the "Company Common Stock." Such outstanding
Company Common Stock is owned of record and beneficially by the
stockholders listed on SCHEDULE 4.3(a), in the amounts set forth opposite
their respective names thereon, and, except as set forth on SCHEDULE
4.3(a), is free and clear of any lien, pledge, security interest, option,
encumbrance, title retention agreement, voting trust or agreement,
adverse claim or charge of any kind whatsoever ("Lien") (other than
restrictions on transfer imposed by federal or state securities laws).
All of the issued and outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable and free of preemptive
rights.
(b) SCHEDULE 4.3(b) sets forth all options to purchase shares of
Company Common Stock (the "Options") outstanding as of the date of this
Agreement. Such outstanding Options are owned of record and beneficially
by the holders listed on SCHEDULE 4.3(b), in the amounts set forth
opposite their respective names thereon, and, except as set forth on
SCHEDULE 4.3(b), as of the date of this Agreement there are no shares of
Company Common Stock issued or outstanding nor any outstanding options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Company to issue, transfer,
sell, redeem, repurchase or otherwise acquire any shares of its capital
stock.
Section 4.4 SUBSIDIARIES; INTERESTS IN OTHER ENTITIES.
(a) There are no options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments by which the
Company or any of the Subsidiaries is or may be bound to issue, transfer,
sell, redeem, repurchase or otherwise acquire any shares of capital stock
of any of the Subsidiaries. All of the outstanding shares of capital
stock of each Subsidiary are validly issued, fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any
Lien (other than restrictions on transfer imposed by federal or state
securities laws), except as set forth on SCHEDULE 4.4(a).
(b) Except for the Subsidiaries and as set forth on SCHEDULE
4.4(b), the Company does not own, directly or indirectly, any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business entity.
<PAGE>
Section 4.5 NO CONFLICT OR VIOLATION; CONSENTS AND APPROVALS.
(a) Except as set forth in SCHEDULE 4.5(a), neither the execution,
delivery or performance of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) conflict with or result in any
breach of any provision of the certificate or articles of incorporation,
as the case may be, or the bylaws of any Member, (ii) result in a
violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default or give rise to any right of
termination, cancellation, vesting, payment, exercise, acceleration,
suspension or revocation under any of the terms, conditions or provisions
of any Material Contract, (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to any Member or any of
<PAGE>
its properties or assets or any of the Selling Stockholders, (iv) result
in the creation or imposition of any Encumbrance on any asset of any
Member, or (v) cause the suspension or revocation of any permit, license,
governmental authorization, consent or approval necessary for any Member
to conduct its business as currently conducted.
(b) Except for (i) the applicable requirements of the HSR Act, (ii)
the filing of the articles of merger provided for in SECTION 1.1(b) of
this Agreement, and (iii) as set forth on SCHEDULE 4.5(b), no Consent of
any individual, corporation, partnership, joint venture, trust,
association or Government Entity is required to be obtained or made by
any Member in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
Section 4.6 LITIGATION. Except as set forth in SCHEDULE 4.6, and
except for matters covered by SECTION 4.13 of this Agreement, no Member
is a party to any Action; no Selling Stockholder is a party to any Action
relating to this Agreement; and, to the Knowledge of the Selling
Stockholders, no Action against or affecting any Member is threatened nor
is any action relating to this Agreement threatened against any of the
Selling Stockholders. No Action listed on SCHEDULE 4.6 (a) is likely,
individually or in the aggregate, to have a material adverse effect on
the business, assets, liabilities, prospects, results of operations or
financial condition of the Members taken as a whole (a "Company Material
Adverse Effect"), (b) questions the validity of this Agreement, or (c)
seeks to enjoin any action taken or to be taken in connection herewith or
the consummation of the transactions contemplated hereby. Except as set
forth in SCHEDULE 4.6, there is no judgment, decree, injunction, rule or
order of any Government Entity outstanding against any Member.
Section 4.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except (a) as
set forth on SCHEDULE 4.7, (b) as and to the extent disclosed or reserved
against or otherwise reflected in the audited consolidated financial
statements (including notes thereof) of the Company Group for the year
ended June 30, 1996 referred to in SECTION 4.17 of this Agreement, or (c)
as and to the extent incurred (i) after June 30, 1996 in the ordinary
course of business and consistent with past practices (none of which is a
liability individually in excess of $50,000), or (ii) in connection with
the transactions contemplated by this Agreement, no Member has any
liability of any nature, whether or not accrued, absolute, asserted, due,
contingent or otherwise. SCHEDULE 4.7 sets forth the outstanding working
capital loans under the Credit Agreement between the Company and The
First National Bank of Boston dated as of August 1, 1996 (the "Credit
Agreement") as of the date which is one (1) business day prior to the
date of this Agreement, together with an estimate (to the Knowledge of
the Selling Stockholders) of the accrued but unpaid interest on all debt
outstanding under the Credit Agreement through the date of this
Agreement.
Section 4.8 NO DEFAULT. Except for matters covered by SECTION
4.13 of this Agreement, no Member is in violation or breach of or default
under (and no event has occurred that with notice or the lapse of time or
both would constitute a violation or breach of, or a default under) any
term, condition or provision of (a) its articles or certificate of
incorporation, as the case may be, or bylaws, (b) any note, bond,
mortgage, deed of trust, security interest, indenture, license,
agreement, plan, contract, lease, commitment or other instrument or
obligation to which any Member is a party or by which it or any of its
properties or assets may be bound or affected, (c) any order, writ,
<PAGE>
injunction, decree, statute, rule or regulation applicable to any Member
or any of its properties or assets, or (d) any permit, license,
governmental authorization, consent or approval necessary for such Member
to conduct its business as currently conducted.
Section 4.9 TAXES.
(a) "Taxes" means all taxes, levies or other like assessments,
charges and fees (including estimated taxes, levies or other like
assessments, charges and fees and including also withholding on amounts
paid by or to the relevant party), 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, levies or other like assessments,
charges, fees and withholding obligations.
(b) Except as set forth in SCHEDULE 4.9(b):
(i) each Member (A) has duly filed (or there have been filed
on its behalf) with the appropriate Government Entities any and all
reports, returns, statements or other written information required
to be supplied to a taxing authority ("Tax Returns") required to be
filed by it and such Tax Returns accurately reflect the Company
Group's obligations to pay Taxes for the periods covered therein,
and (B) has duly paid in full or made provision (or there has been
paid or provision has been made on its behalf) for the payment of
all Taxes required to be paid by it, except to the extent such Taxes
are reserved for in the Company Group Financial Statements; and the
accruals and reserves for Taxes reflected in such financial
statements are adequate to pay in full all Taxes for all periods
through the respective dates covered by such financial statements;
(ii) no audits or other administrative proceedings or court
proceedings by a Governmental Entity are presently pending with
regard to any Taxes or Tax Returns of any Member, and no Member has
granted any requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment of any
Taxes with respect to any Tax Returns of any Member; and
(iii) no Member is a party, or has any liability with
respect to, any tax sharing, tax indemnity or other agreement or
arrangement relating to Taxes with any person or entity other than
another Member.
Section 4.10 REAL PROPERTY.
(a) SCHEDULE 4.10(a) sets forth a complete and correct list of all
real property and interests in real property (other than leasehold
interests) owned by any of the Members, including the name (or other
identifying designation) of the owner of such property (the "Owned Real
Property"). Except as disclosed on SCHEDULE 4.10(a), each Member has
good and marketable title in fee simple to its Owned Real Property, free
and clear of all mortgages, liens, charges, encumbrances, easements,
encroachments, claims, options, title exceptions and restrictions of
every kind and character ("Encumbrances"), except such that do not
interfere materially with the use thereof or reduce the market value
thereof.
<PAGE>
(b) SCHEDULE 4.10(b) lists all real property leased by any of the
Members as a tenant (the "Leased Real Property"; together with the Owned
Real Property, the "Real Property"). Except as set forth in SCHEDULE
4.10(b), each Member has a valid and existing lease or sublease for and
is in peaceful and undisturbed possession of all of its Leased Real
Property, and there is no default in the performance of its obligations
under any of the leases under which it is in possession of its Leased
Real Property which is not capable of being cured without penalty.
(c) Except as disclosed on SCHEDULE 4.10(c), the buildings,
structures and other improvements on each parcel of Owned Real Property
(collectively, the "Improvements") are in good condition and repair
(ordinary wear and tear excepted) and the Improvements on the Leased Real
Property are in the condition they are required to be under the terms of
the applicable lease.
(d) Except as disclosed on SCHEDULE 4.10(d), no Member has received
any written notice that any Real Property or any Improvements or
equipment therein or thereon owned, leased or used by any Member, or the
condition or the operation thereof, violates any restrictive covenant or
any provision of any law, including, without limitation, any building or
zoning code or regulation.
Section 4.11 PERSONAL PROPERTY.
(a) SCHEDULE 4.11(a) sets forth the quantity, size and branch
location of consumer propane tanks and bulk storage tanks owned by the
Members as of the date of this Agreement. One of the Members has good
title to each of the consumer propane tanks and bulk storage tanks set
forth on SCHEDULE 4.11(a), such good title to each such tank being
established by:
(i) such tank being held in inventory on premises owned or
occupied under lease by one of the Members;
(ii) the Company having produced any of the following: (A) a
previously executed tank contract under which rent or charges for
propane service have been billed to or paid by the customer within
the past 12 months; (B) a customer supply agreement executed by the
customer relating to tanks with a capacity of 100 gallons or less
which states that the Company is providing the tank for use by the
customer (such agreement shall not be required to list a serial
number for the tank); (C) a work order executed by the customer
(such work order shall include the serial number of the tank); or
(D) a bill of sale or tank supplier invoice listing the serial
number of the tank; or
(iii) the customer having acknowledged within the past two
years in writing to any Member, that the Member owns the tank.
Within ninety (90) days after the Closing Date or, if Stephen R. Plaster
and Larry A. Weis are both then still employed by the Company, by March
31, 1997, Baird, Kurtz & Dobson, independent certified public accountants
("BKD"), shall, with the assistance of employees of the Company, verify
the Company's title to the propane tanks and bulk storage tanks listed on
SCHEDULE 4.11(a). Such verification shall be accomplished by BKD
utilizing procedures that are acceptable to NGC and the Selling
<PAGE>
Stockholders (including those procedures stated in SECTION 4.11(a)(i),
(ii) AND (iii) of this Agreement, including reviewing the Company's
business records, performing physical inventories of tanks held at the
Members' branch locations and taking a representative sample (as
determined by BKD) of tanks at customer locations. At the end of the
period identified above, BKD shall deliver a report setting forth its
findings with respect to the verification of such tanks. Thereafter, the
Selling Stockholders shall have an additional thirty (30) days to locate
and have verified by BKD, consistent with the aforementioned procedures,
additional tanks, and BKD shall amend its report to reflect such verified
additional tanks. BKD shall deliver to NGC and the Selling Stockholders
the amended report setting forth BKD's findings, which shall be binding
on all parties.
(b) SCHEDULE 4.11(b) sets forth a complete and correct list of all
vehicles and all other material items of tangible personal property owned
by each of the Members (other than consumer propane tanks and bulk
storage tanks), good and marketable title to all of which is owned by a
Member, free and clear of any Encumbrances, except such that do not
interfere materially with the use thereof or reduce the market value
thereof.
(c) SCHEDULE 4.11(c) sets forth a complete and correct list of all
items of personal property that are leased to any Member that are not
reflected in the Company Group Financial Statements.
(d) Except as disclosed on SCHEDULE 4.11(d), each of the items of
property set forth in SCHEDULES 4.11(a), 4.11(b) AND 4.11(c) is in
generally good condition and repair, normal wear and tear excepted, and
generally fit for the uses for which it is intended.
Section 4.12 LEGAL COMPLIANCE. Except for matters covered by
SECTION 4.13 of this Agreement, each Member is currently conducting, and
since June 30, 1994, has conducted, its operations in substantial
compliance with all applicable laws (whether statutory or otherwise),
rules, regulations, orders, ordinances, judgments, decrees, writs and
injunctions of all Government Entities (collectively, "Laws"), including
but not limited to those promulgated by the United States Department of
Transportation and the Occupational Safety and Health Administrative with
respect to: (a) random drug testing of certain employees, (b) training
requirements with respect to handling hazardous materials, (c) so-called
"SARA" Title II filings, (d) so-called "MSPG" mailings to consumers, (e)
recertification of Department of Transportation cylinders, and (f) annual
inspections and hydrostatic tests of trucks and any other motor vehicles,
where applicable. Except for matters covered by SECTION 4.13 of this
Agreement, no Member has received written notification from any
Government Entity in the last two (2) years with respect to any
noncompliance with any Laws which has not been cured or otherwise
satisfied. Except for matters covered by SECTION 4.13 of this Agreement,
each Member has all governmental approvals, consents, licenses,
registrations and permits necessary to carry on its business as presently
conducted, and no event has occurred that would allow revocation or
termination of, or would result in the material impairment of its rights
with respect to, such approvals, consents, licenses, registrations or
permits.
<PAGE>
Section 4.13 ENVIRONMENTAL MATTERS.
(a) "Environmental Law" herein means any Law relating to (i) the
protection, investigation or restoration of the environment, health,
safety, or natural resources, (ii) the handling, use, presence, disposal,
release or threatened release of any Hazardous Materials or (iii) noise,
odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property herein in connection with any Hazardous
Materials; and "Hazardous Materials" herein means any substance that is
listed, classified or regulated pursuant to any Environmental Law,
including any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon.
(b) COMPLIANCE. Except as set forth in SCHEDULE 4.13(b):
(i) Each Member is in substantial compliance with all
Environmental Laws; and
(ii) No Member has received any written communication from any
Government Entity or other person or entity that alleges that any
Member is not in compliance with Environmental Laws.
(c) ENVIRONMENTAL PERMITS. Except as set forth in SCHEDULE
4.13(c):
(i) Each Member has all permits, licenses, authorizations,
certificates and approvals of Government Entities relating to or
required by Environmental Laws and necessary for the conduct of such
Member's business as currently conducted ("Environmental Permits"),
and all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is
pending agency approval by the appropriate Government Entity; and
(ii) Each Member is in substantial compliance with all terms
and conditions of its Environmental Permits and is not required to
make any material capital expenditure in order to obtain or renew
any Environmental Permits.
(d) ENVIRONMENTAL CLAIMS. Except as set forth in SCHEDULE 4.13(d):
(i) There (A) is no Action or claim pending against any
Member, and no written notice has been received by any Member from
any Government Entity or other person or entity, alleging liability
or potential liability (including, without limitation, liability or
potential liability for investigatory costs, cleanup costs, response
costs, natural resources damages, property damages, personal
injuries or civil or criminal penalties) of a Member arising out of
or resulting from the presence or release into the environment of
any Hazardous Material at any location, whether or not owned or
operated by any Member ("Environmental Claim"); and
<PAGE>
(ii) There is no judgment, decree, injunction or Government
Entity ruling or order issued under any Environmental Law
outstanding against any Member.
(e) TRANSPORTATION OF HAZARDOUS MATERIALS. No Member 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 by a Government Entity, or, to the Knowledge of the
Selling Stockholders, is the subject of any investigation by a Government
Entity or private party, which may lead to an Environmental Claim,
against any Member.
(f) RELEASE OF HAZARDOUS MATERIALS. Except as set forth in
SCHEDULE 4.13(f), there has not been any release as defined by Section
101 of the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. Section 9601 ("Release"), of any Hazardous
Material at, from or onto any real property now or previously owned,
operated or leased by any Member with respect to which remediation is
required by such Act which has not been remediated to the extent so
required.
(g) UNDERGROUND STORAGE TANKS. Except as set forth in SCHEDULE
4.13(g):
(i) There are no underground storage tanks located on any of
the Real Property;
(ii) All underground storage tanks located on any of the Real
Property comply at the present time with all Environmental Laws; and
(iii) All underground storage tanks removed by any of the
Members from real property now or previously owned, operated or
leased by any Member were removed in compliance with applicable
Environmental Laws.
(h) REPORTS. There exists no written report of any environmental
investigation, study, audit, test, review or other analysis conducted by
or on behalf of any Member, or previously delivered to, and still in the
possession of, any Member, in relation to any of the Real Property, or
any real property previously owned, operated or leased by any Member,
which has not been previously delivered to NGC. No Member has destroyed
or otherwise discarded any written report of the type described in the
preceding sentence in connection with the entering into of this Agreement
or the consummation of the transactions contemplated hereby.
(i) GAS MANUFACTURING SITES. No Member has ever owned a site where
gas has been manufactured from coal or other products, nor has any Member
ever owned or controlled another entity which has owned such a site.
Section 4.14 INSURANCE. SCHEDULE 4.14 contains a complete and
correct list of all insurance policies maintained by or on behalf of the
Company Group, or any Member, and includes the following information with
respect to each policy: (a) the names of the insurer, the insured and
any additional insureds or loss payees, (b) the policy number, (c) the
<PAGE>
type of risk covered, (d) dollar limits and coverage amounts,
deductibles, self-insured retentions and co-insurance provisions, (e) the
policy expiration date, and (f) the due date for the next premium
payment. Complete and correct copies of all insurance policies listed on
SCHEDULE 4.14 have been delivered to NGC. Such policies are in full
force and effect, there is no basis upon which the insurance carrier
would have the right to terminate any such policy during the policy term,
and no notice of non-renewal, reduction of coverage or increase in
premium has been received by any Member with respect to any such policy.
All premiums are paid through the date shown on SCHEDULE 4.14, and no
policy will in any way be affected by, terminate or lapse by reason of
the transactions contemplated by this Agreement. No Member has been
refused any insurance with respect to its assets or operations, nor has
coverage been limited by any insurance carrier to which any Member has
applied for any insurance or with which it has carried insurance during
the last two (2) years, and no Member has failed to implement any
recommendation with respect to its facilities or operations made by any
insurance carrier. There has been delivered to NGC a complete and
correct list of all claims in excess of $50,000 submitted within the
previous 26 months to insurers under insurance coverage maintained for
any of the Members.
Section 4.15 LABOR MATTERS. Except as set forth in SCHEDULE 4.15:
(a) No Member is engaged in any unfair labor practices as defined
in the National Labor Relations Act or other applicable Law, and each
Member is in substantial compliance with all applicable Laws respecting
employment and employment practices, terms and conditions of employment,
wages, hours of work and occupational safety and health;
(b) There is no unfair labor practice charge or complaint pending
or threatened against any Member before the National Labor Relations
Board nor is there any grievance or any arbitration proceeding against
out of or under collective bargaining agreements pending or, to the
Knowledge of the Selling Stockholders, threatened, and, to the Knowledge
of the Selling Stockholders there is no basis for any such charge,
complaint or grievance;
(c) There is no labor strike, lockout, slowdown or work stoppage
pending or threatened against any Member;
(d) There is no charge or compliance proceeding pending or, to the
Knowledge of the Selling Stockholders, threatened, against any Member
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful employment
practices; and
(e) No Member has any written personnel policy, nor is any Member
bound by any employment contract; no Member has received written notice
of the intent of any federal, state, local or foreign agency responsible
for the enforcement of labor or employment laws to conduct an
investigation of any Member, and no such investigation is in progress;
the employees of the respective Members 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
<PAGE>
such employees; and no union organizational campaign is in progress and
no question concerning representation exists respecting such employees.
Section 4.16 EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 4.16(a) sets forth a list of all present and prior
(including terminated and transferred) plans, programs, agreements and
arrangements (including all amendments to, and components of, the same)
providing any remuneration or benefits to or with respect to any current
or former employee of any Member, whether or not (i) such plans,
programs, agreements and arrangements are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or (ii) are
employee pension benefit plans as defined in Section 3(2) of ERISA and
are intended to meet the qualification requirements of the Internal
Revenue Code of 1986, as amended (the "Code"; each such plan being a
"Qualified Plan"); and such list includes all (iii) pension, retirement,
profit sharing, 401(k), employee stock ownership, severance, deferred
compensation and stock bonus, stock option and stock purchase plans, and
(iv) plans that provide disability benefits, medical benefits, dental
benefits, worker's compensation, health insurance, life insurance,
incentives, vacation benefits and fringe benefits (the "Company Plans").
The Company has heretofore made available to NGC complete and correct
copies of: (A) each such Company Plan (including all amendments thereto)
or for each unwritten plan, a description thereof; (B) the summary plan
description, if required under ERISA, with respect to each Company Plan;
(C) the annual report, if required under ERISA, with respect to each such
Company Plan for the last five years; (D) the actuarial report, if
required under ERISA, with respect to each such Company Plan for the last
five years; (E) if the Company Plan is funded through a trust or any
third party funding vehicle, the trust or other funding agreement
(including all amendments thereto) and the latest financial statements
thereof; and (F) the most recent determination letter received from, and
pending application for a determination letter filed with, the Internal
Revenue Service with respect to each Company Plan that is intended to be
qualified under Section 401 of the Code.
(b) Except as set forth in SCHEDULE 4.16(b):
(i) None of the Company Plans are or have been subject to
Title IV of ERISA (a "Title IV Plan");
(ii) No Member, nor any of their respective employees or
directors, nor any fiduciary, has engaged in any transaction with
respect to any Member or any Company Plan, including the execution
and delivery of this Agreement and other agreements, instruments and
documents for which execution and delivery by the Company is
contemplated herein, in violation of Section 406(a) or (b) of ERISA
or Section 4975(d) of the Code, for which no administrative
exemption has been granted under Section 408(a) of ERISA;
(iii) Full payment has been made of all amounts that each
Member is required to pay as a contribution to each Company Plan as
of the last day of the most recent fiscal year of each of the
Company Plans ended prior to the date of this Agreement;
<PAGE>
(iv) Each Qualified Plan (together with its related funding
instrument) is qualified and tax exempt under Sections 401 and 501
of the Code and is the subject of a favorable Internal Revenue
Service determination with respect to such qualification and
exemption;
(v) There are no pending claims or litigation involving any of
the Company Plans (other than routine claims for benefits);
(vi) No amounts payable under the Company Plans will fail to
be deductible for federal income tax purposes by virtue of
Section 162(m) or 280G of the Code; and
(vii) No Company Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured), with
respect to current or former employees of any Member or their
dependents beyond their retirement or other termination of service,
other than (A) coverage mandated by applicable law, (B) death
benefits or retirement benefits under any "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, (C)
deferred compensation benefits accrued as liabilities on the books
of account of the Company Group, or (D) benefits the full cost of
which are borne by the current or former employee (or his or her
beneficiary).
(c) Except as set forth in SCHEDULE 4.16(c), no Member is
contributing to (or is obligated to), or in the five year period ending
on the date of this Agreement has contributed to an employee benefit plan
that is a "multiemployer plan" within the meaning of Section 3(37) of
ERISA ("Multiemployer Plan"), nor does any Member have any outstanding or
contingent withdrawal liability under Section 4203 or 4205 of ERISA with
respect to any Multiemployer Plan. NGC has received a statement of the
trustee of each Multiemployer Plan listed on SCHEDULE 4.16(c) setting
forth the estimate of withdrawal liability that would occur if any Member
withdrew from such Multiemployer Plan in a complete withdrawal (as
defined in Section 4202 of ERISA).
