1
EXHIBIT 10.25
WMJB, INC.
ASSET PURCHASE AGREEMENT
DATED AS OF:
July __, 2001
2
TABLE OF CONTENTS
Page
----
ARTICLE I THE TRANSACTION.....................................................................................1
1.1 Sale of Assets; Assumption of Liabilities......................................1
1.2 Purchase Price.................................................................2
1.3 Adjustments to Purchase Price..................................................2
1.4 Adjustment Procedure...........................................................2
1.5 Payment of the Closing Estimated Purchase Price................................3
1.6 Sales Taxes....................................................................4
1.7 Approval of the Company Shareholders...........................................4
1.8 Allocation of the Purchase Price...............................................4
1.9 Accounts Receivable............................................................4
ARTICLE II THE CLOSING AND CLOSING DELIVERIES.................................................................5
2.1 Closing........................................................................5
2.2 Deliveries by the Buyer........................................................6
2.3 Deliveries by the Company......................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................8
3.1 Authority......................................................................8
3.2 Organization...................................................................8
3.3 No Conflict....................................................................9
3.4 Capitalization of the Company..................................................9
3.5 Subsidiaries...................................................................9
3.6 Financial Statements...........................................................9
3.7 Subsequent Events.............................................................10
3.8 Absence of Undisclosed Liabilities............................................11
3.9 Banking Relationships.........................................................11
3.10 Insurance.....................................................................11
3.11 Assets; Inventory.............................................................12
3.12 Real Estate...................................................................12
3.13 Personal Property Leases......................................................13
3.14 Intellectual Property.........................................................13
3.15 Employees.....................................................................14
3.16 Labor Matters.................................................................14
3.17 Employee Benefit Plans........................................................14
3.18 Licenses and Permits..........................................................16
3.19 Material Contracts............................................................16
3.20 Taxes.........................................................................17
i
3
3.21 Product Warranty..............................................................18
3.22 Legal Proceedings.............................................................18
3.23 Environmental Matters.........................................................18
3.24 Compliance with Law...........................................................20
3.25 Plant and Equipment...........................................................20
3.26 Capital Expenditures..........................................................21
3.27 Brokers.......................................................................21
3.28 Transactions with Related Parties.............................................21
3.29 No Implied Representation.....................................................21
3.30 Disclosure Schedule Supplements...............................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER..........................................................22
4.1 Authority.....................................................................22
4.2 Organization..................................................................22
4.3 No Conflicts..................................................................22
4.4 Buyer's Business Investigation................................................22
4.5 Disputes or Proceedings.......................................................23
4.6 Financing.....................................................................23
4.7 Brokers.......................................................................23
ARTICLE V COVENANTS OF THE COMPANY...........................................................................23
5.1 Intentionally Omitted.........................................................23
5.2 Interim Conduct of Business...................................................23
5.3 Access; Tank Verification.....................................................25
5.4 Company's Efforts; Shareholders' Undertakings.................................25
5.5 No Shop.......................................................................25
5.6 Covenant Not To Compete.......................................................26
5.7 Pay Off of Long Term Debt; Purchase of Vehicles; Intra-Company Payables.......26
5.8 Financial Statement Review....................................................27
5.9 Approval of the Company Shareholders..........................................27
5.10 Orderly Transfer of Business..................................................27
ARTICLE VI COVENANTS OF BUYER................................................................................28
6.1 Intentionally Omitted.........................................................28
6.2 Records and Documents.........................................................28
6.3 Buyer's Efforts...............................................................28
6.4 Confidentiality...............................................................28
6.5 Employee Matters..............................................................28
6.6 Audited Financial Statements..................................................29
6.7 Environmental Site Assessment.................................................29
ii
4
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER....................................................30
7.1 Accuracy of Warranties and Performance of Covenants...........................30
7.2 No Pending Action.............................................................30
7.3 No Adverse Change.............................................................31
7.4 No Proceeding or Litigation...................................................31
7.5 Escrow Agreement..............................................................31
7.6 Closing of Related Transactions...............................................31
7.7 Title Insurance...............................................................31
7.8 Ability to Obtain Opinion as to Financial Statements..........................32
7.9 Non-Competition Agreement.....................................................32
7.10 ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
on-Competition Agreement......................................................32
7.11 Propane Supply Contract.......................................................32
7.12 Redding Lease.................................................................32
7.13 Railroad Spur Lease...........................................................32
7.14 EDC Lease.....................................................................32
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.............................................33
8.1 Accuracy of Warranties and Performance of Covenants...........................33
8.2 No Pending Action.............................................................33
8.3 No Proceeding or Litigation...................................................33
8.4 Escrow Agreement..............................................................33
8.5 Non-Competition Agreement.....................................................33
8.6 Closing of Related Transactions...............................................34
8.7 ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ Non-Competition Agreement.........................34
8.8 Redding Lease.................................................................34
ARTICLE IX SURVIVAL AND INDEMNIFICATION......................................................................34
9.1 Survival of Representations and Warranties....................................34
9.2 Indemnification of the Buyer..................................................34
9.3 Indemnification of the Company................................................35
9.4 Defense of Third Party Claims.................................................35
9.5 Liability of the Company......................................................36
9.6 Liability of Buyer............................................................37
9.7 Exclusivity...................................................................37
9.8 Reduction for Insurance Proceeds and Tax Savings..............................37
9.9 Subrogation...................................................................37
ARTICLE X TERMINATION BY THE PARTIES.........................................................................38
10.1 Events of Termination.........................................................38
10.2 Action Upon Termination.......................................................38
10.3 Effect of Termination.........................................................38
iii
5
ARTICLE XI GENERAL PROVISIONS................................................................................39
11.1 Amendments and Waiver.........................................................39
11.2 Notices.......................................................................39
11.3 Confidentiality...............................................................40
11.4 No Public Announcement........................................................40
11.5 Expenses......................................................................40
11.6 Successors and Assigns........................................................40
11.7 Entire Transaction............................................................41
11.8 Severability..................................................................41
11.9 Governing Law and Jurisdiction................................................41
11.10 Dispute Resolution............................................................41
11.11 Headings......................................................................42
11.12 Counterparts..................................................................42
11.13 Construction..................................................................42
11.14 Further Assurances............................................................43
iv
6
EXHIBITS
Exhibit A Allocation of Purchase Price
Exhibit B Escrow Agreement
Exhibit C Form of Opinion of Buyer's Counsel
Exhibit D Form of Assumption Agreement
Exhibit E Form of Opinion of Company's Counsel
Exhibit F Consents
Exhibit G Form of Non-Competition Agreement
Exhibit H Form of ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ Non-Competition Agreement
7
ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of July __, 2001, by and among WMJB, Inc., a
California
corporation (the "Company"), the Company's Shareholders listed on the signature
page hereto (the "Shareholders") and Heritage Operating, L.P., a Delaware
limited partnership (the "Buyer"). The Company and the Buyer are hereinafter
collectively referred to herein as the "Parties" and each as a "Party."
RECITALS
A. The Company is engaged in the business of retail marketing
of propane to residential, commercial, industrial and agricultural customers
(the "Business").
B. The Buyer desires to purchase from the Company, and the
Company desires to sell to the Buyer, those assets of the Company necessary to
operate the Business described in Schedule 1.1 of this Agreement on the terms
set forth herein.
C. Defined terms used and not otherwise defined in the body of
this Agreement shall have the respective meanings assigned in the Appendix
attached hereto.
AGREEMENT
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
THE TRANSACTION
1.1 Sale of Assets; Assumption of Liabilities. The Company
hereby agrees to sell, assign, transfer, convey and deliver to the Buyer, and
Buyer agrees to purchase from the Company, at the Closing (as hereinafter
defined), all of the Assets, on the terms and subject to the conditions set
forth in this Agreement (the "Sale"). For purposes of this Agreement, "Assets"
shall mean the properties, rights, interests and other assets of the Company and
its Subsidiaries (wherever located) set forth on Schedule 1.1. Notwithstanding
anything contained herein to the contrary, the Excluded Assets (as defined
herein) are specifically excluded from the Assets and shall be retained by the
Company. In addition, upon the terms and subject to the conditions set forth in
this Agreement, at the Closing the Buyer shall assume the Assumed Liabilities.
For purposes of this Agreement, the "Assumed Liabilities" mean
-1-
8
those obligations and liabilities of the Company set forth on Schedule 1.1.
Except for the Assumed Liabilities, Buyer shall not be required to assume, and
shall not assume, any liability or obligation of the Company or any of its
Subsidiaries of any nature, and Buyer shall specifically not assume, or
otherwise be responsible for, any Excluded Liabilities.
1.2 Purchase Price. The aggregate purchase price for the
Assets shall be U.S. $2,640,331 (the "Purchase Price"), as adjusted in the
manner provided in Section 1.3.
1.3 Adjustments to Purchase Price. The Purchase Price shall be
(i) decreased dollar-for-dollar by the amount of Assumed Debt (as described in
Section 5.7), and (ii) increased by the amount of the Benefit Expense Proration.
(For purposes of this Agreement, the "Benefit Expense Proration" shall equal the
expense paid in advance by the Company and its Subsidiaries with respect to the
Benefit Plans for the month in which the Closing occurs, prorated for the number
of days that elapse in such month until the Closing Date). In addition, the
Purchase Price shall be adjusted for the difference between U.S. $126,418 and
the Company's Net Working Capital (as defined on Schedule 1.3) as of the Closing
Date (the "Adjustment Amount"). Net Working Capital shall be calculated in
accordance with the accounting principles set forth on Schedule 1.3 attached
hereto (collectively, the "Accounting Principles").
1.4 Adjustment Procedure.
(a) The Company will prepare and will cause the
Company's certified public accountants to review consolidated financial
statements ("Closing Financial Statements") of the Company as of the Closing
Date and for the period from the date of the Interim Balance Sheet (as defined
in Section 3.6 below) through the Closing Date, including a computation of the
Company's, Net Working Capital, and Assumed Debt and Benefit Expense Proration
as of the Closing Date. The Company will deliver the Closing Financial
Statements (together with detail and working papers reasonably required for
Buyer's review including tax accruals for the short tax period ending at the
Closing) to the Buyer within sixty (60) days after the Closing Date. If, within
thirty (30) days following delivery of the Closing Financial Statements, the
Buyer has not given the Company notice of its objection to the Closing Financial
Statements (such notice must contain a detailed statement of the basis of the
Buyer's objection), then the Company's Net Working Capital and Assumed Debt and
Benefit Expense Proration reflected in the Closing Financial Statements will be
used in computing the Adjustment Amount, the amount of the Assumed Debt and the
Benefit Expense Proration Amount. If the Buyer gives such notice of objection,
then the issues in dispute will be submitted to such nationally recognized
accounting firm (other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇) as the Parties may designate (the
"Accountants"), for resolution. If issues in dispute are submitted to the
Accountants for resolution, (i) each
-2-
9
Party will furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that Party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the Accountants
any materials relating to the determination and to discuss the determination
with the Accountants; (ii) the determination by the Accountants, as set forth in
a notice delivered to both Parties by the Accountants, will be made within sixty
(60) days of submission and will be binding and conclusive on the Parties; and
(iii) the Buyer and the Company will each bear one-half of the fees of the
Accountants for such determination.
(b) On the tenth business day following the final
determination of the amount to be paid by Buyer for the Adjustment Amount, the
amount of the Assumed Debt and the Benefit Expense Proration, if the Purchase
Price, as adjusted in the manner provided herein, is greater than the Estimated
Purchase Price paid by the Buyer pursuant to Section 1.5, the Buyer will pay the
difference to the Company together with the Net Working Capital Holdback
described in Section 2.2(a)(ii), and if such Purchase Price is less than such
Estimated Purchase Price (the "Purchase Price Shortfall"), (i) the Company will
pay to the Buyer the amount by which the Purchase Price Shortfall exceeds the
Net Working Capital Holdback, if the Purchase Price Shortfall is greater than
the amount of the Net Working Capital Holdback, or (ii) the Buyer shall pay to
the Company the amount by which the Net Working Capital Holdback exceeds the
Purchase Price Shortfall, if the amount of the Net Working Capital Holdback is
greater than the Purchase Price Shortfall. All payments will be made together
with interest at 8% per annum beginning on the Closing Date and ending on the
date of payment. Payments to the Company shall be made by wire transfer of
immediately available funds and shall be made in the manner and will be
allocated in the proportions described in Section 1.2. Payment to the Buyer
shall be made out of the Escrow Fund (as defined in the Escrow Agreement)
pursuant to the terms of the Escrow Agreement.
1.5 Payment of the Closing Estimated Purchase Price. Not later
than two (2) business days prior to the Closing Date, the Company shall prepare
and deliver to the Buyer a statement setting forth a good faith estimate of (i)
the Net Working Capital as of the Closing Date (the "Estimated Net Working
Capital") prepared in accordance with the Accounting Principles, (ii) the amount
of Assumed Debt as of the Closing Date (the "Estimated Assumed Debt"), and (iii)
the amount of the Benefit Expense Proration as of the Closing Date (the
"Estimated Benefit Expense Proration"). The "Estimated Purchase Price" shall
mean an amount equal to the following:
(i) if the Estimated Net Working Capital is greater
than or equal to $126,418, then the Purchase Price plus (a)
the excess of the Estimated Net Working Capital over $126,418
and (b) the
-3-
10
Estimated Benefit Expense Proration less the Estimated Assumed
Debt; and
(ii) if the Estimated Net Working Capital is less
than $126,418, then the Purchase Price plus the Estimated
Benefit Expense Proration less the excess of $126,418 over the
Estimated Net Working Capital and less the Estimated Assumed
Debt.