(d) No Member has made any commitment to create any additional
Company Plan, or to modify or terminate any existing Company Plan
covering its employees or former employees.
(e) No Member and no Company Plan (nor, to the Knowledge of the
Selling Stockholders, any trust created thereunder nor any trustee or
administrator thereof) has engaged in any transaction, taken any action,
or failed to take any action in connection with which any Member could be
subject (whether directly, indirectly or as indemnitor) to any material
liability (whether actual or contingent) or civil penalty assessed
pursuant to Sections 409, 502(c), 502(i), 502(l), 4062, 4063, 4064, 4068
or 4071 of ERISA or tax or penalty imposed pursuant to Sections 4971,
4975 to 4980A, or 4980B of the Code.
<PAGE>
(f) Except as set forth in SCHEDULE 4.16(f), all returns and
reports that were required to be filed with governmental agencies with
respect to Company Plans have been filed on a timely basis and were
substantially correct or complete, and all other disclosure obligations
for those plans have been substantially met.
(g) No Company Plan is presently under audit or examination (nor
has notice been received of a potential audit) by the Internal Revenue
Service, the Department of Labor or the Pension Benefit Guaranty
Corporation ("PBGC") on any other government agency, nor are there any
matters pending with respect to any Company Plan with the Internal
Revenue Service under its Voluntary Compliance Resolution Program, its
Closing Agreement Program or other similar programs.
(h) Each Company Plan has been operated in substantial compliance
with its terms and with all federal and state laws, rules and regulations
to the extent such laws, rules and regulations are applicable.
(i) Set forth in SCHEDULE 4.16(i) is a complete and correct list of
all plans, arrangements and agreements to which any Member is a party or
by which any Member is bound and under which, as a result of a particular
transaction or transactions, any director, officer, employee or other
agent of any Member or any other party claiming through such a person
shall or may acquire rights with respect to any Company Plan (including,
without limitation, the creation, increase or extension of new or
existing rights), become entitled to a distribution or payment with
respect to any Company Plan at a date earlier than if such transaction
had not occurred, or otherwise receive or become vested in rights or
benefits with respect to any Company Plan. Complete and correct copies
of all such plans, arrangements and agreements have been delivered to
NGC.
(j) No Title IV Plan had an accumulated funding deficiency (as such
term is defined in Section 302 of ERISA and Section 412 of the Code) as
of the last day of the most recent plan year of such plan ended prior to
the date of this Agreement. As to each Title IV Plan, the value of the
assets thereof as of the date of this Agreement, as determined by such
plan's independent actuaries, exceeds the present value as of the date of
this Agreement, as determined by such actuaries, of all benefits accrued
under such plan. No events have occurred or are expected to occur with
respect to any Title IV Plan that would cause a change in the value of
the assets or benefits of such plan for purposes of the preceding
sentence. No reportable event (as defined in Section 4043 at ERISA and
regulations issued thereunder) has occurred with respect to any Title IV
Plan. No liability to the PBGC has been incurred, or is expected to be
incurred by any Member with respect to any Title IV Plan. PBGC has not
instituted any proceedings, and there exists no event or condition that
would constitute grounds for the institution of proceedings by PBGC, to
terminate any Title IV Plan under Section 4042 of ERISA.
(k) Set forth on SCHEDULE 4.16(k) is (i) the amount of all past
service liabilities under each Title IV Plan and the period over which
they are being amortized, (ii) the amount of the liability for minimum
contributions for the last two (2) plan years to any Qualified Plan,
<PAGE>
(iii) the approximate amount of the minimum contribution to any Qualified
Plan for the plan year during which the Closing Date is to occur, and
(iv) the annual cost of providing coverage under any Company Plan that is
a welfare plan as defined in Section 3(1) of ERISA for former employees
of any Member and the dependents of such former employees. No waiver
from the minimum funding standard requirements of Section 302 of ERISA
and Section 412 of the Code has been obtained, applied for or is
contemplated with respect to any Title IV Plan.
Section 4.17 FINANCIAL STATEMENTS. The consolidated balance
sheets of the Company Group as at June 30, 1995 and June 30, 1996, and
the consolidated statements of income, changes in stockholders' equity
and cash flows for the respective periods then ended, including in each
case the related notes, certified by BKD ("Company Group Financial
Statements"), fairly present the consolidated financial position of the
Company Group as at the respective dates thereof and the consolidated
results of their operations and changes in their financial position for
the periods then ended, and all such financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied throughout the periods involved. The books
of account of the Company Group fairly reflect, in accordance with GAAP,
all transactions and all items of income and expense, assets and
liabilities and accruals relating to the Members required to be reflected
thereon.
Section 4.18 ABSENCE OF CERTAIN CHANGES. Since June 30, 1996,
except as set forth in SCHEDULE 4.18, the Members have conducted their
businesses only in the ordinary course consistent with past practices and
have not experienced any change, other than in the ordinary course of
business consistent with past practices, which individually or in the
aggregate has had or is reasonably likely to have a Company Material
Adverse Effect. Without limiting the generality of the foregoing, except
as set forth in SCHEDULE 4.18 or otherwise disclosed in this Agreement
(including the other Schedules hereto), since June 30, 1996 the Members
have not taken any action that, if taken after the date hereof, would
constitute a violation of any of the provisions of SECTION 5.1 of this
Agreement. Further, none of the Members has suffered a reduction in the
value of any of its assets by reason of (a) an adjustment in accordance
with GAAP attributable to an increase in the amount of any reserve (or,
for reserves calculated on the basis of a certain rate, any increase in
the rate by which a reserve is calculated) or (b) any other impairment in
value of any asset, normal wear and tear excepted, that is not reflected
on the June 30, 1996 financial statements.
Section 4.19 CERTAIN FEES. Except as disclosed on SCHEDULE 4.19,
no Member nor any Selling Stockholder has entered into any agreement,
arrangement or understanding with any person or firm which will result in
the obligation of NGC, EEC or the parent corporation of NGC, namely,
Northwestern Public Service Company, or any Member, to pay any finder's
fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
Section 4.20 ACCOUNTS RECEIVABLE. All accounts, notes and other
receivables and amounts owing to the Members, whether reflected in the
Company Group Financial Statements or arising after June 30, 1996,
<PAGE>
represent bona fide arms'-length sales in the ordinary course of business
and are legally enforceable obligations of the obligors thereunder.
Except as set forth on SCHEDULE 4.20, since June 30, 1996, there has not
been a material change in the aggregate amount of such accounts, notes
and other receivables and amounts owing to the Members or the aging
thereof, except as a result of payments and charges in the ordinary
course of business.
Section 4.21 SUPPLIERS. SCHEDULE 4.21 sets forth a list of the
ten largest suppliers of propane to the Members during the 12 months
ended June 30, 1996, showing the approximate total purchases by the
Members (on a consolidated basis) from each such supplier during such 12-
month period. Except to the extent set forth in SCHEDULE 4.21, no Member
is presently engaged in any dispute with any such suppliers, no such
supplier has advised any Member of its intention to refuse to do business
with any Member, and the Company Group does not presently intend to
terminate or modify any such relationship. Except as set forth on
SCHEDULE 4.21, none of the suppliers listed on SCHEDULE 4.21 is an
affiliate of the Company or any of the Selling Stockholders. Since June
30, 1996, no Member has ordered, purchased or accepted delivery of
propane, appliances or parts, other than in the ordinary course of
business, and since such date there has not been a material change in the
amount of propane, appliances or parts held in the inventory by the
Company Group, other than in the ordinary course of business, consistent
with past practices and other than changes resulting directly from
changes in the weather.
Section 4.22 CUSTOMERS. SCHEDULE 4.22 lists each retail customer
of the Company Group which accounted for more than $100,000 of sales of
the Company Group on a consolidated basis during the 12 months ended June
30, 1996 and the material terms applicable to sales to such customer.
Except to the extent set forth in SCHEDULE 4.22, no Member is presently
engaged in any dispute with any such customer, no such customer has
advised any Member of its intention to discontinue its normal business
relationship with the Company Group and no Member intends to terminate or
modify any such relationship. Except as set forth on SCHEDULE 4.22, none
of the customers listed on SCHEDULE 4.22 is an affiliate of the Company
or any of the Selling Stockholders. Since June 30, 1996, no Member has
delivered propane to any customer other than in the ordinary course of
business, and since such date there has not been a material change in the
frequency of deliveries, or the amounts of propane delivered, to
customers of the Company Group, compared to the comparable period in the
previous year, other than in the ordinary course of business, consistent
with past practice and other than changes resulting directly from changes
in the weather.
Section 4.23 INTELLECTUAL PROPERTY. Each Member owns or
possesses, and has taken all actions necessary to record, preserve and
protect, adequate and enforceable long-term licenses or other rights to
use, without payment, all copyrights and copyright registrations and
applications, patents, patent applications, utility models, design
registrations, inventions, trade names, trade secrets, trademarks,
franchises, know-hows and similar rights now owned, used, employed or
held by any Member in connection with its business or necessary for the
conduct of its business (the "Intellectual Property"). SCHEDULE 4.23
<PAGE>
sets forth a complete and correct list and summary description of all of
the Intellectual Property. No Member has received written notice to the
effect (or otherwise has reason to believe) that such Intellectual
Property or any use thereof by any Member conflicts with or allegedly
conflicts with or infringes with the rights of any other person or
entity.
Section 4.24 CONTRACTS. SCHEDULE 4.24 lists or describes all
"Material Contracts," which term means all unexpired written or oral
leases (whether of real or personal property) and all agreements,
arrangements, purchase or sales commitments, non-competition agreements,
instruments or other contracts, including notes, loan agreements,
mortgages, guarantees or other evidences of indebtedness, to which any
Member, is a party or to which it or any of its assets or properties are
bound, except those (a) entered into in the ordinary course of business
and which may be terminated by such Member upon thirty (30) or fewer days
notice without any liability or other obligation being incurred by it, or
(b) which involve an aggregate consideration to be provided or received
by such Member of less than $50,000. Complete and correct copies of all
written Material Contracts listed in SCHEDULE 4.24 have been made
available to NGC. All such contracts are valid and binding obligations
of a Member, enforceable in accordance with their terms except as their
enforceability may be limited by bankruptcy, insolvency, moratorium and
other laws affecting creditors' rights generally, or the exercise of
judicial discretion in accordance with general equitable principles, and
are, to the Knowledge of the Selling Stockholders, in full force and
effect. No Member or, to the Knowledge of the Selling Stockholders, any
other party to any such contract is (with or without the lapse of time or
the giving of notice, or both) in violation thereof or in default
thereunder. No Member is a party to any Material Contract which, to the
Knowledge of the Selling Stockholders, if performed by the Member in
accordance with its terms, could only be performed at a loss to the
Member, or which could not be performed within the time limits therein
provided and, when actually performed, would result in an obligation to
pay damages or penalties. SCHEDULE 4.24 also lists or describes all
"Empire Gas Contracts," which term means all unexpired written or oral
leases (whether of real or personal property) and all agreements,
arrangements, including non-competition agreements and tax-sharing
arrangements, purchase or sales commitments, instruments or other
contracts to which any Member, any Selling Stockholder, any director,
officer or employee of a Member and any one of Empire Gas Corporation,
its stockholders, directors, officers or employees are parties.
Section 4.25 COMPLIANCE WITH SAFETY STANDARDS. Each of the
Members has conducted its business at all times substantially in
accordance with generally accepted safety standards for companies
similarly engaged in the retail sale and distribution of propane.
Section 4.26 SUFFICIENCY OF ASSETS. The assets that are owned or
leased by the Company Group are sufficient to permit the Company Group to
carry on their businesses in the ordinary course, substantially as such
businesses have previously been conducted by the Company Group, without
infringement or violation of the rights of any other person or entity
other than such infringements or violations which do not materially
interfere with the use thereof or reduce the market value thereof.
<PAGE>
Section 4.27 RELATED PARTIES. Except as set forth on
SCHEDULE 4.27, no officer or director of any Member or any Selling
Stockholder or any beneficiary of any trust which is a Selling
Stockholder or any member of the immediate family of any such officer,
director, Selling Stockholder or beneficiary, including Robert W.
Plaster, (collectively, "Related Parties") (a) has any direct or indirect
interest in or is an officer, director or employee of, or consultant to,
any entity which has an interest in any property, asset or right,
tangible or intangible, which is used by or is any way associated with
any of the Members in the conduct of their businesses or which is
contemplated for such use; (b) owns, directly or indirectly, in whole or
in part, any property, asset or right, tangible or intangible, which is
associated with any property, asset or right owned by any Member or which
any Member is presently operating or using or the use of which is
contemplated for its business; (c) has any contractual relationship with
any Member; or (d) has any direct or indirect interest in, or is an
officer, director or employee of, any entity which either does business
with any Member or is competitive with the businesses of the Members
(other than shareholdings in publicly-held companies which in the
aggregate total not more than one percent of any class of stock of such
publicly-held company). Except as set forth on SCHEDULE 4.27, since June
30, 1996, there have been no payments (however characterized) by any
Member to any Related Party or by any Related Party to any Member, except
for usual fees to directors, reimbursement of travel and other expenses
incurred on behalf of the Members, and compensation to officers and
employees earned and paid, in each case, in the ordinary course of
business and consistent with past practice. Except as set forth on
SCHEDULE 4.27, no Related Party is indebted to any Member, and no Member
is indebted to any Related Party.
Section 4.28 PUBLIC UTILITY HOLDING COMPANY ACT. No Member is a
"public utility company" or a "holding company" within the meaning of
those terms in the Public Utility Holding Company Act of 1935, as
amended.
Section 4.29 DISCLOSURE. No statement in this ARTICLE 4 and no
statement concerning the Company Group, the Members or the Selling
Stockholders in this Agreement (which includes the Schedules hereto)
contains an untrue statement of material fact, or omits to state a
material fact necessary to make the statements contained herein, in light
of the circumstances in which they were made, not misleading.
ARTICLE 5
AGREEMENTS PENDING THE CLOSING
The parties hereto agree that the provisions in this ARTICLE 5 shall
be performed or observed from the date of this Agreement until the
Effective Time, or until the termination of this Agreement without the
Effective Time having occurred:
Section 5.1 CONDUCT OF BUSINESS. The Company and the Selling
Stockholders shall cause each Member to conduct its business only in the
ordinary course, consistent with past practice, except as otherwise
contemplated by this Agreement. Any transaction or action that is not in
<PAGE>
the ordinary course of business, consistent with the past practice of the
Company Group, shall be subject to the prior written consent of NGC and
EEC, which consent shall not be unreasonably withheld or delayed.
Without limiting the foregoing, without the prior written consent of NGC
and EEC, which consent shall not be unreasonably withheld or delayed, or
except as otherwise contemplated by this Agreement, no Member shall:
(a) Incur any indebtedness for borrowed money, or assume,
guarantee, endorse or otherwise become responsible for the obligations of
any other individual, partnership, firm or corporation (exclusive of
endorsements of checks to negotiate their payment to one of the Members),
or make any loans or advances to anyone, except as necessary to fund
obligations of any Member incurred in a manner consistent with the first
sentence of this SECTION 5.1 (including, without limitation, for the
purpose of purchasing inventory) or by way of replacement or substitution
of existing borrowings;
(b) Amend its organizational documents, change the number of
outstanding shares of its capital stock or issue any warrants, options or
other rights to subscribe for or to purchase any capital stock or
securities convertible into capital stock of any Member;
(c) Mortgage, pledge or otherwise encumber, or sell, transfer or
otherwise dispose of, any of the properties or assets of any Member,
other than in the ordinary course of business, consistent with past
practice; PROVIDED, HOWEVER, that (i) at or before Closing, the Members
shall transfer to Stephen R. Plaster or his designees, as additional
compensation to him in the capacities in which he is employed by the
Company, in the amount listed on SCHEDULE 5.1(c), the assets listed on
SCHEDULE 6.1 (the "Excluded Assets"), and (ii) this SECTION 5.1(c) shall
not prohibit the Company from granting and perfecting any liens that the
Company is required to grant and perfect under the Credit Agreement;
(d) Terminate or make any material change in any Material Contract,
or make any lease, agreement, arrangement, purchase or sale commitment,
instrument, understanding or other contract which, if it had been in
effect on the date hereof, would have been a Material Contract;
(e) Pay or commit to pay any bonuses or make or commit to make any
increase in compensation or benefits (including severance benefits) to
any of its employees or directors, which results in collective payments
or commitments to any one employee or director in excess of $5,000;
(f) Enter into any new contract of service with any director or
employee;
(g) Declare, set aside or pay any dividend or other distribution
with respect to any shares of its capital stock not owned by one or more
of the Members, or repurchase, redeem or otherwise acquire for value any
shares of capital stock or other securities of, or other ownership
interests in, any Member;
(h) Incur capital expenses in excess of $50,000 per item which are
not disclosed in a Schedule to this Agreement, except for expenditures
(i) to replace motor vehicles in the ordinary course of business
<PAGE>
consistent with past practices, or (ii) reasonably required for an
unexpected emergency of which notice is given to NGC as promptly as is
reasonably possible after the expense is incurred;
(i) Fail to maintain its existing insurance coverage in full force
and effect;
(j) Waive any material rights or claims;
(k) Pay (other than payments of accrued interest thereon when due
and payments of principal when due under the Credit Agreement) any
indebtedness for borrowed money of any Member, except for any such
indebtedness paid by one Member to another Member;
(l) Make any contract with any Related Party; or
(m) Commit to take any of the actions listed in clauses (a) through
(l) inclusive.
Section 5.2 PERMITTED TRANSACTIONS. Notwithstanding anything to
the contrary in this Agreement, the Company shall, and shall cause all
other Members to, take the following actions during the period from the
date of this Agreement to immediately prior to the Closing:
(a) Terminate all contracts with Related Parties (other than those
designated on SCHEDULE 5.2(b) to survive the Closing) without making any
payment for such termination or on account thereof, or incurring a
liability, not accrued in the consolidated balance sheet of the Company
Group as at June 30, 1996, which is part of the Company Group Financial
Statements, but obtaining a release of all rights and claims thereunder
in exchange for comparable releases from the counterparties to such
contracts; and
(b) Cause the existing lease to the Company of the building used by
the Company as its headquarters in Lebanon, Missouri and the land on
which the Company's transportation facility is located to be amended (i)
to extend the term thereof to expire 10 years from the Closing Date, with
the rent thereunder to be $250,000 per annum for such extended term,
reduced by the amount of rent received from Empire Gas Corporation under
its existing lease for its headquarters in Lebanon, Missouri (the "Empire
Gas Lease"), (ii) to include a provision that the owner of the building
will (A) not amend the Empire Gas Lease to reduce the annual rent due
thereunder from the amount in effect as of the date of this Agreement,
(B) not waive any obligation of Empire Gas Corporation to pay its rent in
accordance with the provisions of the Empire Gas Lease, and (C) agree to
diligently enforce the obligation of Empire Gas Corporation to pay the
rent due under the Empire Gas Lease, and (iii) to exclude the aircraft
hanger; PROVIDED, HOWEVER, that in lieu of the amendment described in
clause (ii) above, the Company may enter into an assignment of lease with
the owner of the building pursuant to which the Empire Gas Lease is
assigned to the Company.
Section 5.3 ACCESS AND INFORMATION. During the period from the
date hereof until the Closing or termination of this Agreement, the
Company and the Selling Stockholders shall
<PAGE>
keep the three executive-level managers of NGC (which managers shall be
chosen by NGC, subject to the reasonable approval of Stephen R. Plaster)
reasonably informed with respect to the day-to-day operations of the
Company, shall work with NGC to plan the transition to ownership of the
Company by NGC and shall cause the Company Group to afford the three
executive-level managers of NGC identified above reasonable access during
normal business hours to the Company Group's books, records and other
documents and information contained at the Company's headquarters in
Lebanon, Missouri, an opportunity to observe the business operations of
the Company at its headquarters in Lebanon, Missouri, and to consult with
the senior management of the Company located at its headquarters in
Lebanon, Missouri with respect to such business operations. NGC and EEC
shall direct all reasonable requests to review such books, records and
other documents and information, and for such opportunity to observe and
consult, to Stephen R. Plaster or Larry A. Weis, who shall make the
arrangements therefor without unreasonable delay.
Section 5.4 CONFIDENTIALITY. Each party shall continue to abide
by the terms of the confidentiality agreement between NGC and the Company
dated June 21, 1996 (the "Confidentiality Agreement"), provided that the
existence of this Agreement and the pending transactions provided for
herein may be publicly disclosed in accordance with SECTION 5.10 of this
Agreement by any of the parties hereto.
Section 5.5 COMPANY STOCKHOLDER APPROVAL. Commencing immediately
following the date of this Agreement and proceeding with reasonable
diligence, the Company and the Selling Stockholders will take such action
as may be necessary in accordance with applicable law, including, if
necessary, calling a special meeting of the stockholders of the Company
to be held as soon as practicable, to obtain the requisite approvals of
this Agreement and the Merger by the stockholders of the Company. The
Stephen R. Plaster Trust agrees to attend, or be represented by proxy, at
such meeting of the stockholders of the Company, and to vote or cause the
voting of the shares of Common Stock owned by it at such meeting in favor
of granting such requisite approvals, or to execute and deliver written
consents in favor of granting such requisite approvals if action thereon
is taken by written consent of the stockholders in lieu of having such a
meeting.
Section 5.6 PRESERVATION OF BUSINESS. During the period from the
date of this Agreement until the Closing or termination of this
Agreement, the Company and the Selling Stockholders will use their
reasonable and diligent efforts to preserve the Company Group's
reputation and relationship with suppliers, customers, employees and
others having business relations with any of the Members.
Section 5.7 ACQUISITION PROPOSALS. Except as contemplated by
this Agreement, during the period from the date of this Agreement until
the Closing or termination of this Agreement, the Selling Stockholders
and the Company will not, and will cause the officers, directors,
employees and other agents of the Company Group not to, directly or
indirectly, negotiate, or agree to negotiate, with any person or entity
with respect to any proposal to purchase or acquire any equity securities
or (except in the ordinary course of business) assets of, or merge,
consolidate or otherwise combine with any Member.
<PAGE>
Section 5.8 FILINGS; OTHER ACTION. Subject to the terms and
conditions herein provided, as promptly as practicable, the Selling
Stockholders and the Company, as one party, and NGC and EEC, as the other
party, shall (a) promptly (in any event within five (5) business days
from the date of this Agreement) make (or cause their ultimate parent
entity to make) all filings and submissions under the HSR Act and all
filings and notifications required by applicable state law, each as
reasonably may be required to be made in connection with this Agreement
and the transactions contemplated hereby; (b) use all reasonable efforts
to cooperate with each other in (i) determining which filings and
notifications are required to be made prior to the Closing with, and
which consents, approvals, permits or authorizations are required to be
obtained prior to the Closing from, Government Entities in connection
with the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and (ii) timely making all such
filings and notifications and timely seeking all such consents,
approvals, permits or authorizations; and (c) use all reasonable efforts
to take, or cause to be taken, all other actions and do, or cause to be
done, all other things necessary or appropriate to consummate the
transactions contemplated by this Agreement as soon as practicable. In
connection with the foregoing, each such party will provide the other
with copies of correspondence, filings or communications (or memoranda
setting forth the substance thereof) between such party or any of its
representatives, on the one hand, and any Government Entity or members of
their respective staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby. Each such party
acknowledges that certain actions may be necessary with respect to the
foregoing in making notifications and obtaining clearances, consents,
approvals, waivers or similar third party actions that are material to
the consummation of the transactions contemplated hereby, and each such
party agrees to take such action as is necessary to complete such
notifications and obtain such clearances, consents, approvals, waivers or
third party actions, except where such consequences, event or occurrence
would have a material and adverse effect on such party.
Section 5.9 REASONABLE AND DILIGENT EFFORTS. The parties to this
Agreement agree to use their reasonable and diligent efforts in good
faith to satisfy the various conditions to Closing, and to consummate the
Merger as soon as practicable. None of the parties hereto will
intentionally take or intentionally permit to be taken any action that
would be in breach of the terms or provisions of this Agreement or that
would cause any of the statements of essential facts or representations
and warranties contained herein to be or become untrue.
Section 5.10 PUBLIC ANNOUNCEMENT. The Company and the Selling
Stockholders, as one party, and NGC and EEC, as the other party, agree
that they will not issue any press release or otherwise make any public
statement or respond to any press inquiry with respect to this Agreement
or the transactions contemplated hereby without the prior approval of the
other party (which approval will not be unreasonably withheld), except as
may be required by applicable law, provided that it is acknowledged that
NGC, or its parent Northwestern Public Service Company ("NWPS"), may make
an appropriate public announcement, as well as filings under (a) the
Securities Exchange Act of 1934, as amended, with the Securities and
<PAGE>
Exchange Commission and the New York Stock Exchange, and (b) the Federal
Power Act with the Federal Energy Regulatory Commission, with respect to
the entering into of this Agreement and the pendency of the transactions
provided for in this Agreement. Each party shall give the other party a
copy of any public statement issued or filing made in advance of the
issuance or filing of any such statement.
Section 5.11 OPTION HOLDERS. In the event that the Company is not
able to obtain amendments to the option agreements pursuant to which any
Options were issued that is referred to in SECTION 1.5(g) of this
Agreement, the parties hereto agree to restructure the transactions
provided for herein in a manner which is not adverse to the Selling
Stockholders, but which results in the elimination of any options to
purchase common stock in the Surviving Corporation (which may need to be
an entity other than the Company).
Section 5.12 EMPLOYMENT AGREEMENTS. The Company shall use
commercially reasonable efforts to obtain an amendment to the employment
agreements of each of the persons specified in SCHEDULE 5.12, executed by
such persons, containing such terms as are reasonably requested by the
three executive-level managers of NGC referred to in SECTION 5.3 of this
Agreement.
ARTICLE 6
ADDITIONAL AGREEMENTS
Section 6.1 EXCLUDED ASSETS. The parties hereto acknowledge that
the Excluded Assets listed on SCHEDULE 6.1 will be conveyed or otherwise
distributed to Stephen R. Plaster or his designee at or before Closing as
additional compensation to him in his capacity as an employee of the
Company, as provided in SECTION 5.1(c) of this Agreement.
Section 6.2 RIGHT TO HIRE CERTAIN EMPLOYEES. Notwithstanding
anything to the contrary in this Agreement or in any other agreement
executed in furtherance of the transactions contemplated by this
Agreement, Stephen R. Plaster or his designee shall have the right, at or
after Closing, to hire those employees of the Members who are listed on
SCHEDULE 6.2, provided that any such persons so hired shall remain
available to the Surviving Corporation and NGC through December 31, 1996,
at the request and cost of NGC and the Surviving Corporation, to the
extent necessary to effect a smooth transition to the management of the
Company Group by NGC.
Section 6.3 CERTAIN TAX MATTERS.
(a) TAX RETURNS AND PAYMENT OF TAXES FOR PERIODS THROUGH THE
CLOSING DATE. The Company prior to the Closing and NGC after the Closing
shall cause to be prepared and timely filed all Tax Returns with respect
to each Member for all Tax periods which include any period of time
ending on or before the Closing Date, and the Company prior to the
Closing, and the Surviving Corporation thereafter, shall cause to be paid
when due all Taxes in respect of such Tax periods. All Taxes payable by
any Member with respect to any Tax period or portion thereof ending on or
before the Closing Date shall have been reserved for on the books of
account of the Company Group as of the Closing Date on a basis consistent
<PAGE>
with the reserve therefor on the June 30, 1996 consolidated financial
statements of the Company Group included in the Company Group Financial
Statements, and, to the extent such reserves are inadequate to pay all
such Taxes, NGC and/or the Surviving Corporation shall be entitled to
indemnity as provided in ARTICLE 10 of this Agreement. The allocation of
Tax liabilities shall be determined as of the Closing Date in accordance
with GAAP based on the books of account and records of the Company Group
as maintained in accordance with the Company's historical accounting
practices.
(b) TAX AUDITS.
(i) NGC shall notify the Stockholders' Representative in
writing of any audit or examination by any Tax authority (a "Tax
Audit") or of a Tax assessment, which after the Closing is
threatened or becomes pending, for which the Selling Stockholders
may be liable to provide for indemnification under this Agreement
within thirty (30) days after NGC's receipt of notice of such
pending or threatened Tax Audit or Tax assessment, and prior to
NGC's initiation of any discussion with or response to such Tax
authority, NGC shall give the Selling Stockholders ten (10) days to
decide to take control of any Tax Audit or to initiate any claim for
refund, contest, resolve and defend against any assessment, notice
of deficiency or other adjustment or proposed adjustment relating to
any and all Taxes for any Tax period of any Member which covers in
whole or in part any period ending on or before the Closing Date,
and NGC shall not initiate any discussion with or response to the
Tax authority during such ten (10) day period; PROVIDED, HOWEVER,
that NGC shall not be required to give such notice, nor to permit
the Selling Stockholders to participate in the Tax Audit, if NGC
elects to forego any indemnification rights that it may have
hereunder with respect thereto. The Selling Stockholders shall have
the right, at their own expense, to control any Tax Audit, and to
initiate any claim for refund, contest, resolve and defend against
any assessment, notice of deficiency or other adjustment or proposed
adjustment relating to any and all Taxes for any Tax period of any
Member which covers in whole or in part any period ending on or
before the Closing Date; PROVIDED, HOWEVER, that the Selling
Stockholders shall not consent, without the prior written approval
of NGC, to any change in the treatment of any item which would in
any material respect affect the Tax liability of NGC or any Member
(including, always, the Surviving Corporation as a Member) for a Tax
period ending subsequent to the Closing Date. NGC shall have the
right to participate at its own cost in any such Tax Audit and may
elect, by giving written notice to the Selling Stockholders, to
waive NGC's right of indemnity under this Agreement with respect to
Taxes at issue in such Tax Audit and to assume control of such Tax
Audit, but any such written notice to be effective as a waiver of
NGC's right to indemnity hereunder shall specifically reference this
SECTION 6.3(b)(i) and shall in no event be inferred from any written
correspondence between NGC and the Selling Stockholders or the
Stockholders' Representative which contains no specific reference to
this SECTION 6.3(b)(i). The Selling Stockholders shall not enter
into any settlement with respect to a Tax Audit that provides for
payment of additional Taxes without NGC's consent.
<PAGE>
(ii) The parties hereto shall cooperate fully with each other
in connection with any Tax Audit, assessment, notice of deficiency,
or other adjustment or proposed adjustment relating to any and all
Taxes attributable to any Member with respect to any Tax period
which begins before and ends on or after the Closing Date. The
expenses with respect to such Tax Audit, claim for refund,
assessment, notice of deficiency, or other adjustment or proposed
adjustment shall be shared in accordance with the allocation of the
Tax liability at issue.
(c) MUTUAL COOPERATION. The parties hereto and the Stockholders'
Representative shall provide each other with such assistance as may
reasonably be requested by any of them in connection with the preparation
of any Tax Return, any Tax Audit or other examination by any Tax
authority, or any judicial or administrative proceedings relating to
liability for Taxes, and each will retain and provide the other with any
records or information that may be relevant to such Tax Return, Tax Audit
or examination proceedings or determination. Such assistance shall
include making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder and shall include providing copies of any relevant Tax Returns
and supporting work schedules. Without limiting in any way the foregoing
provisions of this SECTION 6.3(c), NGC hereby agrees to retain, or cause
the Surviving Corporation to retain, until the appropriate statutes of
limitation (including any extensions) expire, copies of all Tax Returns,
supporting work schedules and other records or information that may be
relevant to such Tax Returns of any Member for all Tax periods that
include in whole or in part the dates from July 1, 1991 to the Closing
Date, inclusive, and that it will not destroy or otherwise dispose of
such records without first providing the Selling Stockholders'
Representative with a reasonable opportunity to review and copy such
records.
Section 6.4 NGC GUARANTEE. NGC hereby unconditionally guarantees
the performance by EEC of its agreements in, and obligations under, this
Agreement.
Section 6.5 COMPANY HEADQUARTERS. NGC and EEC hereby agree that
Robert W. Plaster may occupy the premises at the headquarters of the
Company in Lebanon, Missouri until December 31, 1996, provided that the
Company may have reasonable access to the conference room within such
premises during such period.
Section 6.6 ROBERT W. PLASTER DEBT. NGC, EEC and the Company
hereby agree that, concurrently with the Closing, Robert W. Plaster shall
be paid the aggregate sum of $8,850,000 (plus accrued interest through
the Closing Date on the Subordinated Promissory Note of Empire
Acquisition Corporation dated August 1, 1996 to Robert W. Plaster), of
which $850,000 shall be paid by the Company, and the balance of which
shall be paid by NGC, in exchange for the assignment to the Surviving
Corporation without recourse of all of his right, title and interest in
and to the Company's claims against SYN Inc. and an assignment to NGC
without recourse of such Subordinated Promissory Note (which shall be
amended to increase the principal amount thereof to $8,000,000).
<PAGE>
Section 6.7 PAYMENT OF FEES. The Company shall pay all amounts
due as of the Closing as specified on SCHEDULE 4.19, or shall accrue the
same prior to Closing and pay the same after Closing upon receipt of
invoices therefor.
ARTICLE 7
CONDITIONS TO BE SATISFIED FOR THE BENEFIT OF
NGC AND EEC IN CONNECTION WITH CLOSING
The following conditions shall be satisfied for the benefit of NGC
and EEC in connection with the consummation of the Merger. To the extent
any condition specified in SECTION 7.1, 7.3, 7.4, 7.7 OR 7.11 is not
satisfied within ten (10) days after the Closing, NGC and EEC shall be
entitled to assert a claim for actual damages pursuant to SECTION 10.4.
Section 7.1 PERFORMANCE OF AGREEMENTS. The Company and the
Selling Stockholders shall have performed or observed in all material
respects all agreements herein required to be performed or observed by it
and them prior to the Closing.
Section 7.2 HSR ACT WAITING PERIOD. All applicable waiting
periods under the HSR Act for the Merger shall have expired or been
terminated.
Section 7.3 CERTIFICATION AS TO STOCKHOLDERS. NGC and EEC shall
have received a certificate, signed by the corporate secretary or
assistant corporate secretary of the Company, certifying the names,
addresses and holdings of shares of Company Common Stock of each holder
of record as of the time of the Closing, and identifying those who are
holders of Dissenting Shares and the number of Dissenting Shares held by
each such holder; and the Dissenting Shares so certified shall not exceed
in the aggregate 30% of the outstanding shares of Company Common Stock.
Section 7.4 CLOSING CERTIFICATE. NGC and EEC shall have received
a certificate, signed by the Selling Stockholders and an executive
officer of the Company and dated as of the Closing Date, certifying in
such detail as NGC may reasonably request as to the fulfillment of the
requirements in SECTIONS 7.1 AND 7.2 of this Agreement.
Section 7.5 STOCKHOLDERS' APPROVAL. This Agreement and the
Merger provided for herein shall have been approved and adopted by the
requisite vote of the stockholders of the Company in accordance with the
TBCA and the articles of incorporation and bylaws of the Company, and NGC
and EEC shall have received a certificate, signed by the corporate
secretary or an assistant corporate secretary of the Company, dated as of
the Closing Date, certifying in such detail as NGC may reasonably request
to the fulfillment of the requirements in the preceding portion of this
SECTION 7.5.
Section 7.6 PROCEEDINGS. No injunction or restraining order
shall have been issued by any Government Entity restraining, prohibiting
or invalidating the Merger.
<PAGE>
Section 7.7 OPINION OF COUNSEL. NGC and EEC shall have received
the opinion of Wilmer, Cutler & Pickering, counsel for the Stephen R.
Plaster Trust and Larry A. Weis in this matter, in form and substance
reasonably satisfactory to NGC and EEC.
Section 7.8 [NOT USED]. [Intentionally omitted]
Section 7.9 ESCROW AGREEMENT. NGC and EEC shall have received
delivery of an escrow agreement (the "Escrow Agreement") in substantially
the form of EXHIBIT 7.9 hereto containing the terms by which the proceeds
of the Escrow Note will be held and distributed, executed by each of the
Selling Stockholders and the escrow agent identified therein (the "Escrow
Agent").
Section 7.10 STANDSTILL AGREEMENTS. NGC and EEC shall have
received delivery of a standstill agreement from each Selling Stockholder
and each Option holder who shall acquire or be entitled to acquire, upon
exercise of the Warrants, 2% or more of the outstanding NWPS Common Stock
(based on the number of shares outstanding as of the date of this
Agreement), in substantially the form of EXHIBIT 7.10 hereto.
Section 7.11 CERTAIN DOCUMENTS. The Company shall have delivered
to NGC and EEC copies of the following documents:
(a) Articles of incorporation, and all amendments thereto, of the
Company, certified by the Secretary of State of the State of Tennessee as
of a date no more than ten (10) days before the Closing Date;
(b) Bylaws, and all amendments thereto, of the Company, certified
by the corporate secretary or assistant corporate secretary of the
Company to be a true and complete copy, dated as of the Closing Date; and
(c) Good standing certificates for each Member from its state of
incorporation and from each state in which qualification and good
standing are stated to exist in SECTION 4.1 of this Agreement, dated as
of a date no more than ten (10) days before the Closing Date.
ARTICLE 8
CONDITIONS TO BE SATISFIED FOR THE BENEFIT OF
THE COMPANY AND THE SELLING STOCKHOLDERS IN CONNECTION WITH CLOSING
The following conditions shall be satisfied for the benefit of the
Company and the Selling Stockholders in connection with the consummation
of the Merger. To the extent any condition specified in SECTION 8.1,
8.3, 8.6 OR 8.9 is not satisfied within ten (10) days after the Closing,
the Selling Stockholders shall be entitled to assert a claim for actual
damages pursuant to SECTION 10.4.
Section 8.1 PERFORMANCE OF AGREEMENTS. NGC and EEC shall have
performed or observed in all respects all agreements herein required to
be performed or observed by either or both of them prior to the Closing.
<PAGE>
Section 8.2 HSR ACT WAITING PERIOD. All applicable waiting
periods under the HSR Act for the Merger shall have expired or been
terminated.
Section 8.3 CLOSING CERTIFICATE. The Company and the Selling
Stockholders shall have received a certificate, signed by an executive
officer of NGC and of EEC and dated as of the Closing Date, certifying in
such detail as the Company and the Selling Stockholders may reasonably
request, as to the fulfillment of the requirements in SECTIONS 8.1 AND
8.2 of this Agreement.
Section 8.4 STOCKHOLDERS' APPROVAL. This Agreement and the
Merger provided for herein shall have been approved and adopted by the
requisite vote of the stockholders of the Company in accordance with the
TBCA and the articles of incorporation and bylaws of the Company.
Section 8.5 PROCEEDINGS. No injunction or restraining order
shall have been issued by any Government Entity restraining, prohibiting
or invalidating the Merger.
Section 8.6 OPINION OF COUNSEL. The Company and the Selling
Stockholders shall have received the opinion of Schiff Hardin & Waite,
counsel for NGC and EEC in this matter, in form and substance reasonably
satisfactory to the Company and the Selling Stockholders.
Section 8.7 ESCROW AGREEMENT. The Company and the Selling
Stockholders shall have received delivery of the Escrow Agreement,
executed by NGC, EEC and the Escrow Agent, and the Escrow Agent shall
have received the Escrow Note, executed and delivered by the Company and
guaranteed by NGC.
Section 8.8 WARRANTS. Each of the Selling Stockholders and
Option holders shall have received delivery of a Warrant Exchange
Agreement in substantially the form of EXHIBIT 8.8(A) hereto, executed by
NWPS, in which NWPS agrees to issue warrants (the "Warrants") to
purchase, in the aggregate, 725,000 shares of common stock, par value
$3.50 per share, of NWPS (the "NWPS Common Stock"), in substantially the
form of EXHIBIT 8.8(B) hereto. The Selling Stockholders agree that the
NWPS obligation to issue such Warrants shall be contingent upon the
issuance by the Federal Energy Regulation Commission of a final order,
granting NWPS all necessary authority under the Federal Power Act to
issue the Warrants and the NWPS Common Stock issuable upon exercise of
the Warrants. NGC shall cause NWPS to file within thirty (30) days after
the date of this Agreement all documents necessary to obtain such an
order. NGC agrees that in the event that such approval is not obtained
within ninety (90) days after the Closing Date, NGC shall provide the
Selling Stockholders and the Option holders with a phantom stock right or
cash in accordance with the terms set forth on SCHEDULE 8.8.
Section 8.9 CERTAIN DOCUMENTS. NGC and EEC shall have delivered
to the Company copies of the following documents:
<PAGE>
(a) Articles of incorporation, and all amendments thereto, of NGC
and EEC, in each case certified by the Secretary of State of the State of
South Dakota (in the case of articles of incorporation for NGC) and of
the State of Tennessee (in the case of articles of incorporation of EEC),
as of a date no more than ten (10) days before the Closing Date;
(b) Bylaws, and all amendments thereto, of NGC, certified by the
corporate secretary or an assistant secretary of NGC to be a true and
complete copy, dated as of the Closing Date, and bylaws, and all
amendments thereto, of EEC, certified by the corporate secretary or an
assistant secretary of EEC to be a true and complete copy, dated as of
the Closing Date; and
(c) Good standing certificates for NGC and EEC from their
respective states of incorporation, dated as of a date no more than ten
(10) days before the Closing Date.
ARTICLE 9
TERMINATION
Section 9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Closing by written agreement of the parties hereto.
Section 9.2 TERMINATION DATE. This Agreement may be terminated
and the Merger may be abandoned by NGC and EEC, on the one side, or the
Company and the Selling Stockholders, on the other side, by written
notice to the parties after 12:01 p.m. Eastern time on October 31, 1996
if the Closing shall not have occurred by that time, except that if the
Closing shall not have occurred due to a second request by either the
Federal Trade Commission or the U.S. Department of Justice with respect
to any filings or submissions under the HSR Act, the aforementioned date
shall be extended until December 15, 1996, and except that a side which
has a party that has materially breached this Agreement shall have no
right to terminate pursuant to this SECTION 9.2 while such breach
continues.
Section 9.3 TERMINATION UPON ORDER OF GOVERNMENT ENTITY. This
Agreement may be terminated and the Merger may be abandoned by NGC and
EEC, on the one side, or the Company and the Selling Stockholders, on the
other side, if a Government Entity has issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action has become final and nonappealable;
PROVIDED, HOWEVER, that the side seeking to terminate this Agreement
pursuant to this SECTION 9.3 shall have used all reasonable efforts to
remove such injunction or other prohibition.
Section 9.4 EFFECT OF TERMINATION. To terminate this Agreement
and abandon the Merger pursuant to this ARTICLE 9, the terminating
parties shall give written notice to the other parties to this Agreement,
and thereupon this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by any of
<PAGE>
the parties hereto. If this Agreement is terminated as provided herein:
(a) within two (2) business days of the effective date of termination,
NGC shall reimburse the Company with respect to the amendment fee payable
by the Company to The First National Bank of Boston pursuant to the
letter agreement referred to in Section 5.1.2(b) of Amendment No. 1 to
the Credit Agreement (i) for 100% of such amendment fee if this Agreement
is terminated (A) as a result of the failure of the applicable waiting
periods under the HSR Act for the Merger to have expired or been
terminated, or (B) solely as a result of a breach of this Agreement by
NGC or EEC; (ii) for 0% of such amendment fee if this Agreement is
terminated solely as a result of a breach of this Agreement by the
Selling Stockholders or any Member; or (iii) for 50% of such amendment
fee if this Agreement is terminated for any other reason (except that, if
this Agreement is terminated as a result of a breach by both (A) NGC
and/or EEC, and (B) the Company and/or the Selling Stockholders, the
responsibility for payment of such amendment fee shall be allocated
according to the relative fault of the parties); and (b) there shall be
no other liability or obligation on the part of any party hereto or any
of its officers, directors or representatives to any other party hereto
on account thereof, and all obligations of the parties hereto shall
terminate, except for the obligations of the parties pursuant to (i)
SECTION 12.6, or (ii) the Confidentiality Agreement; PROVIDED, HOWEVER,
that a party who has breached this Agreement shall be liable for damages
occasioned by such breach including without limitation any expenses
incurred by the other parties hereto in connection with this Agreement
and the transactions contemplated hereby, to the extent permitted by Law;
and (c) all filings, applications and other submissions for the
transactions contemplated by this Agreement shall, to the extent
practicable, be withdrawn from the agency or other party with which made.
ARTICLE 10
REMEDIES; INDEMNIFICATION; ARBITRATION
Section 10.1 REMEDIES ALLOWED BY LAW. Except as provided in
SECTION 10.2 of this Agreement, and subject to the provisions for
arbitration in SECTION 10.4 of this Agreement, each party to this
Agreement shall be entitled to such remedies as are provided by
applicable law in the case of any breach of this Agreement by any other
party hereto, whether involving a breach of any agreement herein to be
performed or observed by the breaching party or a breach of any
representation and warranty made by the breaching party in the second
sentence of ARTICLE 3 or ARTICLE 4, as the case may be, of this
Agreement.