1.6 Sales Taxes. The Buyer shall bear and pay any sales taxes,
use taxes, transfer taxes, documentary charges, recording fees or similar taxes,
charges, fees or expenses that may become payable in connection with the sale or
transfer of the Assets to the Buyer.
1.7 Approval of the Company Shareholders. The Company shall,
as soon as practicable, seek the approval of its shareholders to the transaction
contemplated by this Agreement.
1.8 Allocation of the Purchase Price. Attached hereto as
Exhibit A is a statement setting forth the Parties' determination of the manner
in which the Purchase Price referred to in Section 1.2 is to be allocated among
the Assets. The allocation prescribed by such statement shall be conclusive and
binding upon the Parties for all purposes, and the Parties shall not file any
tax return or other document with, or make any statement or declaration to, any
Governmental Entity that is inconsistent with such allocation.
1.9 Accounts Receivable.
(a) At the Closing, the accounts receivable of the
Company and its Subsidiaries as of the Closing Date that are included in the
Assets (the "Accounts Receivable"), less a reserve placed in a sub-account of
the Escrow in an amount equal to ten percent (10%) of their face amount (the
"A/R Reserve Escrow"), shall be determined. As of the date four (4) months (the
"Collection Period') following the Closing, Buyer shall determine in good faith
the amount, if any, by which the Accounts Receivable exceed the actual
collection of such Accounts Receivable after applying any applicable customer
deposits or credits made or given prior to the Closing Date with respect to such
Accounts Receivable or the transactions giving rise thereto (the "Accounts
Receivable Deficiency") at the expiration of such Collection Period. Buyer
shall, within twenty (20) days following the expiration of such Collection
Period, provide the Company with reasonably satisfactory evidence of the amount
of the Accounts Receivable Deficiency and the components thereof, and subject to
the provisos below, shall assign to the Company any such Accounts Receivable
which have not been collected within the Collection Period, and any rights to
interest and/or penalties relating thereto, provided that:
-4-
11
(i) Buyer may elect to retain any such Accounts
Receivable, in which event the aggregate amounts of such
Accounts Receivable shall be excluded in determining the
Accounts Receivable Deficiency; or
(ii) Buyer may elect to return the uncollected
Accounts Receivable to the Company at their book value to
determine the Accounts Receivable Deficiency.
(b) Except where (i) a customer that owes an Account
Receivable is on a COD basis on the day of the Closing, or (ii) Buyer in good
faith, converts a customer to COD basis after Closing, the first payments
received by Buyer or its successors in interest from such customer shall be
applied to the payment of the oldest outstanding balance of such customer's
account. Payments made to Buyer or its successors in interest by any such
customer for products sold by Buyer or its successors in interest on a COD basis
shall not be applied to the Accounts Receivable that existed prior to the
Closing, but shall be retained exclusively by Buyer or its successors in
interest. Buyer agrees to notify the Company at the time Buyer or its successors
in interest place any customer on a COD basis.
(c) Buyer agrees to use its best efforts to collect
Accounts Receivable, but shall not be required to institute legal action for any
collection.
(d) On or about the date three (3) months after the
Closing Date, Buyer shall provide the Company with a status report setting forth
in reasonable detail Buyer's collections of, and collection efforts with respect
to, the Accounts Receivable and confer with the Company regarding appropriate
steps to be taken to collect unpaid Accounts Receivable.
Within twenty-five (25) days after the Company's receipt of
Buyer's written notice of the Accounts Receivable Deficiency, Buyer shall
receive from the A/R Reserve Escrow the Accounts Receivable Deficiency, with
interest on such Accounts Receivable Deficiency, as earned on such amount under
the A/R Reserve Escrow. In the event that the A/R Reserve Escrow is insufficient
to satisfy the Accounts Receivable Deficiency, then such insufficiency shall be
deducted from the Escrow Fund. In the event the amount of the A/R Reserve Escrow
exceeds the Accounts Receivable Deficiency, then the Escrow Agent shall promptly
transfer the excess to Company.
ARTICLE II
THE CLOSING AND CLOSING DELIVERIES
2.1 Closing. The closing of the Sale contemplated by this
Agreement (the "Closing") shall occur at the offices of Sheppard, Mullin,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
-5-
12
LLP, Four ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, no later than
the third business day after the conditions to Closing (other than those which
by their nature are to be fulfilled at the Closing) are fulfilled or waived, or
at such other place or time as may be mutually agreed upon by the Parties (the
"Closing Date"). Upon consummation, the Closing shall be deemed to have taken
place as of the close of business on the Closing Date.
2.2 Deliveries by the Buyer. At the Closing, the Buyer shall
deliver the following:
(a) By wire transfer of immediately available funds
to such account as the Company may designate at least two business days prior to
the Closing, an aggregate amount equal to the Estimated Purchase Price, reduced
by (i) an amount (the "Escrow Amount") equal to twenty percent (20%) of the
Estimated Purchase Price, to be deposited in the escrow (the "Escrow") with the
Escrow Agent pursuant to the terms of the Escrow Agreement described in Section
2.2(b) below, (ii) a sum equal to twenty percent (20%) of the Estimated Net
Working Capital (such sum, the "Net Working Capital Holdback"), and (iii) the
A/R Reserve Escrow amount, to be deposited into a sub-account of the Escrow as
provided in Section 1.9.
(b) By wire transfer of immediately available funds
to the account of U.S. Bank (the "Escrow Agent"), an amount equal to the Escrow
Amount and the A/R Reserve Escrow Amount to be held pursuant to the terms of the
Escrow Agreement by and among the Buyer, the Company and the Escrow Agent in
substantially the form attached hereto as Exhibit B (the "Escrow Agreement");
(c) The Escrow Agreement, executed on behalf of the
Buyer;
(d) The Non-Competition Agreement, executed on behalf
of the Buyer;
(e) The ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ Non-Competition
Agreement, executed on behalf of the Buyer;
(f) An opinion of the Buyer's counsel in the form
attached as Exhibit C;
(g) A Certificate of the Secretary of the Buyer as to
the resolutions authorizing the transactions contemplated hereby and a
Certificate of an executive officer of the Buyer reaffirming, and updating as
necessary, the Buyer's representations and warranties contained in Article IV;
(h) An assumption agreement (the "Assumption
Agreement") in the form attached as Exhibit D;
-6-
13
(i) The Redding Lease, executed on behalf of the
Buyer; and
(j) Such other instruments or documents as may be
necessary or appropriate to carry out the transactions contemplated hereby.
2.3 Deliveries by the Company. At the Closing, the Company
shall deliver the following:
(a) Such bills of sale, deeds, assignments, and other
transfer documents as may (in the reasonable judgment of the Buyer or its
counsel) be necessary or appropriate to assign, convey, transfer and deliver the
Assets to the Buyer;
(b) A Certificate of an officer of the Company
certifying as to the resolutions of the Board of Directors and Shareholders of
the Company, authorizing the execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated hereby;
(c) Articles of Incorporation of the Company (and any
amendments thereto) certified as of a recent date by the Secretary of State of
the State of
California;
(d) The Escrow Agreement, executed by the Company;
(e) The Non-Competition Agreement executed by ▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇;
(f) The ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ Non-Competition
Agreement, executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇;
(g) An opinion of the Company counsel in the form
attached as Exhibit E;
(h) A Certificate of Good Standing of the Company and
each Subsidiary certified as of a recent date by the Secretary of State of the
State of
California;
(i) A Certificate of an executive officer of the
Company reaffirming, and updating as necessary the Company's representations and
warranties contained in Article III;
(j) UCC lien releases or terminations with respect to
the financing statements listed on Schedule 3.11 filed with respect to the
Company or its Subsidiaries to the extent such releases or terminations have not
been provided to Buyer prior to the Closing;
-7-
14
(k) those books and records of the Company relating
solely to the Assets being sold and transferred to the Buyer;
(l) The Redding Lease executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇;
(m) The consents listed on Exhibit G; and
(n) Such other instruments or documents as may be
necessary or appropriate to carry out the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to the Buyer that
except as provided in the Schedules referred to herein:
3.1 Authority. Subject to approval by its Shareholders, the
Company has full corporate power and authority and has taken all action
necessary to execute and deliver this Agreement, the Escrow Agreement, the ▇▇▇▇
of sale and any other documents required by law to effect the Sale
(collectively, the "Transaction Documents") and to carry out the transactions
contemplated hereby and thereby. The execution and delivery of the Transaction
Documents and the consummation of the transactions contemplated hereby have been
duly and validly approved by the Board of Directors of the Company. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, subject, however, to the approval of
the Shareholders and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or limiting
creditor's rights or by equitable principles generally.
3.2 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California
and has full power and authority to own, lease and operate its assets and to
carry on the Business. The Company is duly licensed, registered and qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions in which the ownership, leasing or operation of its assets or the
conduct of its business requires such qualification, except where the failure to
be so licensed, registered or qualified would not have a material adverse effect
upon its assets or operations. Schedule 3.2 sets forth each state or other
jurisdiction in which the Company is licensed or qualified to do business.
-8-
15
3.3 No Conflict. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not result in
the creation of any Lien or, except as set forth in Schedule 3.3, the
termination or acceleration of any indebtedness or other obligation of the
Company, and are not prohibited by, do not violate or conflict with any
provision of, and do not constitute a default under or a breach of (a) the
Articles of Incorporation or By-laws of the Company, (b) any Material Contract
(as defined in Section 3.19 below), (c) any order, writ, injunction, decree or
judgment of any court or governmental agency, or (d) any law, rule or regulation
applicable to the Company. No approval, authorization, registration, consent,
notice, order or other action of or filing with any Person, including any
Governmental Entity, is required for the execution and delivery by the Company
of this Agreement or the consummation of the transactions contemplated hereby,
other than as set forth on Schedule 3.3.
3.4 Capitalization of the Company. The Company's equity
capital consists of 10,000 authorized shares of common stock, without par value,
of which 10,000 shares are issued and outstanding, all of which are owned by the
Shareholders.
3.5 Subsidiaries. The Company is the record and beneficial
owner of a majority of the outstanding capital stock of the corporations, if
any, listed on Schedule 3.5 attached hereto (such majority owned corporations,
if any, are referred to in this Agreement and the Schedules hereto as the
"Subsidiaries"). The equity capital stock of each Subsidiary is as set forth in
Schedule 3.5. The number of issued and outstanding shares of capital stock of
each Subsidiary owned beneficially and of record by the Company is set forth on
Schedule 3.5 and all of such shares are owned free and clear of any Liens and
have been duly authorized, validly issued, are fully paid and non-assessable,
and have not been issued in violation of any preemptive rights of stockholders.
No options, warrants or other rights to acquire, sell or issue shares of capital
stock of any of the Subsidiaries, whether upon conversion of other securities or
otherwise, are outstanding. Except for the Company's ownership of the capital
stock of the Subsidiaries and except as may be set forth on the Interim Balance
Sheet or Schedule 3.5, neither the Company nor any Subsidiary, either directly
or indirectly, owns an equity interest in any other corporation, limited
liability company, partnership or other entity other than as set forth on
Schedule 3.5, which Schedule accurately describes the nature of the Company's or
its Subsidiary's interest in such entity and the number and type of shares of
stock or other equity interests held in such entity.
3.6 Financial Statements. The Company has delivered to the
Buyer (i) the unaudited consolidated balance sheets of the Company and its
Subsidiaries as of each of the fiscal years ended June 30, 2000, 1999 and 1998,
and the statements of income for each of such years, and (ii) an unaudited
consolidated balance sheet of the Company and its Subsidiaries as at April 30,
2001 (the "Interim Balance Sheet") and
-9-
16
the related statement of income for the ten (10) months then ended. Except as
set forth on Schedule 3.6, all such balance sheets and the notes thereto fairly
present in all material respects the financial position of the Company and its
Subsidiaries as of the respective dates thereof and such statements of income
and the notes thereto fairly present in all material respects the results of
operations for the periods therein referred to, all in accordance with GAAP but
subject, in the case of interim financial statements, to normal year-end
adjustments.
3.7 Subsequent Events. Except as set forth on Schedule 3.7,
since May 1, 2001, the Company has been operated only in the ordinary course of
business and there has not been any (i) material adverse change in the Assets,
liabilities, financial condition, earnings, properties, Business, customer base
or results of operations, (ii) damage, destruction or condemnation with respect
to any Asset or property owned, leased or otherwise used by the Company or any
Subsidiary relating to the Business, whether or not covered by insurance, (iii)
change by the Company in accounting methods, practices or principles, or (iv)
other material transaction not in the ordinary course of business entered into
by the Company or any Subsidiary that would likely have a material adverse
effect on the Business or the Assets. Without limiting the foregoing, except as
set forth on Schedule 3.7 and in each case, except in the ordinary course of
business, since May 1, 2001 to the date hereof, neither the Company nor any
Subsidiary has:
(a) sold, leased, transferred or otherwise disposed
of any tangible assets or property related to the Business of the Company or
canceled, compromised, released or assigned any debt or claim relating to the
Business of the Company, in each case, in an amount individually in excess of
$10,000;
(b) created any Lien on any of the Assets of the
Company;
(c) made (or committed to make) capital expenditures
with respect to the Business in an aggregate amount in excess of $10,000 in any
month;
(d) instituted, settled or agreed to settle any
litigation, action or proceeding before any Governmental Entity with respect to
the Business, except for settlement of workers' compensation and similar claims
or other claims for personal injury, in each case not in excess of $10,000;
(e) assumed, guaranteed, endorsed or otherwise become
responsible for the obligations of any Person with respect to the Business;
(f) granted any increase in compensation or fringe
benefits;
-10-
17
(g) agreed, undertaken, or committed to carry out any
investigation, assessment, remediation or response action regarding the presence
or possible presence of hazardous substances with respect to the Business;
(h) except for Material Contracts listed on Schedule
3.19, entered into any material agreement, contract, license, lease, arrangement
or commitment with respect to the Business; or
(i) authorized or entered into any binding commitment
(whether written or oral) to take any of the types of actions described in the
foregoing paragraphs (a) through (h).