Section 10.2 INDEMNIFICATION; ESCROW CLAIMS. The Selling
Stockholders jointly and severally agree to defend, indemnify and hold
harmless NGC, EEC and, after the Effective Time, the Surviving
Corporation and its subsidiaries, and their respective successors in
interest (collectively, the "NGC Indemnitees"), from and against any and
all loss, liability and reasonable expense (including, but not limited
to, reasonable costs of investigation and defense) arising from or in
connection with the statements of essential facts in ARTICLE 4 of this
Agreement being incorrect. The foregoing indemnity is subject to the
following:
(a) "Reimbursable Amount" means damages resulting to any NGC
Indemnitee on account of any statement of essential facts in ARTICLE 4 of
this Agreement being incorrect, of which NGC gives written notice of its
<PAGE>
claim for such damages as soon as practicable (a "Claim") to the Escrow
Agent and the Stockholders' Representative, on or before the Claim
Expiration Date, specifying the dollar amount of damages claimed, or the
formula for determining such amount when the dollar amount cannot be
accurately stated, the Section or Sections of this Agreement wherein the
incorrect statement or statements of essential facts appear on which the
Claim is based, the general nature of the error in each such statement,
and the manner by which the dollar amount of the damages specified in the
notice was calculated for each incorrect statement, subject to the
following:
(i) For purposes of determining whether a Claim may be made
under this SECTION 10.2 based on an incorrect statement being made
in SECTION 4.11(a) of this Agreement, the following provisions shall
apply:
(A) No Claim shall be made with respect to a particular
tank because such tank was not at the location identified in
SCHEDULE 4.11(a) in the event such tank was located at a
different branch or customer location as of the date of this
Agreement;
(B) No Claim shall be made with respect to a particular
tank if the Selling Stockholders can identify a tank of like
size that was owned by one of the Members as of the date of
this Agreement but was not identified in SCHEDULE 4.11(a);
(C) No Claim shall be made with respect to a particular
tank if the Selling Stockholders can identify one or more tanks
of a different size that were owned by the Members as of the
date of this Agreement but were not identified in SCHEDULE
4.11(a) if the value of the tank(s) that were not identified
equals or exceeds the value of the tank with respect to which
such Claim would have been made; and
(D) Missing tanks shall be valued for purposes of
calculating Claims by reference to the American Tank and
Welding new tank prices for such types and sizes of tanks,
except that if the company is able to acquire tanks of the same
types, sizes and quality (from a source identified to the
Company by the Selling Stockholders) at a cost of that is less
than such new tank cost plus shipping costs, then the amount of
the Claim will be determined by reference to such cheaper cost.
(ii) For purposes of determining the Reimbursable Amount of
any Claim made under this SECTION 10.2 based on an incorrect
statement being made in SECTION 4.9 of this Agreement, the Selling
Stockholders shall be entitled to a credit for any tax refund in
excess of those reflected on the Company Financial Statements or any
excess balance sheet reserves for taxes (E.G., an amount reserved to
pay sales tax in Missouri that is more than the actual tax due may
be credited against sales tax that is due in Alabama in excess of
the amount reserved for Tennessee).
<PAGE>
(iii) For purposes of determining whether a Claim may be
made under this SECTION 10.2 based on an incorrect statement being
made in SECTION 4.13 of this Agreement, the following provisions
shall apply:
(A) No Claim shall be made with respect to any individual
parcel of Real Property until the aggregate of the Reimbursable
Amounts attributable to such incorrect statement (together with
any other incorrect statement made in SECTION 4.13 with respect
to the same parcel of Real Property) exceeds $10,000, and only
Reimbursable Amounts in excess of the first $10,000 may become
Allowed Reimbursable Amounts;
(B) No Claim shall be made with respect to any amount
that was not actually incurred by the NGC Indemnitee in order
to comply with Environmental Laws;
(C) No Claim shall be made with respect to any costs of
investigating, containing, removing or remediating Hazardous
Materials if the Claim arises from the voluntary actions of any
NGC Indemnitee that are not in accordance with the ordinary
course of business of the Company prior to the Merger;
(D) The NGC Indemnitees agree to seek reimbursement from
any state or federal agency with funds available therefor for
the costs of investigating, containing, removing or remediating
Hazardous Materials that would otherwise be the subject of a
Claim pursuant to this SECTION 10.2, in each case to the extent
reasonably practicable; and
(E) The NGC Indemnitees' sole and exclusive remedy with
respect to any and all Claims relating to liability under the
Environmental Laws shall be pursuant to this SECTION 10.2 and,
accordingly, the NGC Indemnitees hereby waive, to the fullest
extent permitted under applicable law, any and all rights,
claims and causes of action that they may have against the
Selling Stockholders under any Environmental Law.
(b) For purposes of determining under this SECTION 10.2 whether any
statement of essential facts in ARTICLE 4 of this Agreement is incorrect,
such determination shall be made by considering each of such statements
as if the phrase "to the Knowledge of the Selling Stockholders" in the
second sentence of ARTICLE 4 was not included therein.
(c) The term "Claim Expiration Date" means September 30, 1997.
(d) If NGC and the Stockholders' Representative (the "Contesting
Parties") agree upon the Reimbursable Amount under any Claim prior to the
maturity date of the Escrow Note, they shall jointly give written
direction to the Escrow Agent to reduce the Escrow Note by the amount of
the Reimbursable Amount in accordance with the provisions of the Escrow
Agreement; PROVIDED, HOWEVER, that no reduction of the Escrow Note shall
be made until the total of all Reimbursable Amounts agreed to by the
Contesting Parties or awarded by the arbitrators pursuant to SECTION 10.4
<PAGE>
(collectively, the "Allowed Reimbursable Amounts") exceeds the Threshold
Amount. On the maturity date of the Escrow Note, the principal amount of
the Escrow Note and all accrued and unpaid interest thereon, net of any
reduction provided for in the preceding sentence, shall be paid to the
Escrow Agent. If the Contesting Parties agree upon the Reimbursable
Amount under any Claim after the maturity date of the Escrow Note, they
shall jointly give written direction to the Escrow Agent to disburse from
the Escrow Amount to the NGC Indemnitees in accordance with the terms of
the Escrow Agreement any amount equal to such Reimbursable Amount;
PROVIDED, HOWEVER, that no disbursement shall be made to the NGC
Indemnitees under the Escrow Agreement until the total of all Allowed
Reimbursable Amounts exceeds the Threshold Amount. As used herein, the
term "Threshold Amount" means $500,000 (except in the case of Allowed
Reimbursable Amounts relating to either SECTION 4.9 or SECTION 4.13,
which amounts shall not be included in determining whether the aggregate
of Allowed Reimbursable Amounts exceeds $500,000 and where, in each case,
the Allowed Reimbursable Amount need only exceed zero). Once the total
of all Allowed Reimbursable Amounts exceeds the Threshold Amount,
reduction of the Escrow Note or disbursement from the Escrow Amount, as
applicable shall be made (including the amount within such threshold), up
to the total amount of the Escrow Note or the total amount of the Escrow
Amount then held by the Escrow Agent.
(e) If NGC shall give written notice of a Claim in accordance with
SECTION 10.2(a) of this Agreement and the Contesting Parties (regardless
of the reason) have not reached agreement as to the Reimbursable Amount
and given a joint written direction to the Escrow Agent in accordance
with SECTION 10.2(d) with respect thereto within thirty (30) days after
the date on which such notice is given by NGC (such date to be determined
in accordance with SECTION 12.9 of this Agreement), any of the Contesting
Parties may submit the Claim to arbitration under SECTION 10.4 of this
Agreement and, in the absence of an agreement by the Contesting Parties
and a joint written direction by them to the Escrow Agent with respect
thereto prior to the completion of such arbitration, the arbitral award
issued with respect to such Claim, when a copy thereof is filed with the
Escrow Agent, shall govern the reduction of the Escrow Note or
disbursement of the Escrow Amount on account of such Claim.
(f) Recovery of Claims from the Escrow Note or the Escrow Amount
pursuant to this SECTION 10.2 shall be the exclusive remedy after the
date of this Agreement for any statement of essential facts in ARTICLE 4
of this Agreement being incorrect as of the date of this Agreement or as
of the Closing Date, unless the Selling Stockholders had Knowledge on the
date of this Agreement that such statement was incorrect.
(g) The ability to recover from the Escrow Note or the Escrow
Amount for a Claim, the Reimbursable Amount receivable under any such
Claim and the time when such a Claim may be asserted shall not be reduced
or otherwise affected by any investigation made at any time by or on
behalf of NGC or EEC.
Section 10.3 THIRD-PARTY CLAIMS.
(a) To the extent a Claim for a Reimbursable Amount relates to a
claim asserted by a person or entity not a party to this Agreement (a
<PAGE>
"Third-Party Claim") and NGC gives notice of the assertion of such Claim
in accordance with the provisions of SECTION 10.2(a) of this Agreement to
the Escrow Agent and the Stockholders' Representative, then the
Stockholders' Representative shall have the option, exercisable by giving
notice to NGC within twenty (20) days after delivery of such notice by
NGC, to control the defense of such Third-Party Claim. All expenses
(including, without limitation, attorneys' fees) incurred by the
Stockholders' Representative in connection with its assumption of control
of the defense of a Third-Party Claim shall be paid by the Stockholders'
Representative. So long as the Stockholders' Representative has not
assumed the defense of a Third-Party Claim, then NGC shall have the right
to control the defense of the Third-Party Claim.
(b) The party with control of the defense may use counsel selected
by it, but if the other party reasonably objects (within twenty (20) days
after designation of the selected counsel, of which notice shall be
promptly given to NGC or the Stockholders' Representative, as the case
may be) on account of such counsel's representation or potential
representation of the designating party in matters in which NGC's and the
Stockholders' Representative's interests are adverse or potentially
adverse, the designating party shall select other counsel free of any
such adverse representation. The party with control of the defense shall
have the right, in its discretion exercised in good faith and upon the
advice of counsel, to settle such matter, either before or after the
initiation of litigation, at such time and upon such terms as it deems
fair and reasonable, provided that at least ten (10) days' prior notice
shall be given to the other party of the intention to settle the
Third-Party Claim, and provided further that the controlling party shall
not agree to any settlement of such Third-Party Claim without the prior
written consent of the other party, which consent shall not be
unreasonably withheld. The non-controlling party will have the right to
be represented by counsel, solely at its own expense. The controlling
party shall keep the other party advised of the status of the Third-Party
Claim and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto.
(c) In the event of a Third-Party Claim, the parties hereto, and
their directors, officers, employees and agents, shall cooperate fully
with the other parties in the defense of such action, including, without
limitation, revealing all information pertinent thereto which is within
their control and by testifying for and on behalf of the defending party.
(d) Unless otherwise agreed by the parties, any arbitration
proceeding under SECTION 10.4 of this Agreement of a Claim for a
Reimbursable Amount with respect to a Third-Party Claim shall be held in
abeyance until the resolution of the Third-Party Claim in order to
facilitate a determination as to the final amount of the Claim.
Section 10.4 ARBITRATION.
(a) Any dispute, controversy or claim arising out of or relating to
this Agreement or its breach, interpretation, termination or validity,
including any question whether a matter is subject to arbitration
hereunder, is referred to herein as a "Dispute."
<PAGE>
(b) If the parties fail to settle any Dispute within thirty (30)
days after any party has given notice to the other parties hereto of the
claimed existence of a Dispute, the Dispute shall be resolved by a
confidential, binding arbitration. All such Disputes shall be arbitrated
in St. Louis, Missouri pursuant to the arbitration rules and procedures
of J.A.M.S. Endispute before a panel of three arbitrators (one picked by
NGC, one picked by the Stockholders' Representative and one picked by the
first two arbitrators).
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction, and each party hereto consents
and submits to the jurisdiction of such court for purposes of such
action. The statute of limitations, estoppel, waiver, laches and similar
doctrines, which would otherwise be applicable in any action brought by a
party, shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the
commencement of an action for those purposes. The Federal Arbitration
Act shall apply to the construction, interpretation and enforcement of
this arbitration provision. Each party shall bear its own expenses
(including without limitation the fees and expenses of legal counsel and
accountants) in connection with such arbitration and NGC and the
Stockholders' Agent shall each bear one-half of the arbitrators' fees and
expenses, provided that the arbitral award shall allocate such fees and
expenses of counsel, accountants, other advisors and the arbitrators
according to the relative success of the Contesting Parties in the
arbitration, as determined by the arbitrators. The arbitrators shall
award an amount equal to the actual monetary damages suffered by each
Contesting Party, which may include interest costs incurred by such party
and, in the case of the Surviving Corporation, actual reductions in
retail earnings before interest, taxes, depreciation and amortization for
the period in which they occur, but the arbitrators shall not have the
authority to award punitive damages.
Section 10.5 ACCESS. In the event that a claim is made against
the Selling Stockholders pursuant to this ARTICLE 10, the Company shall
afford the Stockholders' Representative and the Selling Stockholders with
reasonable access to the books and records of the Company Group
reasonably necessary to assist the Selling Stockholders in reviewing the
details of and, if necessary, of defending, such claim.
ARTICLE 11
DEFINITIONS
Section 11.1 DEFINITIONS. The following indicates the location in
this Agreement of other terms defined herein:
DEFINED TERM LOCATION
Action Sec. 3.5
Agreement Introduction
Allowed Reimbursable Amounts Sec. 10.2(d)
BKD Sec. 4.11(a)
Cash Component Sec. 1.7(b)
Claim Sec. 10.2(a)
<PAGE>
Claim Expiration Date Sec. 10.2(c)
Closing Sec. 2.1
Closing Date Sec. 2.1
Code Sec. 4.16(a)
Company Introduction
Company Common Stock Sec. 1.5, Sec. 4.3(a)
Company Group Recitals
Company Group Financial Statements Sec. 4.17
Company Material Adverse Effect Sec. 4.6
Company Plans Sec. 4.16(a)
Confidentiality Agreement Sec. 5.4
Consent Sec. 3.3
Contesting Parties Sec. 10.2(d)
Credit Agreement Sec. 4.7
Dispute Sec. 10.4(a)
Dissenting Shares Sec. 1.6
EEC Introduction
EEC Stock Sec. 1.5
Effective Time Sec. 1.1(b)
Empire Gas Contracts Sec. 4.24
Empire Gas Lease Sec. 5.2(b)
Employee pension benefit plan Sec. 4.16(b)(vii)
Encumbrances Sec. 4.10(a)
Environmental Claim Sec. 4.13(d)(i)
Environmental Law Sec. 4.13(a)
Environmental Permits Sec. 4.13(c)(i)
ERISA Sec. 4.16(a)
Escrow Agent Sec. 7.9
Escrow Agreement Sec. 7.9
Escrow Amount Sec. 1.5(h)
Escrow Distribution Component Sec. 1.7(c)
Escrow Note Sec. 2.4
Excluded Assets Sec. 5.1(c)
Federal Power Act Sec. 3.3
GAAP Sec. 4.17
Government Entity Sec. 3.3
Hazardous Materials Sec. 4.13(a)
HSR Act Sec. 3.3
Improvements Sec. 4.10(c)
Intellectual Property Sec. 4.23
Knowledge Sec. 12.8
Laws Sec. 4.12
Leased Real Property Sec. 4.10(b)
Lien Sec. 4.3(a)
Material Contracts Sec. 4.24
Member Sec. 4.1
Merger Sec. 1.1(a)
Merger Price Sec. 1.7(a)
Merger Price Components Sec. 1.7(a)
Multiemployer Plan Sec. 4.16(c)
NGC Introduction
NGC Indemnitees Sec. 10.2
NWPS Sec. 5.10
NWPS Common Stock Sec. 8.8
Options Sec. 4.3(b)
<PAGE>
Owned Real Property Sec. 4.10(a)
PBGC Sec. 4.16(g)
Pro Rata Share (Cash) Sec. 1.5(h)
Pro Rata Share (Escrow) Sec. 1.5(h)
Qualified Plan Sec. 4.16(a)
Real Property Sec. 4.10(b)
Reimbursable Amount Sec. 10.2(a)
Related Parties Sec. 4.28
Release Sec. 4.13(f)
Selling Stockholders Introduction
Stockholders' Representative Sec. 1.5(h)
Subsidiaries Recitals
Surviving Corporation Sec. 1.1(a)
Surviving Corporation Common Stock Sec. 1.5(a)
Tax Audit Sec. 6.3(b)(i)
Tax Returns Sec. 4.9(b)(i)
Taxes Sec. 4.9(a)
TBCA Sec. 1.1(b)
Third-Party Claim Sec. 10.3(a)
Threshold Amount Sec. 10.2(d)
Title IV Plan Sec. 4.16(b)(i)
Warrants Sec. 8.8
Section 11.2 CONSTRUCTION. In this Agreement:
(a) Words importing the singular include the plural and vice versa;
(b) Words importing a gender include any gender;
(c) Any reference to a part, clause, party, section, paragraph,
article, annex, appendix, exhibit, schedule or other attachment is a
reference to a part, clause, party, section, paragraph, article, annex,
appendix, exhibit, schedule or other attachment to this Agreement unless,
in any such case, the context requires otherwise;
(d) A reference to any statute, regulation, ordinance or law
includes all statutes, regulations, ordinances or laws varying or
consolidating the same from time to time, and a reference to a statute
includes all regulations, rules and ordinances issued or otherwise
applicable under that statute;
(e) A reference to a particular section, paragraph or other part of
a particular statute shall be deemed to be a reference to any other
section, paragraph or other part substituted therefor from time to time;
(f) A reference to any person includes such person's successors and
permitted assigns;
(g) Words such as "hereunder," "hereto," "hereof" and "herein" and
other words of similar import shall, unless the context requires
otherwise, refer to this Agreement as a whole and not to any particular
article, section, subsection, paragraph or clause hereof; and
<PAGE>
(h) References to "including" shall mean including without
limitation and without limiting the generality of any description
preceding such term.
ARTICLE 12
GENERAL PROVISIONS
Section 12.1 AMENDMENT. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties
hereto.
Section 12.2 BOOKS AND RECORDS. The parties hereto agree that, so
long as any books, records and files relating to the business,
properties, assets or operations of the Company Group, to the extent that
they pertain to any period of time on or prior to the Closing Date,
remain in existence and are available, the party having possession
thereof shall make the same available for inspection and copying by any
party hereto or its authorized representative at any time during business
hours for the purpose of complying with regulatory requirements, meeting
auditing needs, defending claims or fulfilling similar obligations for
which such books, records or files are reasonably necessary.
Section 12.3 COUNTERPARTY EFFECTIVENESS. This Agreement may be
executed in two or more counterparts, each of which shall be deemed to be
an original but all of which shall constitute one and the same agreement.
Section 12.4 DESCRIPTIVE HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 12.5 ENTIRE AGREEMENT; NO ASSIGNMENT. This Agreement
(including the Exhibits, Schedules and other documents and instruments
referred to herein) (a) constitutes the entire agreement and supersedes
all other prior agreements and understandings (other than those contained
in the Confidentiality Agreement), both written and oral, among the
parties or any of them, with respect to the subject matter hereof,
including, without limitation, the transactions provided for herein, and
(b) shall not be assigned by any party hereto by operation of law or
otherwise without the prior written consent of the other parties hereto.
Section 12.6 EXPENSES. To the extent set forth on SCHEDULE 4.19,
NGC and EEC shall pay and be responsible for all costs and expenses that
the Selling Stockholders, the Company and each Member have incurred or
will incur (in each case to the extent paid or accrued as of the Closing
Date) in connection with this Agreement and the transactions contemplated
herein. NGC and EEC shall pay and be responsible for all costs and
expenses they have incurred or will incur in connection with this
Agreement and the transactions contemplated herein.
Section 12.7 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Tennessee
without giving effect to the provisions thereof relating to conflicts of
law.
<PAGE>
Section 12.8 DEFINITION OF KNOWLEDGE. For purposes of this
Agreement, the term "Knowledge" of the Selling Stockholders means (a) the
actual knowledge of Stephen R. Plaster, Robert W. Wooldridge, Earl L. Noe
or Larry A. Weis, or (b) the actual knowledge of Robert W. Plaster
through August 8, 1996.
Section 12.9 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given (a) in the case
of a facsimile transmission, when received by recipient in legible form
and sender has received an electronic confirmation of receipt of the
transmissions; (b) in the case of delivery by a standard overnight
carrier, upon the date of delivery indicated in the records of such
carrier; (c) in the case of delivery by hand, when delivered by hand; or
(d) in the case of delivery by mail, upon the expiration date of five (5)
business days after the day when mailed by first class registered or
certified mail (postage prepaid, return receipt requested), or such
earlier date as delivery is made by the postal service according to its
records, addressed to the respective parties at the following addresses
(or such other address for a party as shall be specified by like notice):
(i) If to NGC or EEC or, after the
Effective Time, the Surviving
Corporation, to or c/o, as the case may be:
Northwestern Growth Corporation
33 Third Street S.E.
P. O. Box 1318
Huron, South Dakota 57350-1318
Telephone: (605) 353-8200
Facsimile: (605) 353-8286
Attention: Richard R. Hylland, President
with a copy to:
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606-6473
Telephone: (312) 876-1000
Facsimile: (312) 258-5600
Attention: Linda Jeffries Wight
(ii) If to the Company or to the Selling
Stockholders, in each case prior to
the Effective Time, to or c/o, as the case may be:
Empire Energy Corporation
1700 South Jefferson
Lebanon, Missouri 65536
Telephone: (417) 532-3101
Facsimile: (417) 532-8872
Attention: Stephen R. Plaster, President
<PAGE>
with a copy to:
Wilmer, Cutler and Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Telephone: (202) 663-6000
Facsimile: (202) 663-6363
Attention: Duane D. Morse, Esq.
Section 12.10 SEVERABILITY; NO THIRD PARTY BENEFICIARIES. If any
provision of this Agreement, or the application thereof to any person or
circumstance is held invalid or unenforceable, the remainder of this
Agreement, and the application of such provision to other persons or
circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable. Nothing in this
Agreement, expressed or implied, is intended to confer upon any person
not a party to this Agreement any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 12.11 WAIVER. At any time prior to the consummation of the
Merger, the parties hereto may (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b)
waive any inaccuracies in the essential statements of facts and/or
representations and warranties contained herein or in any document
delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
IN WITNESS WHEREOF, each of parties hereto has executed, or caused
this Agreement to be executed on its behalf by its duly authorized
representative, all as of the date first above written.
NORTHWESTERN GROWTH EMPIRE ENERGY CORPORATION
CORPORATION
By:_________________________ By:___________________________
Name: Name:
Title: Title:
SELLING STOCKHOLDERS:
EEC CO.
Stephen R. Plaster Trust
By:__________________________ By:___________________________
Name: Daniel K. Newell Dolly F. Plaster, Trustee
Title: Vice President
<PAGE>
_________________________
Robert W. Wooldridge
_________________________
Earl L. Noe
_________________________
Luther Gill
_________________________
Larry A. Weis
_________________________
Floyd J. Waterman
_________________________
Charles Jones
_________________________
Paul E. Stahlman
_________________________
Tom Flak
<PAGE>
SCHEDULE 8.8
Description of Alternative to Warrants
As provided in Section 8.8 of the Merger Agreement, in the event
that NWPS is unable to obtain the necessary authority under the Federal
Power Act to issue the Warrants and the NWPS Common Stock issuable upon
exercise of the Warrants, NGC will provide the Selling Stockholders and
the Option holders with a phantom stock plan that will provide the
Selling Stockholders and the Option holders (upon exercise) with a cash
payment equal to the net amount that would have been realized by a
Warrantholder upon cash exercise of the Warrants and immediate resale of
the NWPS Common Stock subject thereto. As an example, if the Exercise
Price for the Warrants (had they been issued) would have been $40.00, and
the NWPS Common Stock is trading at $50.00 on the date on which the
Selling Stockholder or the Option holder elects to be cashed out (which
date must fall during what would have been the Exercise Period had the
Warrants been issued), the Selling Stockholder or the Option holder would
be entitled to a cash payment from NGC equal to $10.00 per share of the
NWPS Common Stock that would have been acquired upon such exercise. In
addition, the phantom stock plan will provide that, in lieu of cash
exercise, a holder of a phantom right may elect to surrender some or all
<PAGE>
of such holder's phantom rights in exchange for a cash payment from NGC
equal to the value on the date of surrender that an investment banking
firm retained by NGC (and reasonably satisfactory to the holder making
such election) would assign to such right if it was a warrant having the
same terms as the proposed Warrants.
<PAGE>
SCHEDULE 5.12
List of Individuals for Whom Employment Agreement Amendments are to be
Sought
Kermit M. Clay
David Dean, Jr.
William DePriest
Wayne Fatum
Thomas Flak
Frank Floyd
Robert Galipoli
Luther Gill
Dwight R. Gilpin
Charles R. Jones
Byron Marshall
Kevin B. Moran
Earl L. Noe
Lonnie Peterson
Steven G. Politte
Stephen R. Plaster
Theresa Rector
Paul E. Stahlman
Floyd J. Waterman
Larry A. Weis
Robert L. Wooldridge
<PAGE>
STANDSTILL AGREEMENT
This Standstill Agreement (this "Agreement"), dated as of October 7,
1996, is entered into between Northwestern Public Service Company, a
Delaware corporation ("NPS"), and the stockholder of Empire Energy
Corporation, a Tennessee corporation (the "Company"), named on the
signature page hereof (the "Principal Stockholder"), with respect to the
following circumstances:
A. Northwestern Growth Corporation, a South Dakota corporation
which is a wholly-owned subsidiary of NPS ("NGC"), EEC Co., a Tennessee
corporation which is a wholly-owned subsidiary of NGC, the Company, the
Principal Stockholder and the other stockholders of the Company (the
Principal Stockholder and such other stockholders being referred to
collectively as the "Selling Stockholders") have entered into that
certain Agreement and Plan of Merger dated as of September 6, 1996 (the
"Merger Agreement") under which NGC is to acquire the Company and its
subsidiaries by the merger provided for therein (the "Merger").
<PAGE>
B. The execution and delivery of this Agreement is necessary to
satisfy an essential pre-condition to the closing of the Merger under the
Merger Agreement by the Company and the Selling Stockholders.
C. NPS is willing to issue the Warrants (hereinafter defined), and
the shares of its common stock issuable upon the exercise of the
Warrants, subject to the agreements and restrictions contained in this
Agreement, which NPS believes to be in the best interest of NPS and the
other holders of its securities.
NOW, THEREFORE, in consideration of the premises recited above, the
agreements exchanged here and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
AUTHORIZATION; ISSUANCE
Section 1.1 AUTHORIZATION UNDER FEDERAL POWER ACT; OTHER ACTION.
NPS shall promptly make all filings required to obtain, and make its
reasonable and diligent effort to obtain as soon as possible, all
authorizations under Section 204 of the Federal Power Act necessary for
the valid issuance by NPS of both the warrants required to be issued by
Section 8.8 of the Merger Agreement (the "Warrants"), and the shares of
common stock of NPS, par value $3.50 per share (the "NPS Common Stock"),
issuable upon exercise of the Warrants; and to obtain the listing on the
New York Stock Exchange ("NYSE"), subject to official notice of issuance,
of such shares of NPS Common Stock.
Section 1.2 ISSUANCE. Subject to obtaining (a) all
authorizations under Section 204 of the Federal Power Act necessary for
the valid issuance by NPS of the Warrants and the shares of NPS Common
Stock issuable upon exercise of the Warrants, and (b) the listing on the
NYSE, subject to official notice of issuance, of the shares of NPS Common
Stock issuable upon the exercise of the Warrants, NPS shall issue the
Warrants in the amounts, to the parties and at the times required by
Section 8.8 of the Merger Agreement, with the obligation of NPS under
this ARTICLE 1 being enforceable by the Principal Stockholder, and by
each and all other persons or entities entitled to receive Warrants in
accordance with Section 8.8 of the Merger Agreement, as third party
beneficiaries of this Agreement. The date of issuance of the Warrants is
referred to herein as the "Warrant Issuance Date."
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF NPS. NPS hereby
represents and warrants to the Principal Stockholder as follows:
(a) NPS has full legal right, power and authority to enter
into and, subject to obtaining the authorizations and listing
referred to in SECTION 1.1, perform this Agreement. The execution
and delivery of this Agreement by NPS and the consummation by NPS of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on behalf of NPS. This Agreement is
<PAGE>
a valid and binding obligation of NPS, enforceable against NPS in
accordance with the terms hereof, except that such enforcement may
be subject to (i) bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and (ii) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement by
NPS nor the consummation by NPS of the transactions contemplated
hereby conflicts with or constitutes a violation of or default under
the certificate of incorporation or by-laws of NPS, any statute,
law, regulation, order or decree applicable to NPS, or any Material
Contract, to which NPS is a party or by which NPS is bound. For
purposes of the preceding sentence, "Material Contract" shall mean
each indenture, loan agreement, contract, agreement or arrangement,
as each of the same shall have been amended to date, filed as an
exhibit to, or incorporated by reference in, the most recent Annual
Report to the SEC on Form 10-K of the Company or any report filed
since the date of such report with the SEC under Section 13 of the
Securities Exchange Act of 1934 (the "Exchange Act").
Section 2.2 REPRESENTATIONS AND WARRANTIES OF PRINCIPAL
STOCKHOLDER. The Principal Stockholder hereby represents and warrants to
NPS as follows:
(a) It has full legal right, power and authority to enter into
and perform this Agreement; the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby by it have been duly authorized by or for it; and this
Agreement is a valid and binding obligation of it, enforceable
against it in accordance with the terms hereof, except that such
enforcement may be subject to (i) bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and
(ii) general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, by it
conflicts with or constitutes a violation of or default under any
statute, law, regulation, order or decree applicable to it, or any
contract, commitment, agreement, arrangement or restriction of any
kind to which it is a party or by which it is bound.
ARTICLE 3
LIMITATIONS AND RESTRICTIONS
Section 3.1 RESTRICTIONS ON CERTAIN ACTIONS BY PRINCIPAL
STOCKHOLDER. The Principal Stockholder agrees with NPS that, during the
term of this Agreement, it will not, nor will it permit any of its
affiliates or associates (as such terms are used in Rule 12b-2 of the
Exchange Act, these terms to have such meaning throughout this Agreement)
from and after the date that the person or entity becomes such an
affiliate or associate, unless in any such case specifically invited to
do so by the Board of Directors of NPS, to do any of the following:
<PAGE>
(a) Acquire, announce an intention to acquire, offer or
propose to acquire, solicit an offer to sell or agree to acquire by
purchase, by gift, by joining a partnership, limited partnership,
syndicate or other "group" (as such term is used in Section 13(d)(3)
of the Exchange Act, such term to have such meaning throughout this
Agreement) or otherwise, any (i) assets, businesses or properties of
NPS other than in the ordinary course of business, or (ii) shares of
NPS Common Stock or any securities convertible into, exchangeable
for or exercisable for NPS Common Stock (all such securities and NPS
Common Stock, collectively "NPS Voting Securities") (other than the
shares of NPS Common Stock issuable upon exercise of the Warrants)
if either (A) the effect of such acquisition would be to increase
the aggregate number of shares of NPS Common Stock then beneficially
owned, directly or indirectly, by the Principal Stockholder and its
affiliates and associates to greater than the number of shares of
NPS Common Stock which then represents 5.0% of the voting power of
the securities of NPS outstanding and entitled to vote for the
election of directors of NPS in a general election thereof, or (B)
the Principal Stockholder and its affiliates and associates at the
time already beneficially own, directly or indirectly, a number of
shares of NPS Common Stock which represents 5.0% or more of such
voting power, in either case calculated as if the Warrants held by
the Principal Stockholder and its affiliates and associates were
exercised, whether or not then exercisable (such 5.0% limitation
being hereinafter referred to as the "Percentage Limitation");
(b) Participate in the formation or encourage the formation
of, or join or in any way participate with, any "person" (as such
term is used in Section 13(d)(3) of the Exchange Act and Section
2(2) of the Securities Act of 1933 (the "Securities Act"), such term
to have such meaning throughout this Agreement) which owns or seeks
to acquire beneficial ownership of NPS Voting Securities;
(c) Solicit, make or participate in any way in any
"solicitation" of "proxies" or become a "participant" in any
"election contest" (as such terms are defined or used in Regulation
14A under the Exchange Act, these terms to have such meaning
throughout this Agreement) with respect to NPS;
(d) Initiate, propose or otherwise solicit stockholders for
the approval of one or more stockholder proposals with respect to
NPS or induce or attempt to induce any other person to initiate any
stockholder proposal;
(e) Seek election to or seek to place a representative on the
Board of Directors of NPS, or seek the removal of any member of the
Board of Directors of NPS;
(f) Call or seek to have called any meeting of the
stockholders of NPS;
(g) Deposit any NPS Voting Securities in a voting trust or,
except as specifically contemplated by this Agreement, subject them
to a voting agreement or other agreement or arrangement with respect
to the voting of such NPS Voting Securities;
<PAGE>
(h) Otherwise act, directly or indirectly, alone or in concert
with others, to seek to control, direct or influence the management,
Board of Directors, policies or affairs of NPS or solicit, propose,
seek to effect or negotiate with any other person (including,
without limitation, NPS) with respect to any form of business
combination or other extraordinary transaction with NPS or any of
its subsidiaries or any other affiliate of NPS, or with respect to
any restructuring, recapitalization, similar transaction or other
transaction not in the ordinary course of business with respect to
NPS or any of its subsidiaries or any other affiliate of NPS,
solicit, make or propose, encourage or negotiate with any other
person with respect to, or announce an intent to make, any tender
offer or exchange offer for any securities of NPS or any of its
subsidiaries or any other affiliate of NPS, or publicly disclose an
intent, purpose, plan or proposal with respect to NPS or any of its
subsidiaries, or any securities or assets of NPS or any of its
subsidiaries or any other affiliate of NPS, inconsistent with the
provisions of this Agreement (including an intent, purpose, plan or
proposal that would require NPS to waive the benefit of or amend any
provision of this Agreement, or is conditioned upon such waiver or
amendment) or assist, participate in, facilitate, encourage or
solicit any effort or attempt by any person to do or seek to do any
of the foregoing;
(i) Encourage or render advice to or make any recommendation
or proposal to any person or other entity to engage in any of the
actions covered by this SECTION 3.1.
Section 3.2 VOTING. In connection with all matters subject to
the vote of security holders of NPS during the term of this Agreement,
the Principal Stockholder shall, and shall direct its associates and
affiliates to, vote all NPS Voting Securities owned by them (a) in
accordance with the recommendation of NPS' Board of Directors with
respect to each such matter, or (b) in the absence of such a
recommendation, in the same proportion as the votes cast by all other
holders of NPS Voting Securities with respect to such matter.
Section 3.3 RESTRICTIONS ON TRANSFER. During the term of this
Agreement, neither the Principal Stockholder nor any of its affiliates or
associates shall sell, assign, transfer, grant an option with respect to
or otherwise dispose of any interest in (or enter into an agreement,
arrangement or understanding with respect to the foregoing) (individually
and collectively, "Sell") any NPS Voting Securities, except for the
following dispositions which, to the extent provided in SECTION 4.1, are
subject to the right of first refusal specified in SECTION 4.1:
(a) The Principal Stockholder and/or its affiliates and
associates may Sell to any single person or group NPS Voting
Securities in privately negotiated transactions, or any blocks of
NPS Voting Securities in brokerage transactions, if either (1) such
single person or group agrees in writing to be bound by the
provisions of this Agreement (provided that the transferor of such
NPS Voting Securities shall continue to remain bound by the terms of
this Agreement) or (2) the aggregate number of shares of NPS Common
<PAGE>
Stock (assuming the exercise, conversion or exchange of all such NPS
Voting Securities, other than NPS Common Stock, into shares of NPS
Common Stock) would represent a number of shares of NPS Common Stock
constituting not more than 1.0% of the then outstanding shares of
NPS Common Stock; PROVIDED, HOWEVER, that neither the Principal
Stockholder nor any of its affiliates or associates shall Sell any
NPS Voting Securities to a person in a transaction described in, and
otherwise permitted by, this SECTION 3.3(a) if the Principal
Stockholder knows that such acquiring party would hold NPS Voting
Securities representing, in the aggregate (assuming exercise,
conversion or exchange of such NPS Voting Securities, other than NPS
Common Stock, into shares of NPS Common Stock), 5.0% or more of the
then outstanding shares of NPS Common Stock following such sale or
other transfer; and
(b) The Principal Stockholder and/or its affiliates and
associates may Sell NPS Voting Securities (i) pursuant to a
transaction approved in writing by NPS; (ii) pursuant to a
"qualifying offer" (as hereinafter defined); (iii) in a transfer
made by the Principal Stockholder to any majority owned affiliate of
the Principal Stockholder which agrees in writing to be bound by the
provisions of this Agreement (provided that the transferor of such
NPS Voting Securities shall continue to remain bound by the terms of
this Agreement); (iv) pursuant to a bona fide pledge of NPS Voting
Securities by the Principal Stockholder or any of its affiliates or
associates as security for bona fide indebtedness to a brokerage
firm or financial institution not affiliated with the Principal
Stockholder or any of its affiliates or associates for money
borrowed or pursuant to such pledge by such pledgee; (v) in "brokers
transactions" (as such term is defined in Rule 144(g) under the
Securities Act, which definition shall apply for all purposes of
this Agreement) on the NYSE, or if any particular series or class of
NPS Voting Securities is not listed on the NYSE, on the principal
national securities exchange on which such NPS Voting Securities are
listed or admitted to trading, and if not so listing or admitted, in
the over-the-counter market, subject in all cases to the volume
limitations presently set forth in Rule 144(e)(1) under the
Securities Act; (vi) in a registered public offering pursuant to the
terms of the Warrants; or (vii) as a result of a merger,
consolidation, share exchange or liquidation of the Principal
Stockholder (if a corporate entity or other entity to which such
transactions are applicable) in which the Principal Stockholder is
not the survivor, provided that the surviving or successor entity
and each entity that "controls" (as such term is defined in Rule 405
of the Securities Act,) the surviving or successor entity agrees in
writing with NPS to be bound by the provisions of this Agreement.
For purposes of this Agreement, a "qualifying offer" shall mean (i) any
tender offer or exchange offer commenced by NPS for any NPS Voting
Securities; or (ii) any acquisition transaction involving any NPS Voting
Securities proposed by a person or entity other than NPS (A) which is
approved by, or not opposed by, the Board of Directors of NPS, (B) where
such third party offeror already owns at least 50% of the outstanding NPS
Voting Securities, or (C) which is a bona fide tender offer or exchange
offer that is commenced by a third party offeror at a price per share
<PAGE>
greater than the closing price per share on the NYSE, or if the NPS
Common Stock is not listed on the NYSE, the principal securities exchange
on which the NPS Common Stock is then traded on the last trading day
prior to the first public announcement of such offer, if such third party
offer is contingent upon beneficial ownership of 50% or more of the
shares of NPS Common Stock then outstanding.
Section 3.4 DISPOSITIONS IN CERTAIN EVENTS. If the Principal
Stockholder or any affiliate or associate of the Principal Stockholder
acquires any NPS Voting Securities in violation of this Agreement, it
will immediately dispose of such NPS Voting Securities to persons which
are not affiliates or associates of the Principal Stockholder in a manner
permitted by SECTION 3.3; PROVIDED, HOWEVER, that NPS may also pursue any
other available remedy to which it may be entitled as a result of such
violation.
ARTICLE 4
RIGHT OF FIRST REFUSAL
Section 4.1 RIGHT OF FIRST REFUSAL FOR CERTAIN SALES. In the
event that the Principal Stockholder desires to Sell all or part of its
holdings of NPS Voting Securities (the "Shares") pursuant to the terms of
SECTION 3.3(a) or pursuant to a qualifying offer (other than a qualifying
offer that is a tender offer or exchange offer commenced by NPS for any
NPS Voting Securities) and the Principal Shareholder either receives a
bona fide offer from a third party (whether either initiated by such
third party or given by such third party in response to an offer from the
Principal Stockholder) to buy the Shares, NPS shall first be given the
opportunity, in the following manner, to purchase (or cause an entity,
person or group designated by NPS to purchase) all, but not less than
all, of such Shares:
(a) The Principal Stockholder shall deliver a written notice
given in accordance with Section 5.7 (the "Notice") to NPS of such
intention, describing the specific offer to purchase the Shares,
identifying the offeror and the proposed price of the Shares, and
setting forth the other terms and conditions of such offer and, if
in writing, a copy of such offer shall be attached to the Notice.
(b) NPS shall have the right for 5 business days after receipt
of the Notice, exercisable by written notice given in accordance
with SECTION 5.7, to elect to purchase (or to designate an entity,
person or group to purchase) all, but not less than all, of the
Shares specified in the Notice for cash at the price set forth
therein and upon any terms and conditions contained in any offer
attached to the Notice. If the purchase price specified in the
Notice includes any property other than cash, the purchase price
shall be deemed to be the amount of any cash included in the
purchase price plus the value (as may be mutually agreed by the
Principal Stockholder and NPS, or, if they are unable to agree, as
determined by an independent, nationally recognized investment
banking firm mutually selected by the Principal Stockholder and NPS,
the fees and expenses of which firm shall be borne equally by the
Principal Stockholder and NPS) of the other property included in the
price; and in such event NPS' notice of exercise of the right to
<PAGE>
elect to purchase provided for herein shall set forth the purchase
price so determined and such notice of exercise shall not be due
until five business days after such determination is made.
(c) If NPS does not exercise its right to elect to purchase
within 5 business days from the receipt of the Notice (or five
business days after the determination of the value of property, if
applicable), the Principal Stockholder shall be free to sell or
agree to sell the Shares specified in the Notice to the third party
making the offer described in the Notice, at the price specified
therein or at any price in excess thereof and on the other terms and
conditions specified in the Notice. If the Principal Stockholder
shall not so sell all of the Shares within 10 business days, the
provisions of this Agreement (including, without limitation, this
SECTION 4.1) shall thereafter apply to the Shares not so sold.
(d) If NPS exercises its right to purchase specified in
SECTION 4.1(b), the closing of the purchase of the Shares shall take
place within 5 business days after receipt by the Principal
Stockholder of the notice of exercise at a place, time and date
specified by NPS in such notice. At the closing, NPS shall deliver
to the Principal Stockholder cash or immediately available funds in
an amount equal to the purchase price set forth in the Notice, and
the Principal Stockholder shall deliver to NPS certificates
representing the Shares, duly endorsed in blank or accompanied by
stock powers duly executed, in either case with signatures
guaranteed, and otherwise in form acceptable for transfer of the
Shares on the books of the issuer of the Shares, together with all
necessary stock transfer stamps.
Section 4.2 RIGHT OF FIRST REFUSAL FOR PUBLIC OFFERING. In the
event that the Principal Stockholder desires to Sell all or part of its
holding of NPS Voting Securities (the "Offered Shares") pursuant to the
terms of SECTION 3.3(b)(vi), NPS shall have the right to purchase (or
cause an entity, person or group designated by NPS to purchase) all, but
not less than all, of such Offered Shares at the net price per share that
the Principal Stockholder would have received in the public offering. If
NPS exercises its right to purchase specified in this SECTION 4.2, the
closing of the purchase of the Offered Shares shall take place at the
time of the closing of the public offering at a place specified by NPS.
At the closing, NPS shall deliver to the Principal Stockholder cash or
immediately available funds in an amount equal to the purchase price for
the Offered Shares, and the Principal Stockholder shall deliver to NPS
certificates representing the Offered Shares, duly endorsed in blank or
accompanied by stock powers duly executed, in either case with signatures
guaranteed, and otherwise in form acceptable for transfer of the Offered
Shares on the books of the issuer of the Offered Shares, together with
all necessary stock transfer stamps.
Section 4.3 LEGEND REMOVAL. In the event of a sale of securities
by the Principal Stockholder in accordance with SECTION 4.1(c) to a
person other than NPS, the securities sold shall be free from any
restrictions in this Agreement as of the date of such sale, and NPS shall
cause to be removed any legend on the certificates representing the
securities which relates to the restrictions in this Agreement.
<PAGE>
ARTICLE 5
MISCELLANEOUS
Section 5.1 INTERPRETATION. For all purposes of this Agreement,
the term NPS Common Stock shall include any securities of NPS entitled to
vote generally for the election of directors of NPS and any securities
the holders of NPS Common Stock shall have received or as a matter of
right be entitled to receive as a result of (a) any capital
reorganization or reclassification of the capital stock of NPS, (b) any
consolidation, merger or share exchange of NPS with or into another
corporation, or (c) any sale of all or substantially all the assets of
NPS.
Section 5.2 ENFORCEMENT.
(a) The parties hereto acknowledge and agree that irreparable
damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties will be entitled to an
injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically its provisions in any court of the United
States or any state having jurisdiction, this being in addition to
any other remedy to which they may be entitled at law or in equity.
(b) No failure or delay on the part of either party in the
exercise of any power, right or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise
thereof or of any other right, power or privilege.
Section 5.3 ENTIRE AGREEMENT. This Agreement supersedes all
prior agreements between the parties hereto with respect to the subject
matter of this Agreement, and constitutes the entire understanding of the
parties with respect to the subject matter hereof. This Agreement may be
amended only by an agreement in writing executed by all the parties
hereto.
Section 5.4 SEVERABILITY. If any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable, the
remaining provisions shall remain in full force and effect. It is
declared to be the intention of the parties that they would have executed
the remaining provisions without including any that may be declared
unenforceable.
Section 5.5 HEADINGS. Descriptive headings herein are for
convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
Section 5.6 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, and each such executed counterpart will be an
original instrument.