3.8 Absence of Undisclosed Liabilities. Except (i) as
reflected elsewhere in this Agreement, (ii) as shown in Schedule 3.8, (iii) as
reflected in the Interim Balance Sheet, (iv) for liabilities which would be
fully covered by insurance (except for normal deductible amounts), or (v) for
liabilities and obligations incurred in the ordinary course of business
consistent with past practices, neither the Company nor any Subsidiary has any
liabilities or obligations of any nature, whether absolute, accrued, contingent
or otherwise, which relate to the Business and which individually or in the
aggregate would subject the Company or a Subsidiary to a liability which relates
to or affects the Business and which is in excess of $10,000.
3.9 Banking Relationships. Schedule 3.9 sets forth a correct
and complete list of all banks and financial institutions in which the Company
or any Subsidiary has an account, deposit, safe-deposit box, lock box or line of
credit or other loan facility with respect to the Business, and the names of all
Persons authorized to draw on those accounts or deposits, or to borrow under
such lines of credit or other loan facilities, or to obtain access to such
boxes.
3.10 Insurance. Schedule 3.10 sets forth a correct and
complete list (including the name of the insurer, coverage, self-retention and
expiration date) of all binders and policies of fire, casualty, liability,
product liability, workers' compensation, vehicular and other insurance
purchased from outside parties and held by the Company or any Subsidiary on
behalf of the Company or any Subsidiary in effect as of the date hereof. All
policies and binders listed on Schedule 3.10 are valid and binding in accordance
with their terms, have been in full force and effect continuously for the three
(3) years prior to the date hereof, and are in full force and effect as of the
date hereof. Except for claims set forth on Schedule 3.10, there are, as of the
date hereof, no outstanding unpaid claims under any such policy or binder, and,
except as set forth on Schedule 3.10, neither the Company nor any Subsidiary has
received any notice of cancellation or non-renewal of any such policy or binder.
The Company's liability insurance policy described on Schedule 3.10 is an
occurrence-based policy. Schedule 3.10 sets forth (i) each pending claim under
the Company's or any Subsidiary's insurance policies, and except as set forth on
Schedule 3.10, each
-11-
18
such claim has been accepted by the insurer without reservations as covered
under the applicable policy; (ii) each person or entity not employed by the
Company or a Subsidiary that is covered under any policy or binder of the
Company as a named insured and the terms of the agreement or understanding for
the maintenance of such coverage(s) including any payments made to the Company
or any Subsidiary for such coverage.
3.11 Assets; Inventory.
(a) Except as set forth on Schedule 3.11, the Company
and each Subsidiary has good title to all of the Assets purported to be owned by
it, or has possession of all leased properties included in the Assets, necessary
for operation of the Business of the Company as presently conducted, including
all of the Assets reflected on the Interim Balance Sheet (but excluding any Real
Estate, as to which Section 3.12 applies), free and clear of any Lien, except
for:
(i) properties disposed of, or subject to purchase or
sales orders, in the ordinary course of business since the
date of the Interim Balance Sheet; and
(ii) Liens securing taxes, assessments, governmental
charges or levies, or the claims of materialmen, carriers,
landlords and like persons, all of which are not yet due and
payable or are being contested in good faith, so long as such
contest does not involve any substantial danger of the sale,
forfeiture or loss of any material asset of the Company and
the Subsidiaries necessary for the operation of the Business
as presently conducted.
(b) All propane inventory of the Company is (i) of a
quality sufficient to meet industry specifications, and (ii) of a quantity
usable by the Company and saleable at normal selling prices in the normal course
of the Business.
3.12 Real Estate.
(a) Schedule 3.12 sets forth a correct and complete
list (including the street address) of each parcel of real property owned by the
Company or a Subsidiary that is used in the Business (the "Real Estate").
Schedule 3.12 also correctly sets forth for certain properties included in the
Real Estate the approximate dates such properties were acquired by the Company
or its Subsidiaries. The Company or such Subsidiary is the legal and equitable
owner of all right, title and interest in, has good title to, and is in
possession of, the Real Estate, free and clear of all tenancies except as set
forth on Schedule 3.12 or other possessory interests, security interests,
conditional sale or other title retention agreements, Liens, options, and rights
of first refusal, except as set forth on Schedule 3.12, except as disclosed in
the policies
-12-
19
of title insurance to be obtained by Buyer pursuant to Section 7.7 or any
preliminary title reports obtained in connection therewith, and except those
that will not prohibit the use of the Real Estate immediately after the Closing
(assuming for this purpose that legal ownership to the Real Estate had been
transferred to Buyer as of the Closing Date) in substantially the same manner as
such Real Estate is currently used.
(b) Except as set forth on Schedule 3.12, since the
date of the Interim Balance Sheet, no portion of any Real Estate has been
condemned, requisitioned or otherwise taken by any public authority, and, to the
Company's Knowledge, no such condemnation, requisition or taking is threatened
or contemplated.
(c) Prior to the Closing, the Company will have
delivered to the Buyer correct and complete copies of all title insurance
policies, abstracts, title reports, and existing surveys, environmental audits
and similar reports, if any, in the possession of the Company with respect to
each parcel of Real Estate.
(d) Schedule 3.12 sets forth a correct and complete
list of each parcel of real property leased by the Company or a Subsidiary that
is used in the Business (the "Real Estate Leases"). The Company or a Subsidiary
is in peaceable possession of the premises covered by each Real Estate Lease.
Except as disclosed in Schedule 3.12, neither the Company nor any Subsidiary is
in default under any Real Estate Lease to which it is a party, where such
default would prohibit the use of such property immediately after the Closing in
substantially the same manner as such property is currently used. At least 5
business days prior to the Closing, the Company will have provided to the Buyer
correct and complete copies of each Real Estate Lease.
3.13 Personal Property Leases. Schedule 3.13 sets forth a
correct and complete list of all leases of personal property to which the
Company or any Subsidiary is a party which relate to the Business or affects the
Assets and which provide for payment or performance by either party thereto
involving an aggregate annual payment or performance obligation of $10,000 or
more (the "Personal Property Leases"). The Company or a Subsidiary is in
peaceable possession of the property covered by each such Personal Property
Lease. Neither the Company nor any Subsidiary is in default under any Personal
Property Lease to which it is a party, where such default would prohibit the use
of such property immediately after the Closing in substantially the same manner
as such property is currently used.
3.14 Intellectual Property. Schedule 3.14 sets forth a correct
and complete list of all patents, registered trademarks, registered trade names,
registered service marks and registered copyrights owned by the Company or a
Subsidiary that are used in the Business and pending applications for any of the
foregoing (the "Intellectual Property"). Schedule 3.14 sets forth a correct and
complete list of all
-13-
20
licenses and other agreements relating to any Intellectual Property. Except as
set forth in Schedule 3.14, with respect to the Intellectual Property, (a) no
action, suit, proceeding or investigation is pending or, to the Company's
Knowledge, threatened; (b) to the Company's Knowledge, none of the Intellectual
Property interferes with, infringes upon, conflicts with or otherwise violates
the rights of others or is being interfered with or infringed upon by others,
and none is subject to any outstanding order, decree, judgment, stipulation or
charge; and (c) there are no royalties, commissions or similar arrangements, and
no licenses, sublicenses or agreements, pertaining to any of the Intellectual
Property.
3.15 Employees. Schedule 3.15 sets forth a correct and
complete list of all written agreements with employees of the Company or any
Subsidiary regarding services to be rendered, terms and conditions of
employment, and compensation as of the date hereof (the "Employment Contracts").
For purposes of the Agreement, the term "Employees" shall include leased
employees of the Company or any Subsidiary. Schedule 3.15 sets forth a correct
and complete list of all Employees of the Company, including name, title or
position, the present annual compensation (including bonuses, commissions and
deferred compensation), and any interests in any incentive compensation plan.
Except as set forth on Schedule 3.15, there are no claims or proceedings pending
or, to the Company's Knowledge, threatened involving any Employees.
3.16 Labor Matters. Neither the Company nor any Subsidiary has
a collective bargaining, union or labor agreement or other arrangement with any
group of Employees, labor union or employee representative(s). The Company and
each Subsidiary is in compliance with all federal, state or other applicable
laws respecting employment and employment practices and terms and conditions of
employment, including, without limitation, health and safety, and wage and hour.
No unfair labor practice complaint is pending against the Company or any
Subsidiary before the National Labor Relations Board or any similar agency.
There is no labor strike, slow down or work stoppage pending or, to the
Company's Knowledge, threatened against the Company or any Subsidiary.
3.17 Employee Benefit Plans.
(a) Schedule 3.17 sets forth a correct and complete
list of each of the following, whether funded or unfunded, qualified or
unqualified (all the following being herein called "Benefit Plans"), maintained
or contributed to by the Company or a Subsidiary for the benefit of any of its
officers, Employees or other persons: any (i) "employee welfare benefit plan"
(as defined in Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) or "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) ("Pension Plans"); (ii) any bonus, profit sharing,
deferred compensation, incentive or other compensation plan or arrangement,
(iii) any termination or severance agreements or
-14-
21
contracts; or (iv) any other employee fringe benefit plans. Without limiting the
foregoing, Schedule 3.17 specifically discloses any obligation of the Company or
any Subsidiary to provide post-retirement health benefits to current or former
employees of the Company or any Subsidiary.
(b) Except as set forth in Schedule 3.17, each
Benefit Plan and any related trust agreement or annuity contract or any other
funding instrument complies in all material respects with the provisions of
applicable law, including ERISA and the Code, and all necessary governmental
approvals for the Benefit Plans have been obtained. There are no actions, suits,
or claims (other than routine claims for benefits) pending or, to the Company's
Knowledge, threatened, against or with respect to any Benefit Plan or the assets
of any such Benefit Plan, and to the Company's Knowledge no facts exist that
would likely give rise to any actions, suits or claims (other than routine
claims for benefits) against such Benefit Plans or assets. Neither the Company,
nor, to the knowledge of the Company, any other "disqualified person" or "party
in interest" (as defined in Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has engaged in any transaction in connection with any
Benefit Plan that violates Section 406 or 407 of ERISA or that could reasonably
be expected to result in the imposition on the Company of a penalty pursuant to
Section 502 of ERISA, damages pursuant to Section 409 of ERISA or a tax pursuant
to Section 4975 of the Code. Each Pension Plan is qualified in form under
Section 401(a) of the Code, the Internal Revenue Service has issued a favorable
determination letter with respect to each Pension Plan, and to the Company's
Knowledge no event has occurred that will or would likely give rise to a
disqualification under Section 401(a) of the Code. No Pension Plan is subject to
the provisions of Title IV of ERISA.
(c) With respect to each "group health care plan" set
forth in Schedule 3.17 which must comply with Section 4980B of the Code and
Sections 601 through 608 of ERISA, the Company acknowledges and agrees that it
or one or more of the Retained Entities will have the legal obligation to make
COBRA continuation coverage available to qualified beneficiaries whose
qualifying event occurred before the Closing Date. With respect to each
"employee pension benefit plan" set forth in Schedule 3.17: (i) all
contributions (including the Company and any Subsidiary contributions, and
Employee salary redirection contributions) have been paid or accrued for any
period ending on or before the Closing Date; (ii) resolutions shall have been
adopted before the Closing Date terminating each such employee pension benefit
plan with a termination date which precedes the Closing Date, and all Employees
of the Company and any Subsidiary, as applicable, have been 100% vested; and
(iii) the distribution process with regard to such Employees will begin pursuant
to the terms of such plan.
-15-
22
(d) Prior to the Closing, the Company shall have
furnished to the Buyer correct and complete copies of (i) the plan documents and
summary plan descriptions (including any summaries of material modifications),
(ii) the most recent determination letter received from the Internal Revenue
Service, (iii) the two most recent Form 5500 Series Annual Reports required to
be filed for each such Benefit Plan, (iv) all related trust agreements,
insurance contracts or other funding agreements which implement such Benefit
Plan, and (v) all service agreements that affect such Benefit Plan.
3.18 Licenses and Permits. Schedule 3.18 contains a correct
and complete list of each license, permit, certificate, approval, exemption,
franchise, registration or authorization relating to the Business issued to the
Company or a Subsidiary by a governmental body or agency where the failure to
have such license or permit would prohibit the Company or any Subsidiary from
carrying on the Business as presently conducted (collectively, the "Licenses and
Permits") other than certain Cal OSHA Division of Industrial Safety Permits
("DIS Permits") obtained by the Company or its subsidiaries in the normal course
of business. The Licenses and Permits and material DIS Permits are valid and in
full force and effect and there are not pending nor, to the Company's Knowledge,
threatened, any proceedings which would likely result in the termination,
revocation, limitation or impairment of any License or Permit or material DIS
Permit. The Licenses and Permits and DIS Permits constitute all material
licenses and permits necessary under applicable laws, rules and regulations for
the Company to conduct the Business as such Business is now being conducted.