<PAGE>
Section 5.7 NOTICES. All notices, consents, requests,
instructions, approvals and other communications provided for in this
Agreement and all legal process in regard to this Agreement will be
validly given, made or served, if in writing and delivered personally, or
sent by telecopy (except for legal process) or sent by registered mail
postage paid, as follows:
If to NPS, to:
Northwestern Public Service Company
33 Third Street S.E.
Huron, South Dakota 57350-1318
Telecopy Number: (605) 353-8286
Attn: Richard R. Hylland
If to the Principal Stockholder, to:
Empire Energy Corporation
1700 South Jefferson Street
Lebanon, Missouri 65536
Telecopy Number: (417) 532-8872
Attn: Stephen R. Plaster
or to such other address or telecopy number as either party hereto may,
from time to time, designate in a written notice given in a like manner.
Notice or other document sent by telecopy shall be deemed delivered on
the day telephone confirmation of receipt is given; notice or other
document sent by personal delivery or registered mail as aforesaid shall
be validly given, made or serviced when received by the addressee.
Section 5.8 SUCCESSORS AND ASSIGNS. This Agreement shall bind
the successors and assigns of the parties, and inure to the benefit of
any successor or assign of any of the parties; PROVIDED, HOWEVER, that no
party may assign this Agreement without the other party's prior written
consent.
Section 5.9 TERM. The provisions of this Agreement shall continue
in full force and effect from the date of this Agreement until (a) if all
Warrants are exercised prior to the date which is three years after the
Warrant Issuance Date, the date which is five years after the Warrant
Issuance Date, (b) if the last Warrant is exercised after the date which
is three years after the Warrant Issuance Date, two years after the date
of such last exercise, or (c) if any Warrant remains unexercised on the
date which is five years after the Warrant Issuance Date, the date which
is seven years after the Warrant Issuance Date, at which time this
Agreement shall expire and cease to be of any further force or effect.
Notwithstanding the foregoing, this Agreement shall expire and cease to
be of any further force or effect (i) at such time as the Principal
Stockholder and its affiliates and associates shall cease to beneficially
own, directly or indirectly, a number of shares of NPS Common Stock which
represents 1.0% or more of such voting power, calculated as if the
Warrants held by the Principal Stockholder and its affiliates and
associates were exercised, whether of not then exercisable, or (ii) in
the event that the individuals who, as of the date of this Agreement,
<PAGE>
constitute the Board of Directors of NPS (the "Incumbent Board") cease
for any reason to constitute at least a majority of such Board; PROVIDED,
HOWEVER, that any individual becoming a director subsequent to the date
of this Agreement whose election, or nomination for election by NPS'
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board.
Section 5.10 GOVERNING LAW. This Agreement will be governed by
and construed and enforced in accordance with the internal laws of the
State of Delaware, without giving effect to the conflict of laws
principles thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
NORTHWESTERN PUBLIC SERVICE STEPHEN R. PLASTER TRUST
COMPANY
By:_________________________ By:___________________________
Name: Dolly F. Plaster, Trustee
Title:
<PAGE>
WARRANT ISSUANCE AND EXCHANGE AGREEMENT
This Warrant Issuance and Exchange Agreement (this "Agreement"),
dated as of October 7, 1996, is entered into among Northwestern Public
Service Company, a Delaware corporation ("NPS"), and the stockholders of
Empire Energy Corporation, a Tennessee corporation (the "Company"), named
on the signature page hereof (the "Selling Stockholders"), with respect
to the following circumstances:
A. Northwestern Growth Corporation, a South Dakota corporation
which is a wholly-owned subsidiary of NPS ("NGC"), EEC Co., a Tennessee
corporation which is a wholly-owned subsidiary of NGC, the Company and
the Selling Stockholders have entered into that certain Agreement and
Plan of Merger dated as of September 6, 1996 (the "Merger Agreement")
under which NGC is to acquire the Company and its subsidiaries by the
merger provided for therein (the "Merger").
B. Section 8.8 of the Merger Agreement provides that NPS shall
deliver to each of the Selling Stockholders and each of the holders of
"Options" (as defined in the Merger Agreement) warrants to purchase
shares of common stock, $3.50 per share, of NPS (the "NPS Common Stock")
in substantially the form of Exhibit 8.8(b) to the Merger Agreement (the
"Warrants"), subject to the issuance by the Federal Energy Regulatory
Commission of a final order authorizing the issuance of the Warrants and
the NPS Common Stock issuable upon exercise of the Warrants.
C. By their terms, the Warrants are not exercisable prior to the
date which is one year following the date of issuance (the "Initial Cash
Exercise Date"). The Selling Stockholders have required, as a condition
<PAGE>
to the closing of the Merger, that NPS agree to provide each Selling
Stockholder or holder of Options (collectively, the "Warrantholders")
with the right to (a) exchange its or his Warrants for shares of NPS
Common Stock prior to the Initial Cash Exercise Date, and (b) put to NPS
the shares of NPS Common Stock issued to such Warrantholder in exchange
for his Warrants.
D. NPS is willing to offer to exchange the Warrants for shares of
NPS Common Stock, and to grant such put right to any Warrantholder who
elects to exchange his Warrants as provided herein, subject to the
agreements and restrictions contained in this Agreement, which NPS
believes to be in the best interest of NPS and the other holders of its
securities.
NOW, THEREFORE, in consideration of the premises recited above, the
agreements exchanged here and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
ISSUANCE OF WARRANTS; OFFER TO EXCHANGE
Section 1.1 ISSUANCE OF WARRANTS. Subject to obtaining (a) all
authorizations under Section 204 of the Federal Power Act necessary for
the valid issuance by NPS of the Warrants and the shares of NPS Common
Stock issuable upon exercise of the Warrants, and (b) the listing on the
New York Stock Exchange, subject to official notice of issuance, of the
shares of NPS Common Stock issuable upon the exercise of the Warrants,
NPS shall issue the Warrants in the amounts, to the parties and at the
times required by Section 8.8 of the Merger Agreement.
Section 1.2 OFFER TO EXCHANGE. Subject to the terms and
conditions hereof, at any time on or after 9:00 a.m., local time in
Huron, South Dakota, from and after the date on which the Warrants are
issued to the Warrantholders (the "Issuance Date") and before 5:00 p.m.,
local time in Huron, South Dakota, on the date that is thirty (30) days
after the Issuance Date (or, if such day is not a "Business Day" (as
herein defined), at or before 5:00 p.m., local time in Huron, South
Dakota, on the next following Business Day) (such period of time being
hereinafter referred to as the "Exchange Period"), NPS will provide to
each Warrantholder, in exchange for all (but not less than all) of the
Warrants held by such Warrantholder, the number of fully paid and non-
assessable shares of NPS Common Stock equal to the quotient obtained by
dividing (a) the number of shares of Common Stock purchasable upon
exercise of all of the Warrants held by such Warrantholder, by (b) 14.5.
As used herein, the term "Business Day" means a day other than a
Saturday, Sunday or other day on which banks in the State of South Dakota
are authorized by law to remain closed.
ARTICLE 2
PROCEDURE FOR EXCHANGE OF SHARES
Section 2.1 PRESENTATION. Each Warrantholder may exchange his
Warrant for NPS Common Stock during the Exchange Period as provided in
Section 1.2 by presentation and surrender of his Warrant to NPS at its
<PAGE>
Operations Center at 600 Market Street, Huron, South Dakota 57350 with
the Subscription Form annexed hereto duly executed. Each Warrantholder
who elects to exchange his Warrants for NPS Common Stock pursuant to this
Agreement is referred to herein as an "Exchanging Warrantholder."
Section 2.2 ISSUANCE OF SHARES. Upon receipt of any Exchanging
Warrantholder's Warrant with the Subscription Form fully executed, (a)
NPS shall cause to be issued certificates for the total number of whole
shares of NPS Common Stock for which the Warrant is being exchanged in
such denominations as are requested for delivery to such Exchanging
Warrantholder, and NPS shall thereupon deliver such certificates to such
Exchanging Warrantholder, and (b) such Exchanging Warrantholder shall be
deemed to be the holder of record of the shares of NPS Common Stock
issuable upon such exchange, notwithstanding that the stock transfer
books of NPS shall then be closed or that certificates representing such
shares of NPS Common Stock shall not then be actually delivered to such
Exchanging Warrantholder. If at the time any Warrant is exchanged
hereunder, a "Registration Statement" (as defined in the Warrants) is not
in effect to register under the Securities Act of 1933, as amended (the
"Securities Act"), the shares of NPS Common Stock issuable upon such
exchange, NPS may require the Exchanging Warrantholder to make such
representations, and may place such legends on certificates representing
the shares of NPS Common Stock, as may be reasonably required in the
opinion of counsel to NPS to permit the shares of NPS Common Stock to be
issued without such registration.
Section 2.3 RESERVATION OF SHARES. NPS hereby agrees that at all
times there shall be reserved for issuance and delivery upon exchange of
the Warrants such number of shares of NPS Common Stock as are from time
to time issuable upon exchange of the Warrants. All such shares of NPS
Common Stock shall be duly authorized, and when issued upon such
exchange, shall be validly issued, fully paid and nonassessable, free and
clear of all liens, security interests, charges and other encumbrances of
any kind and free and clear of all preemptive rights.
Section 2.4 FRACTIONAL SHARES. NPS shall not be required to
issue any fraction of a share of its capital stock in connection with the
exchange of Warrants provided for herein, and in any case where an
Exchanging Warrantholder would, except for the provisions of this Section
2.4, be entitled under the terms of this Agreement to receive a fraction
of a share upon the exchange of his Warrants, NPS shall, upon the
exchange of such Warrants, issue the largest number of whole shares
issuable upon exchange of such Warrant, and NPS shall make a cash payment
to such Exchanging Warrantholder in an amount equal to the fair market
value (determined as provided in Section 3.1(e) of the Warrants as of the
date of issuance) of such fraction of a share to which such Exchanging
Warrantholder would otherwise be entitled.
Section 2.5 LISTING. Prior to the issuance of any shares of NPS
Common Stock in exchange for any Warrant, NPS shall use its best efforts
to cause such shares of NPS Common Stock to be listed upon each national
securities exchange or included in each automated quotation system, if
any, upon which shares of NPS Common Stock are then listed or quoted
(subject to official notice of issuance upon exchange of such Warrant)
and shall maintain, so long as any other shares of NPS Common Stock shall
<PAGE>
be so listed or quoted, such listing or quotation of all shares of NPS
Common Stock from time to time issuable upon the exchange of the
Warrants.
Section 2.6 TAXES. Any Exchanging Warrantholder who exchanges
his Warrant for NPS Common Stock as provided herein shall be responsible
for the payment of federal or state withholding taxes, if any, required
to be paid by such Exchanging Warrantholder in connection with such
exchange.
ARTICLE 3
PUT OPTION
Section 3.1 RIGHT TO PUT SHARES TO NPS. So long as any shares of
NPS Common Stock issued to an Exchanging Warrantholder in exchange for
his Warrants as provided herein are not registered under the Securities
Act or are not permitted to be sold pursuant to Rule 144 (or any
successor provision) under the Securities Act, the following provisions
shall apply to the shares of NPS Common Stock issued to such Exchanging
Warrantholder hereunder:
(a) An Exchanging Warrantholder may require NPS (or an entity,
person or group designated by NPS) to purchase some or all of such
shares of NPS Common Stock by delivering a written notice (the "Put
Notice") to NPS that expresses such Exchanging Warrantholder's
request that NPS purchase such shares of NPS Common Stock from the
Exchanging Warrantholder pursuant to this Section 3.1.
(b) The purchase price for each share of NPS Common Stock that
is the subject of a Put Notice shall be the fair market value per
share of NPS Common Stock (determined as provided in Section 3.1(e)
of the Warrants) as of the date the Put Notice is delivered to NPS.
(c) The closing of the purchase of the shares of NPS Common
Stock specified in the Put Notice shall take place within 10
business days after receipt by NPS of the Put Notice at a place,
time and date specified by NPS. At the closing, NPS shall deliver
to such Exchanging Warrantholder cash or immediately available funds
in an amount equal to the aggregate purchase price provided for in
Section 3.1(b), and such Exchanging Warrantholder shall deliver to
NPS certificates representing the shares of NPS Common Stock, duly
endorsed in blank or accompanied by stock powers duly executed, in
either case with signatures guaranteed, and otherwise in form
acceptable for transfer of the Shares on the books of NPS, together
with all necessary stock transfer stamps.
Section 3.2 SHARES OF NPS COMMON STOCK NOT REGISTRABLE
SECURITIES. In light of the special benefits granted to the Exchanging
Warrantholders (including, without limitation, the put rights provided
for in Section 3.1), the shares of NPS Common Stock issued to an
Exchanging Stockholder pursuant to the terms of this Agreement shall not
constitute "Registrable Securities" (as defined in the Warrants) and,
accordingly, such shares of NPS Common Stock shall not be entitled to
certain benefits that would have been afforded to a holder thereof by the
terms of the Warrants (including, without limitation, the registration
<PAGE>
rights provided for in Article 6 of the Warrants) in the absence of such
exchange.
ARTICLE 4
MISCELLANEOUS
Section 4.1 REPRESENTATIONS AND WARRANTIES. NPS hereby
represents and warrants as follows:
(a) NPS has full legal right, power and authority to enter
into and, subject to obtaining the authorizations and listing
referred to in SECTION 1.1, perform this Agreement. The execution
and delivery of this Agreement by NPS and the consummation by NPS of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on behalf of NPS. This Agreement is
a valid and binding obligation of NPS, enforceable against NPS in
accordance with the terms hereof, except that such enforcement may
be subject to (i) bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and (ii) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement by
NPS nor the consummation by NPS of the transactions contemplated
hereby conflicts with or constitutes a violation of or default under
the certificate of incorporation or by-laws of NPS, any statute,
law, regulation, order or decree applicable to NPS, or any Material
Contract, to which NPS is a party or by which NPS is bound. For
purposes of the preceding sentence, "Material Contract" shall mean
each indenture, loan agreement, contract, agreement or arrangement,
as each of the same shall have been amended to date, filed as an
exhibit to, or incorporated by reference in, the most recent Annual
Report to the SEC on Form 10-K of the Company or any report filed
since the date of such report with the SEC under Section 13 of the
Securities Exchange Act of 1934.
Section 4.2 ENTIRE AGREEMENT. This Agreement constitutes the
entire understanding of the parties with respect to the subject matter
hereof. This Agreement may be amended only by an agreement in writing
executed by all the parties hereto.
Section 4.3 SEVERABILITY. If any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable, the
remaining provisions shall remain in full force and effect. It is
declared to be the intention of the parties that they would have executed
the remaining provisions without including any that may be declared
unenforceable.
Section 4.4 HEADINGS. Descriptive headings are for convenience
only and will not control or affect the meaning or construction of any
provision of this Agreement.
<PAGE>
Section 4.5 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, and each such executed counterpart will be an
original instrument.
Section 4.6 NOTICES. All notices, consents, requests,
instructions, approvals and other communications provided for in this
Agreement and all legal process in regard to this Agreement will be
validly given, made or served, if in writing and delivered personally, by
telecopy (except for legal process) or sent by registered mail postage
paid.
If to NPS, to:
Northwestern Public Service Company
33 Third Street S.E.
Huron, South Dakota 57350-1318
Telecopy Number: (605) 353-8286
Attn: Richard R. Hylland
If to the Selling Stockholders, to:
Empire Energy Corporation
1700 South Jefferson Street
Lebanon, Missouri 65536
Telecopy Number: (417) 532-8872
Attn: Stephen R. Plaster
or to such other address or telecopy number as any party may, from time
to time, designate in a written notice given in a like manner. Notice by
telecopy shall be deemed delivered on the day telephone confirmation of
receipt is given.
Section 4.7 SUCCESSORS AND ASSIGNS. This Agreement shall bind
the successors and assigns of the parties, and inure to the benefit of
any successor or assign of any of the parties; PROVIDED, HOWEVER, that no
party may assign this Agreement without the other party's prior written
consent.
Section 4.8 GOVERNING LAW. This Agreement will be governed by
and construed and enforced in accordance with the internal laws of the
State of Delaware, without giving effect to the conflict of laws
principles thereof.
Section 4.9 OPTION HOLDERS AS THIRD PARTY BENEFICIARIES. The
obligations of NPS and the rights of the Warrantholders under this
Agreement shall be enforceable by the holders of the Options as third
party beneficiaries of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first referred to above.
NORTHWESTERN PUBLIC SERVICE SELLING STOCKHOLDERS:
COMPANY
Stephen R. Plaster Trust
By:_________________________
Name: By:___________________________
Title: Dolly F. Plaster, Trustee
___________________________
Robert W. Wooldridge
___________________________
Earl L. Noe
___________________________
Luther Gill
___________________________
Larry A. Weis
___________________________
Floyd J. Waterman
___________________________
Charles Jones
___________________________
Paul E. Stahlman
___________________________
Tom Flak
<PAGE>
SUBSCRIPTION FORM
(TO BE EXECUTED UPON EXCHANGE OF WARRANT)
NORTHWESTERN PUBLIC SERVICE CORPORATION
The undersigned hereby irrevocably elects to exercise the right of
exchange that is provided for in that certain Warrant Exchange Agreement
(the "Exchange Agreement"; capitalized terms used herein that are not
defined herein shall have the meanings ascribed to them in the Exchange
Agreement) dated as of October 7, 1996 to which NPS and the undersigned
are parties with respect to the Warrants represented by the Warrant
Certificate which accompanies this Subscription Form. In accordance with
the Exchange Agreement, the undersigned is entitled to receive a total of
______ shares of NPS Common Stock in exchange for such Warrants.
Please issue a certificate or certificates for such NPS Common Stock
in the name of, and pay any cash for any fractional share to:
Name____________________________
____________________________
____________________________
____________________________
(Please print Name, Address
and Federal Income Tax
Identification Number or
Social Security Number)
Signature_______________________
Note: The above signature should
correspond exactly with the
name on the first page of
the Warrant Certificate
which accompanies this
Subscription Form (or, if
applicable, with the name of
the assignee appearing in the
assignment form presented
herewith).
<PAGE>
EXHIBIT 8.8(B)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
[THE SECURITIES REPRESENTED BY THIS CERTIFICATE, INCLUDING THE COMMON
STOCK OBTAINABLE BY EXERCISE OF THIS WARRANT, ARE SUBJECT TO THE TERMS
AND CONDITIONS, INCLUDING RESTRICTIONS ON TRANSFER, OF AN AGREEMENT
BETWEEN NORTHWESTERN PUBLIC SERVICE COMPANY AND THE HOLDER OF THIS
WARRANT DATED __________, 1996 AS AMENDED FROM TIME TO TIME (THE
"RESTRICTION AGREEMENT"), A COPY OF WHICH IS ON FILE WITH THE CORPORATE
SECRETARY OF SUCH COMPANY.]<1>
VOID AFTER 5:00 P.M., CENTRAL [STANDARD] TIME, ON __________, 2001 OR IF
NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., CENTRAL [STANDARD]
TIME, ON THE NEXT FOLLOWING BUSINESS DAY.
WARRANT TO PURCHASE
[__________]
SHARES OF COMMON STOCK
OF
NORTHWESTERN PUBLIC SERVICE COMPANY
NO._____
TRANSFER RESTRICTED--SEE SECTION 5.2
This certifies that, for good and valuable consideration,
____________________ and its registered, permitted assigns (collectively,
the "Warrantholder"), is entitled to purchase from NORTHWESTERN PUBLIC
SERVICE COMPANY, a corporation incorporated under the laws of the State
of Delaware (the "Company"), subject to the terms and conditions hereof,
at any time on or after 9:00 a.m., local time in Huron, South Dakota, on
__________, 1997 and before 5:00 p.m., local time in Huron, South Dakota,
on __________, 2001 (or, if such day is not a Business Day, at or before
5:00 p.m., local time in Huron, South Dakota, on the next following
Business Day) (such period of time being hereinafter referred to as the
"Exercise Period"), the number of fully paid and non-assessable shares of
Common Stock of the Company stated above at the Exercise Price (as
defined herein). The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as provided in
Article 3 hereof.
ARTICLE 1
DEFINITIONS
1.1 DEFINITION OF TERMS. As used in this Warrant, the following
capitalized terms shall have the following respective meanings:
<1> Will be included only on the Warrant issued to the Stephen
R. Plaster Trust.
<PAGE>
(a) BUSINESS DAY: A day other than a Saturday, Sunday or other
day on which banks in the State of South Dakota are authorized by
law to remain closed.
(b) COMMON STOCK: Common stock, $3.50 par value, of the
Company.
(c) COMMON STOCK EQUIVALENTS: Securities that are convertible
into or exercisable for shares of Common Stock.
(d) COMPANY: See the initial paragraph hereof.
(e) DEMAND REGISTRATION: See Section 6.2.
(f) EXCHANGE ACT: The Securities Exchange Act of 1934, as
amended.
(g) EXERCISE PERIOD: See the initial paragraph hereof.
(h) EXERCISE PRICE: $36.45 per Warrant Share, as such price
may be adjusted from time to time pursuant to Article 3 hereof.
(i) EXPIRATION DATE: 5:00 p.m., local time in Huron, South
Dakota, on __________, 2001, or if such day is not a Business Day,
the next succeeding day which is a Business Day.
(j) 50% HOLDERS: At any time as to which a Demand Registration
is requested, the Warrantholder(s) and/or the Holder or Holders of
Warrant Shares who have the right to acquire or hold, as the case
may be, in the aggregate, not less than 50% of the combined total of
Warrant Shares issuable and Warrant Shares outstanding at the time
such Demand Registration is requested.
(k) HOLDER: A Holder of Registrable Securities and/or
Warrants.
(l) NASD: National Association of Securities Dealers, Inc.
(m) NASDAQ: NASD Automated Quotation System.
(n) NYSE: New York Stock Exchange, Inc.
(o) PERSON: An individual, partnership, joint venture,
corporation, trust, unincorporated organization or
government or any department or agency thereof.
(p) PIGGYBACK REGISTRATION: See Section 6.1.
(q) PROSPECTUS: Any prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement,
including all material incorporated by reference in such prospectus.
(r) PUBLIC OFFERING: A public offering of the Company's Common
Stock pursuant to a registration statement under the Securities Act.
<PAGE>
(s) REGISTRABLE SECURITIES: Any Warrant Shares issued to
Warrantholders, and/or their respective designees or transferees as
permitted under Section 5.2 and/or other securities that may be or
are issued by the Company upon exercise of any Warrants, including
those which may thereafter be issued by the Company in respect of
any such securities by means of any stock splits, stock dividends,
recapitalizations, reclassifications or the like, and as adjusted
pursuant to Article 3 hereof; PROVIDED, HOWEVER, that as to any
particular security contained in Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to the sale of such securities
shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such
Registration Statement; (ii) they shall have been sold to the public
pursuant to Rule 144 (or any successor provision) under the
Securities Act; (iii) they shall have been sold, assigned or
otherwise transferred to any person other than those persons
specified in Section 5.2 below ("5.2 Persons") and other than to any
spouses, lineal descendants or adopted children of a 5.2 Person to
whom such securities are transferred upon the death of any 5.2
Person by operation of law or by bequest; or (iv) three years after
the date such Warrant Shares are issued (provided that such
securities may then be sold under paragraph (k) of Rule 144 under
the Securities Act).
(t) REGISTRATION EXPENSES: Any and all expenses incurred in
connection with any registration or action incident to performance
of or compliance by the Company with Article 6, including, without
limitation, (i) all SEC, national securities exchange and NASD
registration and filing fees; all listing fees and all transfer
agent fees; (ii) all fees and expenses of complying with state
securities or blue sky laws (including the fees and disbursements of
counsel of the underwriters in connection with blue sky
qualifications of the Registrable Securities); (iii) all printing,
mailing, messenger and delivery expenses, (iv) all fees and
disbursements of counsel for the Company and of its accountants,
including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance,
and (v) any disbursements of underwriters customarily paid by
issuers or sellers of securities, including underwriting discounts
and commissions, but excluding brokerage fees and transfer taxes, if
any, and fees of counsel or accountants retained by the holders of
Registrable Securities to advise them in their capacity as Holders
of Registrable Securities.
(u) REGISTRATION STATEMENT: Any registration statement of the
Company filed or to be filed with the SEC which covers any of the
Warrants and/or Registrable Securities pursuant to the provisions of
this Agreement, including all amendments (including post-effective
amendments) and supplements thereto, all exhibits thereto and all
material incorporated therein by reference.
<PAGE>
(v) SEC: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the
Exchange Act.
(w) SECURITIES ACT The Securities Act of 1933, as amended.
(x) TRANSFERS: See Section 5.2.
(y) WARRANTS: This warrant, all other warrants issued on the
date hereof pursuant to Section 8.8 of the Agreement and Plan of
Merger by and among Northwestern Growth Corporation, EEC Co., Empire
Energy Corporation and the stockholders of Empire Energy
Corporation, and all other warrants that may be issued in its or
their place (together evidencing the right to purchase an aggregate
of not to exceed 725,000 shares of Common Stock) (subject to
adjustment as provided herein).
(z) WARRANTHOLDERS: The Person(s) to whom the Warrants are
originally issued (including the Warrantholder identified in the
initial paragraph hereof), or any successors in interest thereto, or
any assignees or transferees thereof, in whose names the Warrants
are registered upon the books to be maintained by the Company for
that purpose.
(aa) WARRANT SHARES: Common Stock, Common Stock Equivalents
and other securities purchased or purchasable upon exercise of the
Warrants.
ARTICLE 2
DURATION AND EXERCISE OF WARRANT
2.1 DURATION OF WARRANT. The Warrantholder may exercise this
Warrant at any time and from time to time after 9:00 a.m., local time in
Huron, South Dakota, on __________, 1997, and before 5:00 p.m., local
time in Huron, South Dakota, on the Expiration Date. If this Warrant is
not exercised on the Expiration Date, it shall become void, and all
rights hereunder shall thereupon cease.
2.2 EXERCISE OF WARRANT.
(a) The Warrantholder may exercise this Warrant, in whole or
in part, by presentation and surrender of this Warrant to the
Company at its Operations Center at 600 Market Street, Huron, South
Dakota 57350 or at the office of the stock transfer agent, if any,
for the Common Stock with the Subscription Form annexed hereto duly
executed and accompanied by payment of the full Exercise Price for
each Warrant Share to be purchased.
(b) Upon receipt of this Warrant with the Subscription Form
fully executed and accompanied by payment of the aggregate Exercise
Price for the Warrant Shares for which this Warrant is then being
exercised, (i) the Company shall cause to be issued certificates for
the total number of whole shares of Common Stock for which this
Warrant is being exercised in such denominations as are requested
<PAGE>
for delivery to the Warrantholder, and the Company shall thereupon
deliver such certificates to the Warrantholder, and (ii) the
Warrantholder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding
that the stock transfer books of the Company shall then be closed or
that certificates representing such shares of Common Stock shall not
then be actually delivered to the Warrantholder. If at the time
this Warrant is exercised, a Registration Statement is not in effect
to register under the Securities Act the Warrant Shares issuable
upon exercise of this Warrant, the Company may require the
Warrantholder to make such representations, and may place such
legends on certificates representing the Warrant Shares, as may be
reasonably required in the opinion of counsel to the Company to
permit the Warrant Shares to be issued without such registration.
(c) In case the Warrantholder shall exercise this Warrant with
respect to less than all of the Warrant Shares that may be purchased
under this Warrant, the Company shall execute a new Warrant for the
balance of such Warrant Shares and deliver such new Warrant to the
Warrantholder.
(d) The Warrantholder shall be responsible for the payment of
federal or state withholding taxes, if any, required to be paid by
the Warrantholder in connection with any exercise of this Warrant.
2.3 RESERVATION OF SHARES. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of Warrant Shares as are from time to time
issuable upon exercise of this Warrant. All such Warrant Shares shall be
duly authorized, and when issued upon such exercise, shall be validly
issued, fully paid and nonassessable, free and clear of all liens,
security interests, charges and other encumbrances of any kind and free
and clear of all preemptive rights.
2.4 FRACTIONAL SHARES. The Company shall not be required to issue
any fraction of a share of its capital stock in connection with the
exercise of this Warrant (including pursuant to the Conversion Right),
and in any case where the Warrantholder would, except for the provisions
of this Section 2.5, be entitled under the terms of this Warrant to
receive a fraction of a share upon the exercise of this Warrant, the
Company shall, upon the exercise of this Warrant and receipt of the
Exercise Price, issue the largest number of whole shares purchasable upon
exercise of this Warrant. The Company shall make a cash payment to the
Holder in an amount equal to the fair market value (determined as
provided in Section 3.1(e)) of such fraction of a share to which the
Warrantholder would otherwise be entitled.
2.5 LISTING. Prior to the issuance of any shares of Common Stock
upon exercise of this Warrant, the Company shall use its best efforts to
cause such shares of Common Stock to be listed upon each national
securities exchange or included in each automated quotation system, if
any, upon which shares of Common Stock are then listed or quoted (subject
to official notice of issuance upon exercise of this Warrant) and shall
maintain, so long as any other shares of Common Stock shall be so listed
or quoted, such listing or quotation of all shares of Common Stock from
<PAGE>
time to time issuable upon the exercise of this Warrant; and the Company
shall use its best efforts to cause to be listed or quoted on each
national securities exchange or automated quotation system, and shall
maintain such listing or quotation of, any other shares of capital stock
of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed or quoted on such
national securities exchange or automated quotation system.
ARTICLE 3
ADJUSTMENT OF SHARES OF COMMON STOCK
PURCHASABLE AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall
be subject to adjustment from time to time upon the happening of certain
events as provided in this Article 3.
3.1 MECHANICAL ADJUSTMENTS.
(a) If at any time prior to the exercise of this Warrant in
full, the Company shall (i) declare a dividend or make a
distribution on the Common Stock payable in shares of its capital
stock (whether shares of Common Stock or of capital stock of any
other class); (ii) subdivide, reclassify or recapitalize its
outstanding Common Stock into a greater number of shares; (iii)
combine, reclassify or recapitalize its outstanding Common Stock
into a smaller number of shares, or (iv) issue any shares of its
capital stock by reclassification of its Common Stock (including any
such reclassification in connection with a consolidation or a merger
in which the Company is the continuing corporation), the Exercise
Price in effect at the time of the record date of such dividend,
distribution, subdivision, combination, reclassification or
recapitalization and the number and kind of shares subject to this
Warrant shall be adjusted so that the Warrantholder shall be
entitled to receive the aggregate number and kind of shares which,
if this Warrant had been exercised in full immediately prior to such
event, he, she or it would have owned upon such exercise and been
entitled to receive by virtue of such dividend, distribution,
subdivision, combination, reclassification or recapitalization. Any
adjustment required by this Section 3.1(a) shall be made
successively immediately after the record date, in the case of a
dividend or distribution, or the effective date, in the case of a
subdivision, combination, reclassification or recapitalization, to
allow the purchase of such aggregate number and kind of shares.
(b) If at any time prior to the exercise of this Warrant in
full, the Company shall fix a record date for the issuance of
subscription rights, options or warrants to all holders of Common
Stock entitling them to subscribe for or purchase Common Stock (or
Common Stock Equivalents) at a price (or having an exercise or
conversion price per share) less than the current market price of
the Common Stock (as determined pursuant to Section 3.1(e) on the
record date described below, the Exercise Price shall be adjusted so
that the Exercise Price shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the
date of such issuance (which date shall be deemed to be the record
<PAGE>
date set by the Company to determine stockholders entitled to
participate in such distribution) by a fraction, the numerator of
which shall be (A) the number of shares of Common Stock outstanding
immediately prior to such issuance, plus (B) the number of
additional shares of Common Stock which the aggregate consideration
received by the Company upon such issuance (plus the aggregate of
any additional amount to be received by the Company upon the
exercise of such subscription rights, options or warrants) would
purchase at the then current market price per share of the Common
Stock; and the denominator of which shall be (X) the number of
shares of Common Stock outstanding on the date of such issuance,
plus (Y) the number of additional shares of Common Stock offered for
subscription or purchase (or into which the Common Stock Equivalents
so offered are exercisable or convertible). Whenever the Exercise
Price is adjusted pursuant to this Section 3.1(b), the Warrant
Shares shall simultaneously be adjusted by multiplying the number of
Warrant Shares initially issuable upon exercise of each Warrant by
the Exercise Price in effect on the date thereof and dividing the
product so obtained by the Exercise Price, as adjusted. Any
adjustments required by this Section 3.1(b) shall be made
immediately after such record date. Such adjustments shall be made
successively whenever such event shall occur. To the extent that
shares of Common Stock (or Common Stock Equivalents) are not
delivered after the expiration of such subscription rights, options
or warrants, the Exercise Price and number of shares subject to this
Warrant shall be readjusted to the Exercise Price which would then
be in effect had the adjustments made upon the issuance of such
rights, options or warrants been made upon the basis of delivery of
only the number of shares of Common Stock (or Common Stock
Equivalents) actually delivered. Notwithstanding the foregoing, no
adjustment in the Exercise Price shall be made with respect to (i)
the issuance or sale of shares of Common Stock issued upon exercise
or conversion of (A) any stock options outstanding as of the date of
this Warrant or (B) any Common Stock Equivalent the issuance of
which did not require an adjustment hereunder or (ii) any shares of
Common Stock or Common Stock Equivalent issued or sold in exchange
for securities of another issuer.
(c) If at any time prior to the exercise of this Warrant in
full the Company shall fix a record date for the issuance or making
of a distribution to all holders of the Common Stock (including any
such distribution to be made in connection with a consolidation or
merger in which the Company is to be the continuing corporation) of
evidences of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a combination,
reclassification or recapitalization referred to in Section 3.1(a),
regular cash dividends or cash distributions paid out of net profits
legally available therefor or subscription rights, options or
warrants for Common Stock or Common Stock Equivalents (excluding
those referred to in Section 3.1(b)) (any such nonexcluded event
being herein called a "Special Dividend")), (i) the Exercise Price
shall be decreased immediately after the record date for such
Special Dividend to a price determined by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the current market price of the
<PAGE>
Common Stock immediately prior to such record date less the fair
market value (as determined by the Company's Board of Directors) of
the evidences of indebtedness, securities or property, or other
assets issued or distributed in such Special Dividend, applicable to
one share of Common Stock or of such subscription rights or warrants
applicable to one share of Common Stock and the denominator of which
shall be such then current market price per share of Common Stock,
and (ii) the number of shares of Common Stock subject to purchase
upon exercise of this Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock
subject to purchase immediately before such Special Dividend record
date by a fraction, the numerator of which shall be the Exercise
Price in effect immediately before such record date and the
denominator of which shall be the Exercise Price in effect
immediately after such record date. Any adjustment required by this
Section 3.1(c) shall be made successively whenever such a record
date is fixed and in the event that such distribution is not so
made, the Exercise Price and number of shares subject to this
Warrant shall again be adjusted to be as in effect immediately prior
to such record date.
(d) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to all holders of the
Common Stock of stock of a subsidiary or securities convertible into
or exercisable for such Stock, then in lieu of an adjustment in the
Exercise Price or the number of Warrant Shares purchasable upon the
exercise of this Warrant, each Warrantholder, upon the exercise
hereof at any time after such distribution, shall be entitled to
receive from the Company, such subsidiary or both, as the Company
shall determine, the stock or other securities to which such
Warrantholder would have been entitled if such Warrantholder had
exercised this Warrant immediately prior thereto, all subject to
further adjustment as provided in this Article 3, and the Company
shall reserve, for the life of this Warrant, such securities of such
subsidiary or other corporation; PROVIDED, HOWEVER, that no
adjustment in respect of dividends or interest on such stock or
other securities shall be made during the term of this Warrant or
upon its exercise.
(e) For the purpose of any computation under this Agreement,
the "current market price" or the "fair market value" per share of
Common Stock at any date shall be deemed to be the average of the
daily closing prices over the 30-day period prior to such date. The
closing price for each day shall be the last sale price regular way
or, in case no such reported sales take place on such day, the
average of the last reported bid and asked prices regular way, in
either case on the NYSE or if not the NYSE, the principal national
securities exchange on which the Common Stock is admitted to trading
or listed, or if not listed or admitted to trading on any exchange,
the representative closing bid price as reported by NASDAQ, or other
similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as
determined in good faith by the mutual agreement of the
Warrantholder and the Company, and if the Warrantholder and the
Company are unable to so agree, by an investment banker of national
<PAGE>
reputation selected by the Company and reasonably acceptable to the
Warrantholder (the fees and costs of such investment banker to be
shared equally by the Company and the Warrantholder).
(f) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least five cents ($.05) in such price; PROVIDED, HOWEVER, that any
adjustments which by reason of this Section 3.1(f) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment. No adjustment in the number of Warrant
Shares shall be made where there is no adjustment in the Exercise
Price. All calculations under this Section 3.1 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case
may be. Notwithstanding anything in this Section 3.1 to the
contrary, the Exercise Price shall not be reduced to less than the
then existing par value of the Common Stock as a result of any
adjustment made hereunder.
(g) In the event that at any time, as a result of any
adjustment made pursuant to Section 3.1(a), the Warrantholder shall
become entitled to receive any shares of the Company other than
Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 3.1(a).
(h) In the case of an issue of additional Common Stock or
Common Stock Equivalents for cash, the consideration received by the
Company therefor, before deducting therefrom any discount or
commission or other expenses paid by the Company for any
underwriting of, or otherwise in connection with, the issuance
thereof, shall be deemed to be the amount received by the Company
therefor. The term "issue" shall include the sale or other
disposition of shares held by or on account of the Company or in the
treasury of the Company but until so sold or otherwise disposed of
such shares shall not be deemed outstanding.
3.2 NOTICES OF ADJUSTMENT. Whenever the number of Warrant Shares
or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver forthwith to the Warrantholder a certificate signed
by its Chairman of the Board or President, or by any Vice President,
Treasurer or Corporate Secretary, setting forth the adjusted number of
shares purchasable upon the exercise of this Warrant and the Exercise
Price of such shares after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which adjustment was made.
3.3 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section
3.1(c) of this Agreement, no adjustment in respect of any cash dividends
shall be made to this Warrant.
3.4 PRESERVATION OF PURCHASE RIGHTS IN CERTAIN TRANSACTIONS. In
case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock (other than a reclassification or
<PAGE>
recapitalization subject to Section 3.1(a), and other than a change in
the par value of the Common Stock) or in case of any consolidation or
merger of the Company with or into another corporation (other than a
merger with a subsidiary in which the Company is the continuing
corporation) or in the case of any sale, lease, transfer or conveyance to
another corporation of the property and assets of the Company as an
entirety or substantially as an entirety, the Company shall, as a
condition precedent to such transaction cause such successor or
purchasing corporation, as the case may be, to execute with the
Warrantholder an agreement granting the Warrantholder the right
thereafter, upon payment of the Exercise Price in effect immediately
prior to such action, to receive upon exercise of this Warrant the kind
and amount of shares and other securities and property which he would
have owned or have been entitled to receive as a result of the happening
of such reclassification, change, consolidation, merger, sale or
conveyance had this Warrant been exercised immediately prior to such
action. In the event that in connection with any such reclassification,
capital reorganization, change, consolidation, merger, sale or
conveyance, additional shares of Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for,
or of, a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of
Article 3. The provisions of this Section 3.4 shall similarly apply to
successive reclassifications, capital reorganizations, consolidations,
mergers, sales or conveyances.
3.5 FORM OF WARRANT AFTER ADJUSTMENTS. The form of this Warrant
need not be changed because of any adjustments in the Exercise Price or
the number or kind of Warrant Shares, and Warrants theretofore issued
continue to express the same price and number and kind of shares as are
stated in this Warrant, as initially issued, until surrendered in
connection with an exercise thereof.
3.6 TREATMENT OF WARRANTHOLDER. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat
the Warrantholder as the absolute owner of this Warrant (notwithstanding
any notation of ownership or other writing hereon) for all purposes and
shall not be affected by any notice to the contrary.
ARTICLE 4
OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDER
4.1 NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANTHOLDERS. Nothing
contained in this Warrant shall be construed as conferring upon the
Warrantholder or his, her or its transferees the right to vote or to
receive dividends or to consent or to receive notice as a stockholder in
respect of any meeting of stockholders for the election of directors of
the Company or of any other matter, or any rights whatsoever as
stockholders of the Company. The Company shall give notice to the
Warrantholder in accordance with Section 7.10 hereof if at any time prior
to the expiration or exercise in full of the Warrants, any of the
following events shall occur:
<PAGE>
(a) The Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize
the making of any distribution (other than a cash dividend or
distribution subject to the parenthetical exclusions set forth in
Section 3.1(c)) to all holders of Common Stock;
(b) The Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or Common
Stock Equivalents or of rights, options or warrants to subscribe for
or purchase Common Stock or Common Stock Equivalents or of any other
subscription rights, options or warrants;
(c) A dissolution, liquidation or winding up of the Company
shall be proposed; or
(d) A capital reorganization or reclassification of the Common
Stock (other than a reorganization or reclassification subject to
Section 3.1(a) and other than a change in the par value of the
Common Stock) or any consolidation or merger of the Company with or
into another corporation (other than a consolidation or merger in
which the Company is the continuing corporation) or in the case of
any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety. Such giving
of notice shall be initiated (i) at least 10 days prior to the date
fixed as a record date or effective date or the date of closing of
the Company's stock transfer books for the determination of the
shareholders entitled to such dividend, distribution or subscription
rights, or for the determination of the shareholders entitled to
vote on such proposed merger, consolidation, sale, conveyance,
dissolution, liquidation or winding up. Such notice shall specify
such record date or the date of closing the stock transfer books, as
the case may be. Failure to provide such notice shall not affect
the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding
up.
4.2 LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If this Warrant
is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its reasonable discretion
impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor
as, and in substitution for, this Warrant.
ARTICLE 5
SPLIT-UP, COMBINATION
EXCHANGE AND TRANSFER OF WARRANTS
5.1 SPLIT-UP, COMBINATION, EXCHANGE AND TRANSFER OF WARRANTS.
Subject to the provisions of Section 5.2 hereof, this Warrant may be
split up, combined or exchanged for another Warrant or Warrants
containing the same terms to purchase a like aggregate number of Warrant
Shares. If the Warrantholder desires to split up, combine or exchange
this Warrant, he shall make such request in writing delivered to the
<PAGE>
Company and shall surrender to the Company this Warrant and any other
Warrants to be so split-up, combined or exchanged. Upon any such
surrender for a split-up, combination or exchange, the Company shall
execute and deliver to the Person entitled thereto a Warrant or Warrants,
as the case may be, as so requested. The Company shall not be required
to effect any split-up, combination or exchange which will result in the
issuance of a Warrant entitling the Warrantholder to purchase upon
exercise a fraction of a share of Common Stock. The Company may require
such Warrantholder to pay a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any split-up,
combination or exchange of Warrants.
5.2 RESTRICTIONS ON TRANSFER. This Warrant may be exercised, sold,
transferred, assigned or hypothecated (any such action, a "Transfer")
only in accordance with and subject to the provisions of the Securities
Act and the rules and regulations promulgated thereunder. If at the time
of a Transfer, a Registration Statement is not in effect to register this
Warrant, the Company may require the Warrantholder to make such
representations, and may place such legends on certificates representing
this Warrant, as may be reasonably required in the opinion of counsel to
the Company to permit a Transfer without such registration. If this
Warrant bears a legend on the first page hereof indicating that this
Warrant is subject to what is defined as the Restriction Agreement, then
this Warrant, and the Warrant Shares issuable upon exercise of this
Warrant, are subject to the terms and conditions, including restrictions
on transfer, of such Restriction Agreement.
ARTICLE 6
REGISTRATION UNDER THE SECURITIES ACT OF 1933
6.1 PIGGYBACK REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If at any time
or from time to time after __________, 1997 and prior to __________,
2003, the Company proposes to register any of its securities under
the Securities Act on any form for the registration of securities
under such Act, whether or not for its own account (other than by a
registration statement on Form S-8 or S-4 or other form which does
not include substantially the same information as would be required
in a form for the general registration of securities or would not be
available for the Warrants and/or the Registrable Securities) (a
"Piggyback Registration"), it shall as expeditiously as possible
give written notice to all Holders of its intention to do so and of
such Holders' rights under this Section 6.1. Such rights are
referred to hereinafter as "Piggyback Registration Rights." Upon the
written request of any such Holder made within 20 days after receipt
of any such notice (which request shall specify the Warrants and/or
the Registrable Securities intended to be disposed of by such
Holder), the Company shall include in the Registration Statement the
Warrants and/or the Registrable Securities which the Company has
been so requested to register by the Holders thereof and the Company
shall keep such registration statement in effect and maintain
compliance with each Federal and state law or regulation for the
period necessary for such Holder to effect the proposed sale or
other disposition (but in no event for a period greater than 120
<PAGE>
days). The Company's obligations under this Section 6.1 shall
terminate upon completion of the third Piggyback Registration that
is not withdrawn pursuant to Section 6.1(b) or cut-back pursuant to
Section 6.1(e).
(b) WITHDRAWAL OF PIGGYBACK REGISTRATION BY COMPANY. If, at
any time after giving written notice of its intention to register
any securities in a Piggyback Registration but prior to the
effective date of the related Registration Statement, the Company
shall determine for any reason not to register such securities, the
Company shall give notice of such determination to each Holder and,
thereupon, shall be relieved of its obligation to register any
Warrants and/or Registrable Securities in connection with such
Piggyback Registration. All best efforts obligations of the Company
pursuant to Section 6.4 shall cease if the Company determines to
terminate prior to such effective date any registration where
Warrants and/or Registrable Securities are being registered pursuant
to this Section 6.1.
(c) PIGGYBACK REGISTRATION OF UNDERWRITTEN PUBLIC OFFERINGS.