3.19 Material Contracts. Except for Real Estate Leases,
Personal Property Leases, licenses of Intellectual Property, Benefit Plans and
Employment Contracts (which are set forth on other Schedules hereto), Schedule
3.19 sets forth a correct and complete list of all instruments, commitments,
agreements, arrangements and understandings in effect as of the date hereof that
relate to or affect the Business or Assets of the Company and each Subsidiary to
which the Company or a Subsidiary is a party and meeting any of the criteria set
forth below (the "Material Contracts"):
(a) Loan agreements, security agreements and
promissory notes relating to the Business; and
(b) Any other contract, commitment, agreement,
arrangement or understanding related to or affecting the Business or Assets
which (i) provides for payment or performance by either party thereto involving
an aggregate annual payment or performance obligation of $10,000 or more, (ii)
is not terminable without payment or penalty on sixty (60) days (or less)
notice, or (iii) is with any affiliate of the Company or any officers or
directors of the Company. Prior to the Closing Date, correct and complete copies
of each Material Contract identified on Schedule 3.19 shall be delivered or made
available to the Buyer; provided, however, that the Company shall not be
required to disclose the identity of any individual customer, reseller or other
-16-
23
agent or provide any customer lists to the Buyer (but the other provisions of
any Material Contract shall be provided) until all conditions to Closing have
been satisfied or waived. To the Company's Knowledge, each Material Contract is
in full force and effect and is valid, binding and enforceable in accordance
with its terms. No event has occurred which is or, after the giving of notice or
passage of time, or both, would constitute a default under or a breach of any
Material Contract by the Company or any Subsidiary, or, to the Company's
Knowledge, by any other party. There is no Lien on the Company's or any
Subsidiary's interest under any Material Contract.
3.20 Taxes.
(a) The Company and each of the Subsidiaries has paid
all federal, state and local taxes (including, but not limited to, income,
profits, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad
valorem, severance, capital, transfer, withholding, employment, unemployment
compensation, payroll and property taxes) and other governmental charges and
assessments, including any deficiencies, interest, additions to tax or interest
and penalties with respect thereto which relate to or affect the Business
(collectively "Taxes" or, individually, a "Tax") and which are required to be
paid by it through the date hereof, and shall timely pay any Taxes required to
be paid by it on or prior to the Closing Date for periods ending on or before
the Closing Date. The provisions for Taxes (as opposed to any reserve for
deferred taxes established to reflect timing differences between book and tax
income), including federal, state and local income taxes on the Interim Balance
Sheet are sufficient for the payment of all Taxes due with respect to the
conduct of the Business of the Company and the Subsidiaries and the effect of
the consummation of the Related Transactions at the Closing up to and through
the date of the Interim Balance Sheet and the Closing Date, but excluding the
effects of any transaction that occurs on the Closing Date after the Closing
contemplated by this Agreement and the closing of the Related Transactions have
occurred (for purposes of eliminating doubt, the transactions the effects of
which shall be excluded pursuant to the immediately preceding phrase beginning
with the word "but" include Buyer's liquidation of any companies by merger or
otherwise upon or after the Closing under this Agreement, the effects of any
such liquidation being solely the responsibility of Buyer notwithstanding any
provision of this Agreement that might be construed to the contrary).
(b) The Company and each of the Subsidiaries has
timely filed all tax returns required to be filed by them through the date
hereof, and the Company shall prepare and timely file, in a manner consistent
with prior years and applicable law, all tax returns required to be filed on or
before the Closing Date.
(c) Except as set forth in Schedule 3.20, no
penalties or other charges are or will become due with respect to the late
filing of any tax return of the Company or any Subsidiary required to be filed
for any period ending on or before the Closing Date.
-17-
24
(d) With respect to all tax returns of the Company
and the Subsidiaries, except as set forth on Schedule 3.20, to the Company's
Knowledge, no audit is in progress, and no extension of time is in force with
respect to any date on which any such return for Taxes was or is to be filed and
no waiver or agreement is in force for the extension of time for the assessment
or payment of any Tax, and (ii) copies of such returns supplied to Buyer in the
data room (i.e. for the tax years 1999, 1998, 1997 and 1996) are true and
correct in all material respects).
(e) Except as set forth on Schedule 3.20, neither the
Company nor any Subsidiary is a party to, nor is bound by or has any obligation
under any tax sharing, tax indemnification or similar agreement.
(f) Neither the Company nor any of the Subsidiaries
currently has a permanent establishment in any foreign country or engages or has
previously engaged in a trade or business in any foreign country. Neither the
Company nor any of the Subsidiaries is a foreign person within the meaning of
Code Section 1445.
3.21 Product Warranty. To the Company's Knowledge, all
products processed, distributed, shipped or sold by the Company or any
Subsidiary in connection with the Business conform with all applicable
contractual commitments, except where a failure to conform by the Company or a
Subsidiary (i) would not permit the other party to terminate such contract, or
(ii) have a material adverse effect on the Company or any Subsidiary. No
products distributed, sold or delivered by the Company or a Subsidiary prior to
the date of this Agreement are now subject to any guarantee, express warranty,
claim for product liability, or patent or other indemnity, other than those set
forth or described in Schedule 3.21.
3.22 Legal Proceedings. Except as set forth in Schedule 3.22,
neither the Company nor any Subsidiary is engaged in or is a party to or, to the
Company's Knowledge, threatened with any action, suit, proceeding, complaint,
charge, hearing, investigation or arbitration or other method of settling
disputes or disagreements (other than environmental claims as to which Section
3.23 applies) that relates to or might affect the Business or the Assets or that
challenges or may have the effect of preventing, delaying, making illegal or
otherwise interfering with the Sale. As of the date hereof, neither the Company
nor any Subsidiary has received notice of any investigation threatened by any
Governmental Entity. As of the date hereof, except as set forth in Schedule
3.22, neither the Company nor any Subsidiary is subject to any judgment, order,
writ, injunction, stipulation or decree of any court or any Governmental Entity
or any arbitrator.
3.23 Environmental Matters. Except as set forth in Schedule
3.23:
(a) Neither the Company nor any Subsidiary has
received written notice from any Governmental Entity that the Company or any
Subsidiary is
-18-
25
not in compliance in all material respects with all applicable federal and state
laws and regulations in effect on the date hereof relating to pollution or the
environment under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C.A. Section 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C.A. Section 6901 et seq., the Clean Water
Act, 33 U.S.C.A. Section 1251 et seq., the Clean Air Act, 42 U.S.C.A. Section
7401 et seq., and laws and regulations relating to emissions, spills, leaks,
discharges, releases or threatened releases of any "hazardous substance," or
"hazardous waste," as defined therein, petroleum and petroleum products, natural
gas or synthetic gas, special nuclear or by-product material, as defined by the
Atomic Energy Act of 1954, 42 U.S.C.A. Section 3011 et seq., and the regulations
promulgated thereto and "hazardous chemical," as defined in 29 C.F.R. Part 1910
or otherwise relating to the manufacture, possession, distribution, use,
treatment, storage, disposal, transport or handling of such material (such laws
and regulations being hereinafter referred to as "Environmental Laws");
(b) Neither the Company nor any Subsidiary is and has
not in the past 5 years been, in violation of, or charged with, convicted of, or
to Company's Knowledge investigated for any violation of any federal, state or
local Environmental Law or regulation by any court, governmental body or agency
with respect to the Real Estate or in the Company's or such Subsidiary's
operations, except as set forth in Schedule 3.23. Except as disclosed in
Schedule 3.23, no environmental condition created by the Company or its
Subsidiaries or by any third party that has used the Real Estate with the
permission of the Company or its Subsidiaries exists on any portion of the Real
Estate, on the real property leased under the Real Estate Leases, or on any real
property previously owned or leased by the Company or its Subsidiaries
("Previously Owned/Leased Real Property") that would likely give rise to a
material claim that the Company or any Subsidiary is in violation of any
Environmental Laws; and there have been no disposals, releases of hazardous
substances, materials or wastes, or pollutants or contaminants by the Company or
its Subsidiaries or any such third party from, in or under any of the Real
Property or Previously Owned/Leased Real Property during the past 5 years (or to
the Company's knowledge, prior thereto) in violation of any Environmental Laws
except as disclosed in Schedule 3.23. Except as set forth on Schedule 3.23,
there:
(i) are presently no tanks in excess of 55
gallons for storage of petroleum products or other
hazardous material (other than propane inventory)
that were placed on the Real Estate, or the real
property leased under the Real Estate Leases, by the
Company or its Subsidiaries;
(ii) is no contamination of soil, ground
water or surface water on or under the Real Estate or
Previously Owned/Leased Real Estate, or the real
property leased under the Real Estate
-19-
26
Leases, that was caused by the Company or its
Subsidiaries (or any such third party) in violation
of any Environmental Laws;
(iii) is no portion of the Real Estate, or
the real property leased under the Real Estate
Leases, that is or during the past 5 years has been
on any list prepared by any federal, state or local
governmental body or agency and provided to the
Company or its Subsidiaries or published in official
government records as requiring remedial
environmental action; or
(iv) are no environmental studies or reports
in the Company's or its Subsidiary's control or
possession referring or relating to the Real Estate,
or the real property leased under the Real Estate
Leases, except those that have been provided or made
available to Buyer.
(c) All material permits and other material
governmental authorizations required under Environmental Laws currently held by
the Company or a Subsidiary are identified on Schedule 3.23, and, as of the date
hereof, the Company and each Subsidiary is in compliance in all material
respects with the terms and conditions of such permits and authorizations.
3.24 Compliance with Law. Except as described in Schedule
3.24, the Company and each Subsidiary is in compliance, in all material
respects, with all statutes, codes, ordinances, licensing requirements, laws,
rules, regulations, decrees, awards or orders applicable to the Business to the
extent necessary to carry on the Business as currently conducted, including
those relating to employment and those relating to the sale and distribution of
propane (including the requirements of Pamphlet No. 58), except with respect to
Benefit Plans and Environmental Laws, which are covered by Sections 3.17 and
3.23, respectively, and except where non-compliance would not have a material
adverse effect on the Business or the ownership or use of any of the Assets by
the Company and its Subsidiaries.
3.25 Plant and Equipment. Except as set forth in Schedule 3.25
and except for ordinary wear and tear, the plants, structures and equipment of
the Company are in good operating condition and repair in all material respects,
comply in all material respects with Pamphlet 58 and applicable state law, and
are adequate for the uses to which they are being put, except where
non-compliance would not have a material adverse effect on the Company and its
Subsidiaries. The Company has received no notification that it is in violation
of any applicable building, zoning or other law, ordinance or regulation in
respect of its plants and or structures or their operations and, to the
Company's Knowledge, no such violation exists. Except as set forth in Schedule
3.25, the Company has received no recommendation from any insurance carrier or
any consultant hired by the Company proposing changes in its
-20-
27
methods of operation or relating to changes with respect to any of the Company's
properties, including the Real Estate, or the real property leased under the
Real Estate Leases, that are included in the Assets (excluding information
received from any insurance carrier mailed to its customers or the public
generally).
3.26 Capital Expenditures. Neither the Company nor any of the
Subsidiaries has outstanding commitments for capital expenditures with respect
to the Business in excess of $10,000 except as set forth on Schedule 3.26.
3.27 Brokers. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. ("SSB")
(whose fees shall be borne by the Company), the Company has not retained any
broker, finder or agent or incurred any liability or obligation for any
brokerage fees, commissions or finders' fees with respect to this Agreement or
the transactions contemplated hereby.
3.28 Transactions with Related Parties. Except as set forth in
Schedule 3.28, and except for employment agreements and arrangements described
on Schedule 3.15, the Company is not party to any agreement, arrangement or
transaction, oral or written, with any officer, director, employee or
Shareholder of the Company or any member of their immediate families that would
affect the Business or Assets after the Closing.
3.29 No Implied Representation. NOTWITHSTANDING ANYTHING
CONTAINED IN THIS ARTICLE III OR ANY OTHER PROVISION OF THIS AGREEMENT, THE
COMPANY IS NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, BEYOND THOSE EXPRESSLY GIVEN BY THE COMPANY IN THIS AGREEMENT,
INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OR REPRESENTATION AS TO THE
VALUE, CONDITION, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
SUITABILITY OF ANY OF THE ASSETS, PROPERTIES, RIGHTS OR CLAIMS OF THE COMPANY,
ANY SUBSIDIARY OR THE BUSINESS, OR ANY DOCUMENTS MADE AVAILABLE OR MANAGEMENT
PRESENTATION TO THE BUYER OR ITS REPRESENTATIVES, ALL OF WHICH ARE HEREBY
DISCLAIMED.
3.30 Disclosure Schedule Supplements. Promptly after the
Company becomes aware of the same, the Company shall supplement or amend the
Schedules delivered by it in connection herewith with respect to any matter
hereafter arising which, if existing, occurring or known by it at the date of
this Agreement, would have been required to be set forth or described in such
Schedules or which is necessary to correct any information in such Schedules
that has been rendered inaccurate in any material respect thereby, and shall
provide prompt written notice to the Buyer regarding the same. Except for
purposes of Section 7.1 herein, the disclosure in any such supplement or
amendment shall be treated for all purposes as having been included in the
original Schedules at the time of the execution of this Agreement.