If a Piggyback Registration involves an offering by or through
underwriters, then (i) all Holders requesting to have their Warrants
and/or Registrable Securities included in the Company's Registration
Statement must sell their Warrants and/or Registrable Securities to
the underwriters selected by the Company on the same terms and
conditions as apply to other selling shareholders, and (ii) any
Holder requesting to have his, her or its Warrants and/or
Registrable Securities included in such Registration Statement may
elect in writing, not later than three Business Days prior to the
effectiveness of the Registration Statement filed in connection with
such registration, not to have his, her or its Warrants and/or
Registrable Securities so included in connection with such
registration.
(d) PAYMENT OF REGISTRATION EXPENSES FOR PIGGYBACK
REGISTRATION. The Company shall pay all Registration Expenses in
connection with each registration of Warrants and/or Registrable
Securities requested pursuant to a Piggyback Registration Right
contained in this Section 6.1.
(e) PRIORITY IN PIGGYBACK REGISTRATION. If a Piggyback
Registration involves an offering by or through underwriters, the
Company shall not be required to include Warrants and/or Registrable
Securities therein if and to the extent the underwriter managing the
offering reasonably believes in good faith and advises each Holder
requesting to have Registrable Securities included in the Company's
Registration Statement that such inclusion would materially
adversely affect such offering; PROVIDED, HOWEVER, that if other
selling shareholders (other than shareholders whose demand caused
the filing of the Registration Statement) have requested
registration of securities in the proposed offering, the Company
will reduce or eliminate such other selling shareholders' securities
pro rata in proportion to the respective number of shares they have
requested to be registered.
<PAGE>
6.2 DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. If, at any time subsequent to
__________, 1997 and prior to the Expiration Date, any 50% Holders
request that the Company file a registration statement under the
Securities Act to sell all or any portion of their Warrants and/or
Warrant Shares (a "Demand Registration"), as soon as practicable
thereafter the Company shall use its best efforts to file a
registration statement with respect to all Warrants and/or Warrant
Shares that it has been so requested to include and obtain the
effectiveness thereof, and to take all other action necessary under
any Federal or state law or regulation to permit the Warrants and/or
Warrant Shares that are held and/or (in the case of Warrant Shares)
that may be acquired upon the exercise of the Warrants specified in
the notices of the 50% Holders to be sold or otherwise disposed of,
and the Company shall maintain such compliance with each such
Federal and state law and regulation for the period necessary for
such 50% Holders to effect the proposed sale or other disposition;
PROVIDED, HOWEVER, the Company shall be entitled to defer such
registration for a period of up to 90 days if and to the extent that
its Board of Directors shall determine that such registration would
interfere with a pending corporate transaction. The Company shall
also promptly give written notice to any other Warrantholders and/or
the holders of any Warrant Shares who are not included in the 50%
Holders making the request pursuant to the provisions of this
Section 6.2(a) of its intention to effect any required registration
or qualification, and shall use its best efforts to effect as
expeditiously as possible such registration or qualification of all
such other Warrants and/or Warrant Shares that are then held and/or
(in the case of Warrant Shares) that may be acquired upon the
exercise of the Warrants, the Holder or holders of which have
requested such registration or qualification, within 15 days after
such notice has been given by the Company, as provided in the
preceding sentence. The Company shall be required to effect a
registration or qualification pursuant to this Section 6.2(a) of
this and all other Warrants and/or Warrant Shares on one occasion
only.
(b) PAYMENT OF REGISTRATION EXPENSES FOR DEMAND REGISTRATION.
The Company shall pay all Registration Expenses in connection with
the Demand Registration.
(c) SELECTION OF UNDERWRITERS. If any Demand Registration is
requested to be in the form of an underwritten offering, the
managing underwriter shall be Morgan Stanley & Co. Incorporated and
the co-manager (if any) and the independent pricer required under
the rules of the NASD (if any) shall be selected and obtained by the
Holders of a majority of the Warrant Shares to be registered, such
selection shall be subject to the Company's consent, which consent
shall not be unreasonably withheld. All fees and expenses (other
than Registration Expenses otherwise required to be paid) of any
managing underwriter, any co-manager or any independent underwriter
or other independent pricer required under the rules of the NASD
shall be paid for by such underwriters or by the Holders or holders
<PAGE>
whose shares are being registered. If Morgan Stanley & Co.
Incorporated should decline to serve as managing underwriter, the
Holders of a majority of the Warrant Shares to be registered may
select and obtain one or more managing underwriters. Such selection
shall be subject to the Company's consent, which shall not be
unreasonably withheld.
(d) PROCEDURE FOR REQUESTING DEMAND REGISTRATION. Any request
for a Demand Registration shall specify the aggregate number of the
Warrants and/or Registrable Securities proposed to be sold and the
intended method of disposition. Within ten (10) days after receipt
of such a request the Company will give written notice of such
registration request to all Holders, and, subject to the limitations
of Section 6.2(a), the Company will include in such registration all
Warrants and/or Registrable Securities with respect to which the
Company has received written requests for inclusion therein within
15 Business Days after the date on which such notice is given. Each
such request shall also specify the aggregate number of Registrable
Securities to be registered and the intended method of disposition
thereof.
6.3 BUY-OUTS OF REGISTRATION DEMAND. In lieu of carrying out its
obligations to effect a Piggyback Registration or Demand Registration of
any Warrants and/or Registrable Securities pursuant to this Article 6,
the Company may offer to purchase and purchase such Warrants and/or
Registrable Securities requested to be registered at an amount in cash
equal to the difference between (a) the current market price (determined
in accordance with Section 3.1(e) of the Common Stock on the day the
request for registration is made and (b) the Exercise Price in effect on
such day; PROVIDED, HOWEVER, that the Holder or Holders may withdraw such
request for registration rather than accept such offer by the Company.
6.4 REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to take action pursuant to any Federal
or state law or regulation to effect or cause the registration of any
Warrants and/or Registrable Securities under the Securities Act as
provided in this Article 6, the Company shall, as expeditiously as
practicable:
(a) Prepare and file with the SEC, as soon as practicable
within ninety (90) days after the end of the period within which
requests for registration may be given to the Company (but subject
to the provision for deferral contained in Section 6.2(a) and the
provision for reduction or elimination contained in Section 6.1(e))
a Registration Statement or Registration Statements relating to the
registration on any appropriate form under the Securities Act, which
form shall be available for the sale of the Warrants and/or
Registrable Securities in accordance with the intended method or
methods of distribution thereof and use its best efforts to cause
such Registration Statements to become effective; provided that
before filing a Registration Statement or Prospectus or any
amendment or supplements thereto, including documents incorporated
by reference after the initial filing of any Registration Statement,
the Company will furnish to the Holders of the Warrants and/or
Registrable Securities covered by such Registration Statement and
<PAGE>
the underwriters, if any, copies of all such documents to be filed,
which documents will be subject to the reasonable review of such
Holders and underwriters;
(b) Prepare and file with the SEC such amendments and post-
effective amendments to a Registration Statement as may be necessary
to keep such Registration Statement effective for a reasonable
period not to exceed 90 days; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities
Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in
such Registration Statement or supplement to such Prospectus;
(c) Notify the selling Holders of Warrants and/or Registrable
Securities and the managing underwriters, if any, promptly, and (if
requested by any such Person) confirm such advice in writing, (i)
when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or
the initiation of any proceedings for that purpose; (iv) if at any
time the representations and warranties of the Company contemplated
by Section 6.4(m) cease to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the
Warrants and/or Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose;
and (vi) of the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus or
any document incorporated therein by reference untrue or which
requires the making of any changes in the Registration Statement or
Prospectus so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading;
(d) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement as soon as
possible;
(e) If reasonably requested by the managing underwriters,
incorporate in a Prospectus supplement or post-effective amendment
such information as the managing underwriters believe (on advice of
counsel) should be included therein as required by applicable law
relating to such sale of Warrants and/or Registrable Securities,
including, without limitation, information with respect to the
purchase price being paid for the Warrants and/or Registrable
Securities by such underwriters and with respect to any other terms
of the underwritten (or "best-efforts" underwritten) offering; and
<PAGE>
make all required filings of such Prospectus supplement or post-
effective amendment;
(f) Furnish to each selling Holder of Warrants and/or
Registrable Securities and each managing underwriter, without
charge, at least one signed copy of the Registration Statement and
any post-effective amendment thereto, including financial statements
and schedules, all documents incorporated therein by reference and
all exhibits to the Registration Statement (including those
incorporated by reference);
(g) Deliver to each selling Holder of Warrants and/or
Registrable Securities and the underwriters, if any, without charge,
as many copies of the Prospectus (including each preliminary
Prospectus) and any amendment or supplement thereto as such Persons
may reasonably request; the Company consents to the use of such
Prospectus or any amendment or supplement thereto by each of the
selling Holders of Warrants and/or Registrable Securities and the
underwriters, if any, in connection with the offering and sale of
the Warrants and/or Registrable Securities covered by such
Prospectus or any amendment or supplement thereto;
(h) Prior to any public offering of Warrants and/or
Registrable Securities, cooperate with the selling Holders of
Warrants and/or Registrable Securities, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification of such Warrants and/or Registrable Securities for
offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder or
underwriter reasonably requests in writing, use its best efforts to
keep each such registration or qualification effective during the
period such Registration Statement is required to be kept effective
and use its best efforts to do any and all other acts or things
necessary or advisable to enable the disposition in such
jurisdictions of the Warrants and/or Registrable Securities covered
by the applicable Registration Statement; provided that the Company
will not be required to qualify to do business in any jurisdiction
where it is not then so qualified or to take any action which would
subject the Company to general service of process in any
jurisdiction where it is not at the time so subject;
(i) Cooperate with the selling Holders of Warrants and/or
Registrable Securities and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates
representing Warrants and/or Registrable Securities to be sold and,
unless counsel advises otherwise in a written opinion, not bearing
any restrictive legends; and enable such Warrants and/or Registrable
Securities to be in such denominations and registered in such names
as the managing underwriters may request at least two Business Days
prior to any sale of Warrants and/or Registrable Securities to the
underwriters;
(j) Use its best efforts to cause the Warrants and/or
Registrable Securities covered by the applicable Registration
Statement to be registered with or approved by such other
<PAGE>
governmental agencies or authorities within the United States as may
be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such Warrants
and/or Registrable Securities;
(k) Upon the occurrence of any event contemplated by Section
6.4(c)(vi) above, prepare a supplement or post-effective amendment
to the applicable Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers
of the Warrants and/or Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein not misleading;
(l) With respect to each issue or class of Registrable
Securities, use its best efforts to cause all Registrable Securities
covered by the Registration Statements to be listed on each
securities exchange, if any, on which similar securities issued by
the Company are then listed if requested by the Holders of a
majority of such issue or class of Registrable Securities;
(m) Enter into such agreements (including an underwriting
agreement in customary form, scope and substance) and take all such
other action reasonably required in connection therewith in order to
expedite or facilitate the disposition of such Warrants and/or
Registrable Securities and in such connection, if the registration
is in connection with an underwritten offering (i) make such
representations and warranties to the underwriters, in such form,
substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and
when requested; (ii) use its best efforts to obtain opinions of
counsel to the Company and updates thereof (which counsel and
opinions in form, scope and substance shall be reasonably
satisfactory to the underwriters) addressed to the underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings; (iii) use its best efforts to obtain "cold
comfort" letters and updates thereof from the Company's accountants
addressed to the underwriters, such letters to be in customary form
and covering matters of the type customarily covered in "cold
comfort" letters by underwriters in connection with underwritten
offerings; (iv) set forth in full in any underwriting agreement
entered into the indemnification provisions and procedures of
Section 6.5 hereof with respect to all parties to be indemnified
pursuant to said Section; and (v) deliver such documents and
certificates as may be reasonably requested by the underwriters to
evidence compliance with clause (i) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company; the above shall be done at
each closing under such underwriting or similar agreement or as and
to the extent required hereunder;
(n) Make available for inspection by one or more
representatives of the Holders of Warrants and/or Registrable
Securities being sold, any underwriter participating in any
<PAGE>
disposition pursuant to such registration, and any attorney or
accountant retained by such Holders or underwriter, all financial
and other records, pertinent corporate documents and properties of
the Company, and authorize the Company's officers, directors and
employees to supply all information reasonably requested by any such
representatives, in connection with such; and
(o) Otherwise use its best efforts to comply with all
applicable Federal and state regulations; and take such other action
as may be reasonably necessary to or advisable to enable each such
Holder and each such underwriter to consummate the sale or
disposition in such jurisdiction or jurisdictions in which any such
Holder or underwriter shall have requested that the Warrants and/or
Registrable Securities be sold.
Except as otherwise provided herein, the Company shall have sole
control in connection with the preparation, filing, withdrawal, amendment
or supplementing of each Registration Statement, the selection of
underwriters, and the distribution of any preliminary prospectus included
in the Registration Statement, and may include within the coverage
thereof additional shares of Common Stock or other securities for its own
account or for the account of one or more of its other security holders.
The Company may require each Seller of Warrants and/or Registrable
Securities as to which any registration is being effected to furnish to
the Company such information regarding the distribution of such
securities and such other information as may otherwise be required by the
Securities Act to be included in such Registration Statement, and in
connection with an underwritten public offering, to execute an
underwriting agreement in customary form with respect to such Warrants
and/or Registrable Securities.
6.5 INDEMNIFICATION.
(a) INDEMNIFICATION BY COMPANY. In connection with each
Registration Statement relating to disposition of Warrants and/or
Registrable Securities, the Company shall indemnify and hold
harmless each Holder and each underwriter of Warrants and/or
Registrable Securities and each Person, if any, who controls such
Holder or underwriter (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) against any and
all losses, claims, damages and liabilities, joint or several
(including any reasonable investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of
any action, suit or proceeding or any claim asserted), to which
they, or any of them, may become subject under the Securities Act,
the Exchange Act or other Federal or state law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or any
amendment thereof or supplement thereto, or arise out of or are
based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; PROVIDED, HOWEVER, that such
<PAGE>
indemnity shall not inure to the benefit of any Holder or
underwriter (or any person controlling such Holder or underwriter
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) on account of any losses, claims, damages or
liabilities arising from the sale of the Warrants and/or Registrable
Securities if such untrue statement or omission or alleged untrue
statement or omission was made in such Registration Statement,
Prospectus or preliminary prospectus or such amendment or
supplement, in reliance upon and in conformity with information
furnished in writing to the Company by the Holder or underwriter
specifically for use therein.
(b) INDEMNIFICATION BY HOLDER. In connection with each
Registration Statement, each Holder shall indemnify, to the same
extent as the indemnification provided by the Company in Section
6.5(a), the Company, its directors and each officer who signs the
Registration Statement, and each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act) but only insofar as such losses, claims,
damages and liabilities arise out of or are based upon any untrue
Statement or omission or alleged untrue statement or omission which
was made in the Registration Statement, the Prospectus or
preliminary prospectus or any amendment thereof or supplement
thereto, in reliance upon and in conformity with information
furnished in writing by such Holder to the Company specifically for
use therein. In no event shall the liability of any selling Holder
of Warrants and/or Registrable Securities hereunder be greater in
amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Warrants and/or Registrable Securities
giving rise to such indemnification obligation. The Company shall
be entitled to receive customary indemnities from underwriters with
respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus, Registration Statement
or preliminary prospectus or any amendment thereof or supplement
thereto.
(c) CONDUCT OF INDEMNIFICATION PROCEDURE. Any party that
proposes to assert the right to be indemnified hereunder will,
promptly after receipt of notice of commencement of any action, suit
or proceeding against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section,
notify each such indemnifying party of the commencement of such
action, suit or proceeding, enclosing a copy of all papers served.
No indemnification provided for in Section 6.5(a) or Section 6.5(b)
shall be available to any party who shall fail to give notice as
provided in this Section 6.5(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have
related and was prejudiced by the failure to give such notice, but
the omission so to notify such indemnifying party of any such
action, suit or proceeding shall not relieve it from any liability
that it may have to any indemnified party for contribution otherwise
than under this Section. In case any such action, suit or
proceeding shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the
<PAGE>
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof and the approval by the indemnified party
of such counsel, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, except as
provided below and except for the reasonable costs of investigation
subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall have the right to
employ its counsel in any such action, but the fees and expenses of
such counsel shall be at the expense of such indemnified party
unless (i) the employment of counsel by such indemnified party has
been authorized in writing by the indemnifying parties, (ii) counsel
for the indemnified party shall have reasonably concluded that there
may be a conflict of interest between the indemnifying parties and
the indemnified party in the conduct of the defense of such action
(in which case the indemnifying parties shall not have the right to
direct the defense of such action on behalf of the indemnified party
but will be responsible for the reasonable fees of only one
additional counsel for all of the indemnified parties) or (iii) the
indemnifying parties shall not have employed counsel to assume the
defense of such action within a reasonable time after notice of the
commencement thereof, in each of which cases the reasonable fees and
expenses of counsel shall be at the expense of the indemnifying
parties. An indemnifying party shall not be liable for any
settlement of any action, suit, proceeding or claim effected without
its written consent.
(d) CONTRIBUTION. In connection with each Registration
Statement relating to the disposition of Warrants and/or Registrable
Securities, if the indemnification provided for in Section 6.5(a) or
Section 6.5(b) hereof is unavailable to an indemnified party in
respect to any losses, claims, damages or liabilities referred to
therein, then the Company and each Holder shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid
or payable by such indemnified party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate
to reflect (i) if the Company has included its own securities in
such Registration Statement, the relative benefits received by the
Company, on the one hand, and each such Holder, on the other hand,
from the public offering of such securities and the Warrants and/or
Registrable Securities, or (ii) if the Company has not included any
of its securities in such Registration Statement, the relative fault
of the Company, on the one hand, and each such Holder, on the other
hand, in connection with the facts which resulted in such loss,
claim, damage or liability. The relative fault, in the case of an
untrue statement, alleged untrue statement, omission or alleged
omission, shall be determined by, among other things, whether such
statement, alleged statement, omission or alleged omission relates
to information furnished by the Company or such Holder and the
parties' relative intent, knowledge, access to information and their
relative opportunities to correct or prevent such statement, alleged
statement, omission or alleged omission. In no event shall the
liability of any selling Holder of Warrants and/or Registrable
<PAGE>
Securities hereunder be greater in amount than the dollar amount of
the net proceeds received by such Holder upon the sale of the
Warrants and/or Registrable Securities giving rise to such
contribution obligation.
ARTICLE 7
OTHER MATTERS
7.1 SUCCESSORS AND ASSIGNS. All the covenants and provisions of
this Warrant by or for the benefit of the Company or the Holder shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
7.2 NO INCONSISTENT AGREEMENTS. The Company will not on or after
the date of this Warrant enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Holders
in this Warrant or otherwise conflicts with the provisions hereof. The
rights granted to the Holders hereunder do not in any way conflict with
and are not inconsistent with the rights granted to holders of the
Company's securities under any other agreements.
7.3 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will
not take any action outside the ordinary course of business, or permit
any change within its control to occur outside the ordinary course of
business, which is intended to interfere with the ability of the Holders
of Warrants and/or Registrable Securities to include such Warrants and/or
Registrable Securities in a registration undertaken pursuant to this
Agreement.
7.4 INTEGRATION/ENTIRE AGREEMENT. This Warrant is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein with respect to the
registration rights granted by the Company with respect to the Warrants
and/or Registrable Securities.
7.5 AMENDMENTS AND WAIVERS. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified
or supplemented, and waiver or consents to departures from the provisions
hereof may not be given, unless the Company has obtained the written
consent of Holders of at least a majority of the outstanding Registrable
Securities. Warrantholders and Holders shall be bound by any consent
authorized by this Section whether or not certificates representing such
Warrants and/or Registrable Securities have been marked to indicate such
consent
7.6 GOVERNING LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of Delaware.
7.7 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable, the validity,
<PAGE>
legality and enforceability of any such provisions in every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
7.8 ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provisions of this Warrant, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to
recover reasonable attorneys' fees and disbursements in addition to its
costs and expenses and any other available remedy.
7.9 COMPUTATIONS OF CONSENT. Whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its affiliates
(other than the Warrantholder or Holders, if they are deemed to be such
affiliates solely by reason of their holdings of Warrants or Registrable
Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
7.10 NOTICE. Any notices or certificates by the Company to a Holder
and by a Holder to the Company shall be deemed delivered if in writing
and delivered in person or by registered mail (return receipt requested)
to the Holder addressed to it at the address provided to the Company of
such Holder at the time a Warrant was first issued to him, her or it, or,
if the Holder has designated by notice in writing to the Company any
other address, to such other address, and if to the Company, addressed to
it at its Operations Center, 600 Market Street, Huron, South Dakota,
57350, Attention: President, or if the Company has designated by notice
in writing to the Holder any other address, to such other address. The
Company may change its address by written notice to the Holders and the
Holders may change their respective addresses by written notice to the
Company.
IN WITNESS WHEREOF, this Warrant has been duly executed by the
Company under its corporate seal as of the _____ day of __________, 1996.
NORTHWESTERN PUBLIC SERVICE COMPANY
(Corporate Seal) By:____________________________________
President
Attest:_________________________
Corporate Secretary
<PAGE>
ASSIGNMENT
(TO BE EXECUTED ONLY UPON ASSIGNMENT OF WARRANT CERTIFICATE)
For value received, ____________________ hereby sells, assigns and
transfers unto ____________________ the within Warrant Certificate,
together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint ____________________ attorney, to
transfer said Warrant Certificate on the books of the within-named
Company with respect to the number of Warrants set forth below, with full
power of substitution in the premises:
Federal Income
Tax Identification Number or No. of
Name(s) of Assignee(s) Address Social Security Number Warrants
- ---------------------- ------- ---------------------- --------
And if said number of Warrants shall not be all the warrants represented
by said Warrant Certificate, a new Warrant Certificate is to be issued in
the name of said undersigned for the balance remaining of the Warrants
registered by said Warrant Certificate.
Signature___________________________
Note: The above signature should
correspond exactly with the
name on the face of this
Warrant Certificate
Dated:_______________, 19___
<PAGE>
SUBSCRIPTION FORM
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
NORTHWESTERN PUBLIC SERVICE CORPORATION
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to
purchase thereunder, ______ shares of Common Stock, as provided for
therein, and tenders herewith payment of the purchase price in full in
the form of cash or a certified or official bank check in the amount of
$__________.
Please issue a certificate or certificates for such Common Stock in
the name of, and pay any cash for any fractional share to:
Name______________________________
______________________________
______________________________
______________________________
(Please print Name, Address
and Federal Income Tax
Identification Number or
Social Security Number)
If said number of shares shall not be all the shares purchasable
under the within Warrant Certificate, a new Warrant Certificate is to be
issued in the name of said undersigned for the balance remaining of the
shares purchasable thereunder rounded up to the next higher number of
shares.
Signature_________________________
Note: The above signature should
correspond exactly with the
name on the first page of
this Warrant Certificate
(or, if applicable, with the
name of the assignee appearing
in the assignment form
presented herewith).