-21-
28
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Company as set
forth below:
4.1 Authority. The Buyer has full right, power and authority
and has taken all corporate action, including obtaining approval and consent of
the Board of Directors of Buyer's general partner, necessary to execute and
deliver this Agreement and to carry out the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the Buyer and
constitutes a valid and legally binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
principles or equity.
4.2 Organization. The Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to own, lease and operate its assets
and to carry on the business in which it is engaged.
4.3 No Conflicts. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not result in
the creation of any Lien or the termination or acceleration of any indebtedness
or other obligation of the Buyer and are not prohibited by, do not violate or
conflict with any provision of, and do not result in a default under or a breach
of (a) the limited partnership agreement or any other organizational documents
of the Buyer, (b) any contract, agreement, permit, license or other instrument
to which the Buyer is a party or by which it is bound, (c) any order, writ,
injunction, decree or judgment of any court or Governmental Entity, or (d) any
law, rule or regulation applicable to the Buyer. No approval, authorization,
consent or other order or action of or filing with any Governmental Entity is
required for the execution and delivery of this Agreement by the Buyer or the
consummation by the Buyer of the transactions contemplated hereby.
4.4 Buyer's Business Investigation. The Buyer has conducted
such investigation of the Business of the Company and its Subsidiaries and
related matters as it has deemed necessary in order to make an informed decision
concerning the transactions contemplated hereby. As of the date hereof, with
respect to information furnished by the Company and without limiting the effect
of Section 3.29, the Buyer has relied only upon information set forth herein,
made available in the data room or supplementally requested by Buyer, or set
forth in a Schedule attached hereto and has not relied upon any other
information or statement, oral or written, not described
-22-
29
herein or in a Schedule attached hereto, notwithstanding the delivery or
disclosure to the Buyer by the Company or any representative of the Company
(including SSB) of other information with respect to any of the foregoing. The
Buyer acknowledges that the Company has made no representation to the Buyer as
to the future business or prospects of the Company or the Subsidiaries. The
Buyer has been given the opportunity to ask questions of and receive answers
from the Company concerning the Company and its Subsidiaries and their
respective businesses and operations, and all of its questions have been
satisfactorily answered. The Buyer acknowledges that it has been given access to
and has been given the opportunity to visit and examine the Real Estate of the
Company, and the property leased by the Company under the Real Estate Leases,
and the other assets of the Company and the Subsidiaries, and is familiar with
the condition thereof. The Buyer does not know of any breach of any
representation or warranty set forth in Article III hereof.
4.5 Disputes or Proceedings. There is no action, arbitration,
audit, hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) pending or, to the Buyer's
knowledge, threatened that challenges or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, the consummation of the
transactions contemplated hereby.
4.6 Financing. The Buyer acknowledges that its obligations
under this Agreement are not in any way contingent upon its obtaining financing
for its obligations hereunder. The Buyer has sufficient capital resources
presently available to it, and usable for the transactions contemplated hereby,
in order to consummate such transactions in a timely fashion, and the Buyer will
have such resources available at the Closing.
4.7 Brokers. The Buyer has not retained any broker, finder,
advisor or intermediary or incurred any liability or obligation for any
brokerage fees, commissions or finders' fees with respect to this Agreement or
the transactions contemplated hereby.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Intentionally Omitted.
5.2 Interim Conduct of Business. From the date hereof until
the Closing, unless approved by the Buyer in writing, the Company and each
Subsidiary shall operate the Business consistent with past practice and in the
ordinary course of business and, except as permitted or contemplated by this
Agreement, will not:
(a) merge or consolidate with or agree to merge or
consolidate with, or purchase or agree to purchase all or substantially all of
the assets of, or sell or
-23-
30
agree to sell all or substantially all of the assets of the Company or any
Subsidiary, or take any action or make any commitment with respect to a possible
liquidation, recapitalization, reorganization or other winding up of the
business of the Company or any Subsidiary or otherwise acquire, any corporation,
limited liability company, partnership, or other business organization or
division thereof;
(b) amend the certificate or articles of
incorporation or by-laws of any such company;
(c) make any changes in its accounting methods,
principles or practices;
(d) encumber, sell, transfer, or otherwise dispose of
any Assets, except in the ordinary course of business consistent with past
practices;
(e) establish, modify, amend or terminate any Benefit
Plans or Material Contracts, except as may be required under applicable law;
(f) agree, undertake or commit to make any capital
expenditure with respect to the Business in excess of $10,000, except as set
forth in Schedule 3.26;
(g) agree, undertake, or commit to carry out any
investigation, assessment, remediation, or response action regarding the
presence or possible presence of any Hazardous Materials, unless the results are
communicated to the Buyer in writing;
(h) cause the Company to incur or assume any
liabilities for borrowed money relating to the Business, other than liabilities
incurred in the ordinary course of business consistent with past practices;
(i) cancel or waive or modify any claims or rights
relating to the Business with a value to the Company in excess of $10,000;
(j) promote or hire any employees of the Company or
recall any laid-off employees of the Company except in the ordinary course of
business consistent with past practices;
(k) defer making payments of any accounts payable or
other obligations of the Company relating to the Business unless such deferral
is due to a good faith dispute as to liability or amount or is in accordance
with the Company's past practices as to the timing of payments of such payables
or other obligations;
(l) allow any of the Company's insurance coverage to
lapse; or
-24-
31
(m) authorize or enter into an agreement to do any of
the foregoing.
5.3 Access; Tank Verification. The Company shall give the
Buyer and its representatives reasonable access during normal business hours to
all properties, facilities, senior management, books, contracts, commitments and
records of the Company and the Subsidiaries relating to the Business. The
Company and the Subsidiaries shall also furnish the Buyer with all financial and
operating data and other information as to the Business and the Assets as the
Buyer from time to time may reasonably request in furtherance of the due
diligence process. In addition, the Company shall permit the Buyer, working with
the Company's representatives, to have access, to the extent practicable and
commercially reasonable, to tanks owned and leased by the Company and its
Subsidiaries for the purpose of verifying the number and condition of such
tanks. Notwithstanding the foregoing, the Buyer agrees not to contact any
vendors, distributors or customers or non-senior management employees of the
Company or the Subsidiaries without the prior written consent of the Company,
such consent not to be unreasonably withheld. The Company shall consult with the
Buyer and keep the Buyer reasonably apprised of material developments relating
to the Business or the Assets of the Company.
5.4 Company's Efforts; Shareholders' Undertakings. The Company
shall use its reasonable commercial efforts to consummate the transactions
contemplated by this Agreement and shall not take any action inconsistent with
its obligations hereunder or which could hinder or delay the consummation of the
transactions contemplated hereby except as permitted in Section 5.5. From the
date hereof through the Closing Date, the Company shall use its reasonable
commercial efforts to fulfill the conditions precedent to its obligations
hereunder. Each Shareholder agrees to vote such Shareholder's shares of the
Company owned by such Shareholder to approve this Agreement and the sale
contemplated hereby. Each Shareholder agrees that such Shareholder shall not
take any action inconsistent with such Shareholder's obligations hereunder or
which could hinder or delay the consummation of the transactions contemplated
hereby except as permitted in Section 5.5.
5.5 No Shop. The Company and each Shareholder agrees not to
solicit, initiate or encourage the submission of inquiries, proposals or offers
from any other Person relating to a purchase of either the assets or capital
stock of the Company or to respond to any unsolicited inquiries; provided,
however, that the Company and the Shareholders shall be permitted to solicit
proposals, inquiries or offers or to respond to any unsolicited inquiries in the
event (a) the transactions contemplated by this Agreement have not closed prior
to July 31, 2001, or (b) the Buyer gives written notice to the Company (which
notice shall be given by the Buyer immediately upon its knowledge thereof) that
a problem has come to light as a result of the Buyer's due
-25-
32
diligence which would reasonably be expected to result in a failure to close the
transactions contemplated hereby and such problem has not been resolved within
two business days thereof.
5.6 Covenant Not To Compete. In connection with Sale
hereunder, and without limiting the provisions of the Non-Competition Agreement,
the Company agrees to the restrictions contained in this Section 5.6.
(a) Subject to Section 5.6(b), the Company agrees
that, for a period of ten (10) years from the Closing Date in the geographical
markets in which the Business of the Company is currently conducted, the Company
will not, directly or indirectly, alone or in association with any other Person,
engage in activities competitive with the Business of the Company.
(b) Notwithstanding Section 5.6(a), the Company and
its affiliates may own up to 5% of a class of equity securities of a publicly
held company engaged in the Business of the Company.
(c) As a separate and independent covenant, the
Company agrees that, for a period of five (5) years from the Closing Date, the
Company will not, directly or indirectly, for the purpose of engaging in the
Business of the Company, call upon, solicit, advise or otherwise do business
with or attempt to do business with, any customer of the Company or any
Subsidiary as of the Closing Date so as to take away or interfere with such
Business, or induce or solicit any employees of the Company, any Subsidiary, or
Buyer to leave the employ of the Buyer.
(d) The Company acknowledges that the failure of the
Company to comply with the provisions of this Section 5.6 will result in
irreparable and continuing damage to the Buyer and its affiliates for which
there will be no adequate remedy at law and that, in the event of a failure of
the Company so to comply, the Buyer and its successors and permitted assigns
shall be entitled to injunctive relief and to such other and further relief as
may be proper and necessary to ensure compliance with the provisions of this
Section 5.6.
(e) The parties acknowledge that no part of the
Purchase Price is allocable to the covenants set forth in this Section 5.6 for
financial reporting, tax or any other purpose and that the consideration for the
Non-Competition Agreement is separate and apart from this covenant.
5.7 Pay Off of Long Term Debt; Purchase of Vehicles;
Intra-Company Payables. At or prior to Closing and except as otherwise described
on Schedule 5.7, the Company shall pay or discharge all debts and obligations of
the Business that are properly classified as long-term liabilities under GAAP
and that affect the Business or the Assets ("Long Term Debt"), except to the
extent that
-26-
33
(i) Buyer advises the Company at least thirty business days prior to the Closing
that Buyer wishes to assume such Long Term Debt, and (ii) the Company is able by
the Closing to receive all necessary third party consents and approvals as to
the Long Term Debt that Buyer wishes to assume. With respect to the Company's
and the Subsidiaries' vehicle leases, the Company shall purchase the vehicles
covered by such leases prior to or on the Closing Date and cause such leases to
be canceled, except with respect to the vehicles on order described in Schedule
5.7. The amount of any Long Term Debt assumed by Buyer at the Closing pursuant
to this Section 5.7 ("Assumed Debt"), shall be deducted dollar-for-dollar from
the Purchase Price otherwise payable to the Company at the Closing. Except as
set forth on Schedule 5.7, the Company and its Subsidiaries shall, at or prior
to Closing, (i) pay any indebtedness or account relating to the Business or
otherwise affecting the Assets that is owed by the Company and the Subsidiaries
to the Retained Entities and (ii) collect from the Retained Entities all such
indebtedness and accounts owed to the Company and the Subsidiaries by the
Retained Entities.
5.8 Financial Statement Review. The Company shall permit the
Buyer, at Buyer's expense, to review the Company's and its Subsidiaries' books
and records during normal business hours and pursuant to procedures reasonably
acceptable to the Parties, for the purpose of permitting Buyer's auditors to
confirm their ability to render an opinion with respect to the Company's
consolidated financial statements as of and for the periods ending on August 31,
1998, August 31, 1999 and August 31, 2000 and to review the Company's interim
financial statements as of and for the period ending February 29, 2000 and
February 28, 2001. All information examined and obtained by Buyer's auditors
shall be deemed to be "Confidential Information" for purposes of the
Confidentiality Agreement. The Company shall provide reasonable assistance,
cooperation and access to Company management as reasonably necessary to complete
such pre-closing review and such post-closing audit, including but not limited
to providing management representation letters and arranging for outside legal
representation letters and board of director minute representation letters.
5.9 Approval of the Company Shareholders. The Company will (a)
take all steps necessary to submit to the Shareholders for approval this
Agreement and the Sale contemplated hereby, and (b) cooperate and consult with
the Buyer in connection with the foregoing matter.
5.10 Orderly Transfer of Business. For a period of four (4)
months after the Closing, the Company and the Shareholders shall use
commercially reasonable efforts to assist Buyer in the orderly transfer of the
Business to Buyer, including forwarding of mail relating to the Business, the
forwarding of telephone calls from customers of the Business and the forwarding
of other propane customer requests received by the Company after the Closing;
provided, however, that neither
-27-
34
the Company nor the Shareholders shall be required to incur any out-of-pocket
costs or expenses (other than minor postage and telephone expenses) relating to
such assistance. During the same period, Buyer shall use commercially reasonable
efforts to forward to the Company all telephone calls, mail and other inquiries
and requests of third parties relating to the Excluded Assets or any business of
the Company not being transferred to Buyer.
ARTICLE VI
COVENANTS OF BUYER
6.1 Intentionally Omitted.
6.2 Records and Documents. For seven (7) years following the
Closing Date, the Buyer shall grant to the Company and its representatives, at
the Company's written request, and at the Company's expense, access to and the
right to make copies of those Company records and documents that relate to the
Business or the Assets for any period on or before the Closing Date and as may
be reasonably necessary or useful in connection with the Company's affairs after
the Closing, including the preparation of Tax returns.
6.3 Buyer's Efforts. The Buyer shall use its reasonable
commercial efforts to consummate the transactions contemplated by this Agreement
and shall not take any action inconsistent with its obligations hereunder or
which could hinder or delay the consummation of the transactions contemplated
hereby. From the date hereof through the Closing Date, the Buyer shall use its
reasonable commercial efforts to fulfill the conditions to its obligations
hereunder.
6.4 Confidentiality. The Buyer agrees to maintain strict
confidentiality of all information furnished in connection with the transactions
contemplated hereby, all in accordance with the terms and conditions of the
Confidentiality Agreement dated as of October 18, 2000 to which the Buyer is a
party (the "Confidentiality Agreement"). In the event that the transactions
contemplated hereby are not consummated, the Buyer shall return to the Company
all written information furnished to it (and an executive officer shall certify
in writing as to such return) and will not thereafter use such information for
any purpose whatsoever or permit any such confidential information to be made
publicly available.
6.5 Employee Matters. Except as described in Schedule 6.5, the
Buyer agrees to employ, commencing on the Closing Date and for a period of at
least two (2) months after the Closing Date, those Employees of the Company who
are Employees in good standing as of the Closing Date, unless good cause exists
for termination. Such employment shall be at least at the same salaries or
hourly rates as was paid by the Company on the date immediately preceding the
Closing Date, and while such employment shall be on an "at will" basis, each
such Employee will be
-28-
35
evaluated by the Buyer by standards no different than those applied by the Buyer
to its other employees performing similar job functions. The Buyer agrees, to
the fullest extent permitted by applicable law, that (i) all Employees of the
Company and the Subsidiaries shall be entitled to participate in the employee
benefit plans, including group health, life and disability plans, presently
maintained by the Buyer (true and correct copies of which have been furnished by
the Buyer to the Company) pursuant to the terms of those plans, (ii) the Buyer
will not amend such employee benefit plans or permit any such plans to be
amended in any way materially detrimental to the employees of the Company and
the Subsidiaries during the two month period following the Closing Date, except
for general and uniform changes applying to all employees covered by such plans
and (iii) with respect to any "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) maintained or sponsored by Buyer, any waiting period for
eligibility will be prorated for each Employee, to the extent such Employee was
covered under a similar plan maintained or sponsored by the Seller or any
Subsidiary, as applicable, on the Closing Date. Without limiting the foregoing,
such Employees will receive credit for years of service with the Company and the
Subsidiaries in determining vacation and sick days including credit for any
accrued and unused sick and vacation time under the Company's or any
Subsidiary's sick and vacation policy, as applicable. The Buyer shall comply
with the WARN Act to the extent applicable and be solely responsible for
furnishing the required notice of any "plant closing" or "mass layoff" which may
occur after Closing, and the Buyer shall indemnify and hold the Company harmless
for any inadequacy of such notice and for any liabilities under or relating to
the WARN Act for such period. In the event of the termination by the Buyer of
any such Employees during the first twelve (12) months following Closing, the
Buyer hereby agrees to indemnify and hold the Company harmless from and against
any claims arising from such terminations, unless such claims are based upon
commitments, representations made or other actions taken by the Company to the
terminated Employee prior to Closing and not disclosed by the Company to the
Buyer (but for this purpose, the Company's severance policy heretofore provided
to the Buyer shall not be deemed to be a commitment, representation or other
action taken by the Company).
6.6 Audited Financial Statements. The Buyer intends to prepare
audited financial statements of the Company for periods prior to the Closing.
The Buyer acknowledges that the preparation of such financial statements is
solely the responsibility of the Buyer and shall be at its sole cost and
expense.
6.7 Environmental Site Assessment. The Buyer may conduct
environmental site assessments after the Closing with respect to the Real Estate
and properties covered by the Real Estate Leases. The Buyer acknowledges that
the conducting of such environmental site assessments is solely the
responsibility of the Buyer and shall be at its sole cost and expense. For a
period of three (3) years from the Closing or such longer period, if any, as any
claims remain outstanding that have been made by Buyer or any of the Buyer
Indemnitees with respect to any alleged
-29-
36
breach of the representations and warranties in Section 3.23 or of any other
representations, warranties or covenants relating to environmental matters, the
Buyer agrees to provide the Company with at least ten (10) business days notice
prior to conducting any such environmental site assessment and to permit the
Company and/or an independent environmental consultant retained by the Company
to have reasonable access to such Real Estate and properties and to have access
(on a current basis) to the extent reasonably practicable to data and
information collected and conclusions reached by the environmental consultants
or other environmental employees or representatives utilized by Buyer for such
environmental site assessments ("Buyer's Environmental Consultants"), including,
without limitation, raw data, boring logs, splits of all samples taken and
laboratory results obtained by Buyer's Environmental Consultants, and to contact
Buyer's Environmental Consultants directly. Buyer shall promptly provide to the
Company copies of all Phase I reports and other environmental reports prepared
by Buyer's Environmental Consultants.
ARTICLE VII
CONDITIONS PRECEDENT
TO OBLIGATIONS OF BUYER
The obligations of the Buyer to consummate the transactions
contemplated by this Agreement are subject to fulfillment or waiver of the
following conditions prior to or at the Closing:
7.1 Accuracy of Warranties and Performance of Covenants. The
representations and warranties of the Company contained herein shall be true and
correct in all material respects (without giving effect to any supplements or
amendments to the Disclosure Schedules by the Company, as described in Section
3.29, that have been disapproved by the Buyer within five business days after
receipt thereof by the Buyer) on and (except where they speak of a specific
date) as of the Closing Date, except for failures to be true and correct
resulting from omissions or actions taken with the Buyer's written consent; and
the Company shall have performed in all material respects all of the covenants
and agreements required to be performed by the Company on or prior to the
Closing; provided, however, that if the Buyer is to claim that this condition
has not been satisfied as to a particular representation, warranty, covenant or
agreement, the Buyer shall have given the Company written notice describing such
representation, warranty, covenant or agreement and the respect in which the
same is not true or correct or has not been performed, and if the Company shall
have cured such noticed inaccuracy or non-performance within five business days
after receipt of such notice and without any material adverse effect to the
Buyer, then this condition shall be deemed for all purposes to have been
satisfied as to such representation, warranty, covenant or agreement.
7.2 No Pending Action. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute,
-30-
37
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) that is in effect and restrains, enjoins or
otherwise prohibits consummation of the transactions contemplated in this
Agreement.
7.3 No Adverse Change. There shall have been no material
adverse change since the date of the Interim Balance Sheet, in the Business,
Assets, customer base, financial condition or operations of the Company and its
Subsidiaries, taken as a whole.
7.4 No Proceeding or Litigation. No action, suit or proceeding
before any court, arbitrator or Governmental Authority shall have been commenced
or threatened against the Company or the Buyer or any of their respective
principals, officers or directors seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of any
of such transactions or seeking damages in connection with any of such
transactions.
7.5 Escrow Agreement. The Company shall have entered into the
Escrow Agreement, an original of which shall have been delivered to the Buyer.
7.6 Closing of Related Transactions. The transactions
contemplated by the agreements listed on Schedule 7.6 hereto (the "Related
Transactions") shall have been consummated concurrently with the Closing of the
transactions contemplated by this Agreement.
7.7 Title Insurance. The Buyer shall have received a CLTA
owner's or leasehold owner's policy of title insurance or an unconditional
commitment therefor for the properties as indicated on Schedule 3.12:
(a) issued by a title company reasonably acceptable
to Buyer;
(b) in an amount reasonably satisfactory to Buyer;
(c) insuring in the case of the Real Estate that fee
simple title to such property is vested in the Company or one of its
Subsidiaries, and in the case of properties covered by the Real Estate Leases,
that a valid leasehold estate to such property is vested in the Company or one
of its Subsidiaries; and
(d) subject, in each case described in the preceding
clause (c), only to (i) the lien for current real property taxes and assessments
or other governmental charges or claims not yet delinquent, (ii) the standard
printed exceptions, (iii) easements, rights of way, restrictions, minor defects
and irregularities in and exceptions to title and other similar charges not
interfering in any material respect with the ordinary conduct of the business of
the Company, and (iv) any other monetary or non-monetary liens or encumbrances
expressly permitted by this Agreement.
-31-
38
The Buyer shall make commercially reasonable efforts to obtain such title
insurance prior to the Closing.
7.8 Ability to Obtain Opinion as to Financial Statements. The
Buyer, following the review described in Section 5.8, shall have obtained from
Buyer's independent auditors assurances that are reasonably satisfactory to
Buyer that such auditors expect to be able after the Closing to render an
opinion on the financial statements of the Company described in Section 5.8.
7.9 Non-Competition Agreement. ▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed and delivered to Buyer a
Non-Competition Agreement in the form attached as Exhibit G (the
"Non-Competition Agreement"), pursuant to which such individuals shall have
agreed to the non-competition and related provisions set forth therein.
7.10 ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ Non-Competition Agreement.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ shall have executed and delivered to Buyer a
Non-Competition Agreement in the form attached as Exhibit H (the "▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ Non-Competition Agreement"), pursuant to which such individuals
shall have agreed to the non-competition and related provisions set forth
therein.
7.11 Propane Supply Contract. Buyer shall have received a
termination agreement terminating on or prior to Closing the Propane Gas Supply
Contract dated June 30, 1992 between the Company and ProFlame, Inc., an Oklahoma
corporation.
7.12 Redding Lease. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ and
the Company shall have executed and delivered to the Buyer a termination
agreement terminating all leases in effect as of the date hereof for that
certain property being leased by the Company in Redding,
California, and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ shall have executed and delivered to the Buyer a new
lease covering said property (the "Redding Lease").
7.13 Railroad Spur Lease. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
and the Company shall have executed and delivered to the Buyer an assignment of
all of their rights under the lease of that certain railroad spur in Redding,
California, such assignment to be terminable upon the termination of the Redding
Lease.
7.14 EDC Lease. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, the
Company and the Economic Development Corporation of Shasta County, Inc. shall
have executed and delivered to the Buyer an assignment of all of the Company's
rights under that certain lease for real property in Redding,
California dated
October 31, 1991 (the "EDC Lease"), such assignment to be terminable upon the
termination of the Redding Lease.
-32-
39
ARTICLE VIII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE COMPANY
The obligations of the Company to consummate the transactions
contemplated by this Agreement are subject to fulfillment or waiver of the
following conditions prior to or at the Closing:
8.1 Accuracy of Warranties and Performance of Covenants. The
representations and warranties of the Buyer contained herein shall be true and
correct in all material respects as of the Closing Date except for failures to
be true and correct resulting from omissions or actions taken with the Company's
written consent; and the Buyer shall have performed in all material respects all
of the covenants and agreements required to be performed by the Buyer on or
prior to the Closing; provided, however, that if the Company is to claim that
this condition has not been satisfied as to a particular representation,
warranty, covenant or agreement, then the Company shall have given the Buyer
written notice describing such representation, warranty, covenant or agreement
and the respect in which the same is not true or correct or has not been
performed, and if the Buyer shall have cured such noticed inaccuracy or
non-performance within five (5) business days after receipt of such notice and
without any material adverse effect to the Company, then this condition shall be
deemed for all purposes to have been satisfied as to such representation,
warranty, covenant or agreement.
8.2 No Pending Action. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) that is in effect and restrains, enjoins or
otherwise prohibits consummation of the transactions contemplated in this
Agreement.
8.3 No Proceeding or Litigation. No action, suit or
proceedings before any court, arbitrator or Governmental Authority shall have
been commenced or threatened against the Buyer or the Company or any of their
respective principals, officers or directors seeking to restrain, prevent or
change the transactions contemplated hereby or questioning the validity or
legality of any such transactions or seeking damages in connection with any of
such transactions.
8.4 Escrow Agreement. The Buyer shall have entered into the
Escrow Agreement, an original of which shall have been delivered to the Company.
8.5 Non-Competition Agreement. The Buyer shall have executed
and delivered to ▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (i) the
Non-Competition Agreement described in Section 7.9, pursuant to which the Buyer
shall have agreed to make payments to such individuals as described therein, and
(ii) the
-33-
40
security documents described in the Non-Competition Agreement, pursuant to which
such payments shall be secured.
8.6 Closing of Related Transactions. The Related Transactions
shall have been consummated concurrently with the Closing of the transactions
contemplated by this Agreement.
8.7 ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ Non-Competition Agreement. The
Buyer shall have executed and delivered to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
the ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ Non-Competition Agreement.
8.8 Redding Lease. The Buyer shall have executed and delivered
to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ the ▇▇▇▇▇▇▇ Lease.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 Survival of Representations and Warranties. The
representations and warranties of the Company and the Buyer contained in this
Agreement shall survive for a period of one year from the Closing Date and shall
thereafter expire and be of no further force or effect, and all liability of the
Parties with respect thereto shall thereupon be extinguished, except with
respect to breaches theretofore specified in reasonable, written detail in the
manner provided in the Escrow Agreement to the Company by the Buyer or to the
Buyer by the Company, as the case may be, prior to the first anniversary of the
Closing Date and except for (i) the representations and warranties contained in
Sections 3.17 to the extent relating to Benefit Plans covered by ERISA and 3.23
relating to Environmental Matters, which shall survive for a period of three
years from the Closing Date, and (ii) the representations and warranties
contained in Sections 3.1 relating to authority and 3.20 relating to Taxes,
which shall survive for the applicable statute of limitations periods with
respect thereto. Notwithstanding anything to the contrary contained herein, all
claims for damages based on intentional or fraudulent actions, or intentional
misrepresentations, shall survive without limitation.
9.2 Indemnification of the Buyer. Subject to the terms and
conditions of this Article IX, the Company agrees to indemnify and hold harmless
the Buyer and its affiliates, and their respective directors, officers,
shareholders, agents and employees and their respective successors and permitted
assigns against and in respect of any and all claims, demands, losses, damages,
costs and reasonable expenses, including reasonable legal fees and expenses,
other than any special, incidental, consequential, exemplary or punitive damages
or damages relating to lost profits (collectively, "Damages"), resulting from or
arising out of:
-34-
41
(i) any breach of any representation or
warranty of the Company in this Agreement (including
information in the Disclosure Schedule referenced in
any such representation or warranty) or in any
certificate or instrument delivered to the Buyer in
connection with Closing for the period such
representation and warranty survives hereunder;
(ii) any failure of the Company to perform
or otherwise fulfill or comply with any covenant
contained in this Agreement; and
(iii) any claim against the Buyer by a
current or former shareholder of the Company, arising
out of or in connection with any action, event or
occurrence involving the Company or its Subsidiaries
taking place prior to or at the Closing.
9.3 Indemnification of the Company. Subject to the terms and
conditions of this Article IX, the Buyer agrees to indemnify and hold harmless
the Company and its affiliates, and their respective directors, officers,
shareholders, agents and employees and their respective successors and permitted
assigns against and in respect of any and all Damages resulting from or arising
out of:
(i) any breach or violation of any
representation or warranty of the Buyer hereunder or
in any certificate or instrument delivered to the
Company in connection with Closing for the period
such representation and warranty survives hereunder;
and
(ii) any failure by the Buyer to perform or
otherwise fulfill or comply with any covenant
contained in this Agreement.
9.4 Defense of Third Party Claims. If either Party hereto or
such Party's other indemnitees described in Section 9.2 or 9.3 (each an
"Indemnitee") receives notice or otherwise obtains knowledge of any third party
claim or other matter with respect to which the other Party hereto (the
"Indemnifying Party") may become obligated to hold harmless or indemnify the
Indemnitee hereunder, then the Indemnitee shall promptly deliver to the
Indemnifying Party a written notice describing such matter in reasonable detail
and specifying the estimated amount of the Damages that may be incurred by the
Indemnitee in connection therewith. The Indemnifying Party shall have the right,
at its option, to assume the defense of such matter at its own expense and with
its own counsel, provided such counsel is reasonably satisfactory to the
Indemnitee. If the Indemnifying Party elects to assume the defense of such
matter, (i) notwithstanding anything to the contrary contained herein, the
Indemnifying Party shall not be required to pay or otherwise indemnify the
-35-
42
Indemnitee against any attorneys' fees or other expenses incurred on behalf of
the Indemnitee in connection with such matter following the Indemnifying Party's
election to assume the defense of such matter, (ii) the Indemnitee shall fully
cooperate as reasonably requested by the Indemnifying Party in the defense or
settlement of such matter, (iii) the Indemnifying Party shall keep the
Indemnitee informed of all material developments and events relating to such
matter and (iv) the Indemnitee shall have the right to participate, at its own
expense, in the defense of such matter. In no event will the Indemnifying Party
be liable for any settlement or admission of liability with respect to such
matter without its prior written consent.
9.5 Liability of the Company.
(a) The Company shall have no liability (for
indemnification or otherwise) under or relating to this Agreement or the
transaction contemplated hereby until the total of all Damages with respect
thereto exceeds one percent (1%) of the Purchase Price (the "Deductible Amount")
and then only for the amount by which such Damages exceed the Deductible Amount.
(b) Except for Environmental Liabilities governed by
Section 9.5(c) hereof, the Company's cumulative liability under this Agreement
and the Schedules, certificates and documents delivered pursuant hereto or in
connection herewith, shall in no event exceed, and the total amount of the
indemnification payments that the Company can be required to make under or
relating to this Agreement, shall be limited in the aggregate to, a maximum of
twenty percent (20%) of the Purchase Price and except as provided in Section
9.5(c), the Buyer's sole recourse under this Agreement or the Escrow Agreement
or with respect to the transactions contemplated hereby and thereby shall be
against the Escrow Amount.
(c) The Company's cumulative liability for breaches
of Section 3.23 of this Agreement and Schedule 3.23 delivered pursuant thereto
(the "Environmental Liabilities") shall in no event exceed, and the total amount
of indemnification payments that the Company can be required to make under or
relating to this Agreement with respect to Environmental Liabilities shall be
limited in the aggregate to a maximum of the Purchase Price, less any amounts
paid or required to be paid by the Company pursuant to Section 9.2 other than on
account of breaches of Section 3.23 (the "Environmental Maximum"), so that in no
event will the Company's cumulative liability under this Agreement and the
Schedules, certificates and documents delivered pursuant hereto or in connection
herewith exceed, and the total amount of the indemnification payments that the
Company can be required to make under or relating to this Agreement with respect
to any and all matters (including Environmental Liabilities) shall be limited in
the aggregate to the Purchase Price. Any Environmental Liabilities shall be
satisfied first by the Company's insurance if any. To the extent any
Environmental Liability is not satisfied by the Company's insurance, the Buyer's
recourse shall then be against the Escrow Fund, with the Company being
-36-
43
liable only for the amount, up to the Environmental Maximum, not satisfied by
the Company's insurance and/or the Escrow Fund.
9.6 Liability of Buyer. The Buyer shall have no liability (for
indemnification or otherwise) under or relating to this Agreement or the
transaction contemplated hereby until the total of all Damages with respect
thereto exceeds the Deductible Amount and then only for the amount by which such
Damages exceed the Deductible Amount. The Buyer's cumulative liability under
this Agreement and the Schedules, certificates and documents delivered pursuant
hereto or in connection herewith shall in no event exceed, and the total amount
of the indemnification payments that the Buyer can be required to make hereunder
shall be limited in the aggregate to a maximum of twenty percent (20%) of the
Purchase Price.
9.7 Exclusivity. The right of each Party hereto and its other
Indemnitees to demand and receive indemnification payments pursuant to this
Article IX shall be the sole and exclusive remedy exercisable by such Party and
its other Indemnitees with respect to any of the matters described in Sections
9.2 or 9.3 or with respect to any other claims arising out of or relating to
this Agreement or any of the transactions contemplated hereby or any of the
Related Transactions.
9.8 Reduction for Insurance Proceeds and Tax Savings. The
amount of any Damages claimed by any Indemnitee hereunder shall be reduced to
the extent of (i) any insurance proceeds, indemnification or other reimbursement
or payment recoverable by the Company or the Indemnitee in connection with such
Damages or the claim giving rise thereto; and (ii) any Tax savings or benefits
realized or to be realized by the Company or by any Indemnitee in connection
with such Damages or the claim giving rise thereto (it being acknowledged by the
Parties that there may be no such Tax savings or benefits).
9.9 Subrogation. Each Indemnifying Party shall be subrogated
to any and all defenses, claims or setoffs which the Indemnitee or the Company
asserted or could have asserted with respect to any third party claim as to
which the Indemnifying Party is required to provide indemnification pursuant to
this Article IX. The Indemnitee shall, and (in the event the Buyer is an
Indemnitee) shall cause the Company to, execute and deliver to the Indemnifying
Party such documents as may be necessary or appropriate to establish by way of
subrogation the ability and right of the Indemnifying Party to assert such
defenses, claims or setoffs. In no event shall any Party hereto be liable for
special, incidental, consequential, exemplary or punitive damages or damages
relating to lost profits, nor shall there be any double counting of any item of
Damage.
-37-
44
ARTICLE X
TERMINATION BY THE PARTIES
10.1 Events of Termination. Without prejudice to other
remedies which may be available to the Parties by law or under this Agreement,
this Agreement may be terminated and the transactions contemplated herein may be
abandoned:
(a) by mutual written consent of the Parties hereto;
(b) at the election of the Company, if any one or
more of the conditions to the obligations of the Company to close has not been
fulfilled as of July 31, 2001; or
(c) at the election of the Buyer, if any one or more
of the conditions to the obligations of the Buyer to close has not been
fulfilled as of July 31, 2001.
10.2 Action Upon Termination. In the event of a termination of
this Agreement pursuant to this Article X, the Party so terminating shall give
written notice thereof to the others, and the transactions contemplated by this
Agreement shall be terminated without further action by any Party. Upon
termination of this Agreement:
(a) The Buyer shall return to the Company all
documents and copies and other materials received from the Company relating to
the transactions contemplated hereby, the Company, the Subsidiaries, or the
Business of the Company or the Subsidiaries, whether obtained before or after
the execution hereof; and
(b) All confidential information received by the
Buyer shall be treated in accordance with the Confidentiality Agreement, which
shall remain in full force and effect notwithstanding the termination of this
Agreement.
10.3 Effect of Termination. If this Agreement is terminated
and the transactions contemplated hereby are abandoned, this Agreement shall
become null and void and of no further force and effect, except for this Article
X, Article XI and the obligation of the Buyer to keep confidential certain
information concerning the Company and the Business as described in Section 11.3
and as provided in the Confidentiality Agreement. Nothing in this Article X
shall be deemed to release any Party from any liability for any breach by such
Party of the terms and provisions of this Agreement or to impair the right of
any Party to compel specific performance by another Party of its obligations
hereunder.
-38-
45
ARTICLE XI
GENERAL PROVISIONS
11.1 Amendments and Waiver. No amendment, waiver or consent
with respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by all Parties hereto, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. The failure of any Party
at any time or times to require performance of any provisions hereof shall in no
manner affect that Party's right at a later time to enforce the same. No waiver
by any Party of the breach of any term or covenant contained in this Agreement
in any one or more instances shall be deemed to be, or construed as, a further
or continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
11.2 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be personally delivered
or sent by facsimile transmission with confirming copy sent by overnight courier
(such as Express Mail, Federal Express, etc.) and a delivery receipt obtained
and addressed to the intended recipient as follows:
(i) If to the Buyer: Heritage Operating, L.P.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to: Doerner, Saunders, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
(ii) If to the Company: WMJB, Inc.
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Sheppard, Mullin, ▇▇▇▇▇▇▇ & Hampton LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Short, Esq.
-39-
46
Any Party may change its address for receiving notice by
written notice given to the others named above.
11.3 Confidentiality. All information given by any Party
hereto to any other Party shall be considered confidential and shall be used
only for the purposes intended. The provisions of the Confidentiality Agreement
are incorporated herein by reference and shall continue to apply for the benefit
of the Company and the Subsidiaries as if entirely set forth herein, unless and
until the Closing occurs. The provisions of this Section 11.3 and of the
Confidentiality Agreement referenced in the preceding sentence shall remain in
force and effect notwithstanding any termination of this Agreement under Article
X hereof.
11.4 No Public Announcement. Neither the Buyer nor the Company
nor any of the affiliates of either of them shall make any public announcement
or disclosure concerning the transactions contemplated by this Agreement without
the prior written approval of the other Party, except as required by law or as
permitted by this Section 11.4. If any Party or any of its affiliates determines
upon advice of counsel that a public announcement or disclosure is required by
applicable securities laws or regulations or stock exchange regulations, such
Party may make the announcement or disclosure provided it first consults with
the other Party hereto so that the Parties may coordinate concurrent public
announcements and/or other disclosures and review the proposed text of such
announcement. In addition, the Parties shall jointly prepare press releases
disclosing the Sale described herein, for release immediately upon the execution
of this Agreement and immediately after the Closing.
11.5 Expenses. Except as otherwise expressly provided herein,
each Party to this Agreement shall bear its own costs and expenses in connection
with the transactions contemplated hereby. The provisions of this Section 11.5
shall survive any termination of this Agreement.
11.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and assigns; provided, however, that no Party shall assign any rights
or delegate any of its obligations created under this Agreement prior to Closing
without the prior written consent of the other Parties. This Agreement does not
create any rights, claims or benefits inuring to any Person that is not a party
hereto nor create or establish any third-party beneficiary hereto.
-40-
47
11.7 Entire Transaction. This Agreement and the documents
referred to herein contain the entire understanding among the Parties with
respect to the transactions contemplated hereby and supersede all other
agreements, understandings and undertakings among the Parties regarding the
subject matter hereof. All Schedules hereto are hereby incorporated herein by
reference and made a part of this Agreement.
11.8 Severability. In the event that any provision of this
Agreement shall be held to be invalid or unenforceable by any court of competent
jurisdiction, such holding shall in no way effect, invalidate or render
unenforceable any other provision hereof.
11.9 Governing Law and Jurisdiction. This Agreement, the
Escrow Agreement and the other documents executed pursuant hereto or in
connection herewith (the "Related Agreements") shall be governed by and
construed in accordance with the domestic laws of the State of
California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of
California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California. Subject to the provisions of Section 11.9, and without limiting such
provisions in any way, each of the Parties submits to the jurisdiction of the
United States District Court for the Northern District of California, sitting in
San Francisco, California, or the Superior Court of the State of California for
the County of San Francisco, in any action or proceeding arising out of or
relating to this Agreement or the Related Agreements and agrees that all claims
in respect of any such action or proceeding may be heard and determined in any
such court. Subject to the provisions of Section 11.9, and without limiting such
provisions in any way, each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement or the Related
Agreements in any other court or tribunal. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any such action or
proceeding so brought. Each Party agrees to frame any complaint brought in any
such action or proceeding to support federal court jurisdiction if grounds for
federal jurisdiction exist, and further agrees that any of the other Parties may
require such Party to dismiss any state law case where a federal court would
have jurisdiction over the subject matter.
11.10 Dispute Resolution. Except for disputes as to the
Adjustment Amount, which shall be resolved in the manner provided in Section
1.4, all disputes arising under or relating to this Agreement or the Related
Agreements shall be settled by final and binding arbitration in San Francisco,
California, by a mutually agreeable retired judge in the San Francisco office of
the Judicial Arbitration and Mediation Service (JAMS) selected pursuant to the
procedures set forth below (the "Arbitrator"). Judgment upon the award rendered
by the Arbitrator may be entered only in the United States District Court for
the Northern District of California or the Superior Court of San Francisco
County, California, and such judgment may be enforced in any court
-41-
48
having jurisdiction thereof. The arbitration shall proceed in accordance with
the laws of the State of California, except as otherwise expressly provided
herein. Any Party requesting arbitration shall serve a written demand for
arbitration on the other Parties in the manner described in this Section. The
demand shall set forth in reasonable detail a statement of the nature of the
dispute, the amount involved and the remedies sought. No later than thirty (30)
calendar days after a demand for arbitration is served, the Parties shall
jointly agree upon a retired judge to serve as Arbitrator. In the event that the
Parties do not agree within said 30-day period on the selection of a retired
judge, then no later than ten (10) days after the end of such 30-day period, the
San Francisco office of JAMS shall select a retired judge located in its San
Francisco office to become the Arbitrator and to resolve the dispute.
No later than ten (10) calendar days after appointment of the
Arbitrator pursuant to the terms of this Section 11.10, the Parties shall
jointly prepare and submit to the Arbitrator a set of rules for the arbitration.
In the event that the Parties do not agree on the rules for the arbitration, the
Arbitrator shall establish the rules and procedures for any such proceedings
which, unless the Parties otherwise agree, shall be concluded within sixty (60)
days after such submission. The fees and expenses of such arbitration (including
reasonable attorneys' fees) or any action to enforce an arbitration award shall
be paid by the Party that does not prevail in such arbitration as determined by
the Arbitrator. The Arbitrator shall not have the power to amend this Agreement
in any respect, nor shall the Arbitrator have the right to award punitive
damages. The Parties agree that all facts and information relating to any
arbitration arising under this Agreement or the Related Agreements shall be kept
confidential to the extent possible. The Parties agree that all documents filed
with any court in connection with the resolution of any dispute hereunder shall
be filed under seal. The decision in the arbitration proceeding shall be final
and non-appealable.
Any action to compel arbitration or to preserve the
jurisdiction of any arbitrator by obtaining interim relief pending arbitration
shall be brought in the United States District Court for the Northern District
of California or the Superior Court of San Francisco County, California.
11.11 Headings. The headings in this Agreement are for
reference only and shall not affect the interpretation of this Agreement.
11.12 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
11.13 Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement and the Related Agreements. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement and the Related Agreements shall be construed as if drafted jointly by
the Parties and no presumption
-42-
49
or burden of proof shall arise favoring or disfavoring any Party by virtue of
the authorship of any of the provisions of this Agreement or the Related
Agreements. Any reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean "including without limitation."
11.14 Further Assurances. Subject to the terms and conditions
herein provided, each of the Parties hereto agrees to use its reasonable
commercial efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.
[The remainder of this page is intentionally left blank.]
-43-
50
IN WITNESS WHEREOF, each of the Parties has executed, or
caused this Agreement to be executed on its behalf by a duly authorized officer
all as of the date first written above.
THE COMPANY: BUYER:
WMJB, Inc. Heritage Operating, L.P.
By: By: Heritage Holdings, Inc.
---------------------------------- its General Partner
Name:
---------------------------------
Title: By:
--------------------------------- --------------------------
Name:
------------------------
Title:
------------------------
SHAREHOLDERS
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee, The
▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Revocable Trust dated 2/4/97
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee, The
▇▇▇▇▇▇▇ Revocable Trust dated 8/2/96
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee, The ▇▇▇▇▇
Family Trust dated 9/92
51
APPENDIX
DEFINITIONS
"ACCOUNTANTS" - As defined in Section 1.4(a).
"ACCOUNTING PRINCIPLES" - As defined in Section 1.3
"ACCOUNTS RECEIVABLE" - As defined in Section 1.9.
"ACCOUNTS RECEIVABLE DEFICIENCY" - As defined in Section 1.9.
"ADJUSTMENT AMOUNT" - As defined in Section 1.3.
"ARBITRATOR" - As defined in Section 11.10.
"A/R RESERVE ESCROW" - As defined in Section 1.9.
"ASSETS" - As defined in Schedule 1.1 under the heading therefor.
"ASSUMED DEBT" - As defined in Section 5.7.
"ASSUMED LIABILITIES" - As defined in Schedule 1.1 under the heading therefor.
"ASSUMPTION AGREEMENT" - As defined in Section 2.2(g).
"BENEFIT EXPENSE PRORATION" - As defined in Section 1.3.
"BENEFIT PLANS" - As defined in Section 3.17(a).
"BUSINESS" - As defined in Recital B.
"BUYER" - As defined in the first paragraph of this Agreement.
"BUYER'S ENVIRONMENTAL CONSULTANTS" - As defined in Section 6.9.
"CERCLA" - As defined in Section 3.23(a).
"CLOSING" - As defined in Section 2.1.
"CLOSING DATE" - The date and time as of which the Closing actually takes place.
"CLOSING FINANCIAL STATEMENTS" - As defined in Section 1.4(a).
"COLLECTION PERIOD" - As defined in Section 1.9.
"COMPANY" - As defined in the Recitals of this Agreement.
Appendix - Page 1
52
"COMPANY'S KNOWLEDGE" - "Company's Knowledge" or a similar phrase with respect
to the Company shall mean the actual knowledge as of the date of this Agreement
or of any certificate delivered pursuant hereto of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, without any duty of inquiry or investigation.
"CONFIDENTIALITY AGREEMENT" - That certain Confidentiality Agreement dated as of
October 18, 2000 to which the Buyer and SSB (as agent for the Company) are
parties.
"DAMAGES" - As defined in Section 9.2.
"DEDUCTIBLE AMOUNT" - As defined in Section 9.5.
"DIS PERMITS " - As defined in Section 3.18.
"DISCLOSURE SCHEDULE" - As defined in the introduction to the Schedules to this
Agreement.
"EDC LEASE" - As defined in Section 7.14.
"EMPLOYEES " - As defined in Section 3.15.
"EMPLOYMENT CONTRACTS" - As defined in Section 3.15.
"ENVIRONMENTAL LAWS" - As defined in Section 3.23(a).
"ENVIRONMENTAL LIABILITIES" - As defined in Section 9.5(c).
"ENVIRONMENTAL MAXIMUM" - As defined in Section 9.5(c).
"ERISA" - As defined in Section 3.17(a).
"ESCROW" - As defined in Section 2.2(a).
"ESCROW AGENT" - As defined in Section 2.2(b).
"ESCROW AGREEMENT" - As defined in Section 2.2(b).
"ESCROW AMOUNT" - As defined in Section 2.2(a).
"ESTIMATED ASSUMED DEBT" - As defined in Section 1.5.
"ESTIMATED BENEFIT EXPENSE PRORATION" - As defined in Section 1.5.
"ESTIMATED NET WORKING CAPITAL" - As defined in Section 1.5.
"ESTIMATED PURCHASE PRICE" - As defined in Section 1.5.
Appendix - Page 2
53
"EXCLUDED ASSETS" - As defined in Schedule 1.1 under the heading therefor.
"EXCLUDED LIABILITIES" - All liabilities and obligations of the Company and/or
its Subsidiaries, whether actual or contingent, matured or unmatured, liquidated
or unliquidated, or known or unknown, whether arising out of occurrences prior
to, at or after the date hereof, other than the Assumed Liabilities.
"GAAP" - Generally accepted U.S. accounting principles applied on a basis
consistent with the basis on which the Interim Balance Sheet and the other
financial statements referred to in Section 3.6 were prepared.
"GOVERNMENTAL ENTITY" - Any:
(a) nation, state, county, city, town, district or other
jurisdiction;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi-governmental authority of any
nature; or
(d) body exercising or entitled to exercise any
administrative, executive, judicial, legislative,
policy, regulatory or taxing authority or similar
power.
"INDEMNIFYING PARTY" - As defined in Section 9.4.
"INDEMNITEE" - As defined in Section 9.4.
"INTELLECTUAL PROPERTY" - As defined in Section 3.14.
"INTERIM BALANCE SHEET" - As defined in Section 3.6.
"LICENSES AND PERMITS" - As defined in Section 3.18.
"LIENS" - Any lien, pledge, security interest, mortgage, deed of trust, or other
similar encumbrance, other than any of the foregoing (i) created by or through
the Buyer; (ii) relating to any Taxes or other governmental charges or
liabilities that are not yet due or payable; (iii) that is a statutory lien
arising in the ordinary course of business securing one or more payments not yet
due and payable or, if due and payable, the validity of which is being contested
in appropriate legal proceedings; or (iv) that does not interfere with the use
of any material asset and that, in the aggregate, involves amounts of less than
$10,000.
Appendix - Page 3
54
"LONG TERM DEBT" - As defined in Section 5.7.
"MATERIAL CONTRACTS" - As defined in Section 3.19.
"NET WORKING CAPITAL" - As defined on Schedule 1.3.
"NET WORKING CAPITAL HOLDBACK" - As defined in Schedule 2.2(a).
"NON-COMPETITION AGREEMENT" - As defined in Section 7.9.
"PAMPHLET NO. 58" - The publication prepared by the Technical Committee on
Liquefied Petroleum Gases and acted on by the National Fire Protection
Association, Inc. ("NFPA") that sets standards for the storage and handling of
liquefied petroleum gases, including, among other things, maintaining liquefied
petroleum gas equipment and appliances, installing liquefied petroleum gas
systems, storing portable containers and transporting liquefied petroleum gas.
"PARTY" AND "PARTIES" - As defined in the first paragraph of this Agreement.
"PENSION PLANS" - As defined in Section 3.17(a).
"PERSON" - An individual, a partnership, a corporation, an association, a joint
stock company, a limited liability company, a trust, a joint venture, an
unincorporated organization or a Governmental Entity.
"PERSONAL PROPERTY LEASES" - As defined in Section 3.13.
"PREVIOUSLY OWNED/LEASED REAL PROPERTY" - As defined in Section 3.23(b).
"PURCHASE PRICE" - As defined in Section 1.2.
"PURCHASE PRICE SHORTFALL" - As defined in Section 1.4(b).
"REAL ESTATE" - As defined in Section 3.12(a).
"REAL ESTATE LEASES" - As defined in Section 3.12(b).
"REDDING LEASE" - As defined in Section 7.12.
"RELATED AGREEMENTS" - As defined in Section 11.9.
"RELATED TRANSACTION" - As defined in Section 7.6.
"RETAINED ENTITIES" - Each Shareholder of the Company and every shareholder in
each of the Related Transactions (the "Control Group") and any entity under
common control with any members of the Control Group.
Appendix - Page 4
55
"SALE" - As defined in Section 1.1.
"SSB" - ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
"SUBSIDIARY" - The corporations (if any) listed on Schedule 3.5.
"TAX OR TAXES" - As defined in Section 3.20(a).
"TRANSACTION DOCUMENTS" - As defined in Section 3.1.
"WARN ACT" - The Workers Adjustment Restraining and Notification Act (Title 29
U.S.C., Chapter 23, Section 2101 et seq.
"▇▇▇▇▇▇▇ AND ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ NON-COMPETITION AGREEMENT" - As defined in Section
7.10.
Appendix - Page 5
56
SCHEDULE 1.1: ASSETS AND EXCLUDED ASSETS; ASSUMED LIABILITIES
1. Assets
The term "Assets" as used in the Agreement shall mean:
(a) all of the current assets of the Company set
forth on the spreadsheet as of April 30, 2001 attached hereto under the column
"Assets Being Sold," as the same may increase or decrease in the ordinary course
of business from April 30, 2001 until the Closing Date;
(b) all propane inventories and related products
(appliances, parts, fittings, cylinders and tools) of the Company and its
Subsidiaries;
(c) all bulk plant storage tanks, customer tanks,
vehicles, machinery, equipment, materials, tools, supplies, furniture, fixtures,
leasehold improvements and other tangible assets of the Company and its
Subsidiaries relating to the Business;
(d) all advertising and promotional materials
possessed by the Company and its Subsidiaries relating to the Business;
(e) all Intellectual Property and goodwill of the
Company and its Subsidiaries relating to the Business, including the telephone
numbers and post office box numbers used by the Company and its Subsidiaries in
the Business;
(f) all rights of the Company and its Subsidiaries
under the Personal Property Leases, the Material Contracts and the Real Property
Leases other than prepaid amounts, deposits, and rights to refunds relating to
the Pre-Closing Period and not included in current assets under clause (a)
above, except to the extent that the Buyer specifically assumes hereunder the
liability related to any such asset;
(g) all Licenses and Permits held by the Company and
its Subsidiaries relating to the Business (including the Licenses and Permits
identified in Schedule 3.18 of this Agreement), to the extent the same are
transferable;
(h) all customer contracts, customer lists, and
customer tank leases related to the Business;
(i) the Real Estate and the Real Estate Leases to the
extent assignable and to the extent that they are not terminated by the
transactions contemplated by this Agreement; and
Appendix - Page 1
57
(j) all books, records, files and data of the Company
and its Subsidiaries related to the Business being sold, subject to employee
privacy rights with respect to any employee files and records.
2. Excluded Assets
Notwithstanding anything to the contrary in this Schedule 1.1 or
elsewhere in this Agreement, the Assets shall not include, and the Company shall
retain the following (the "Excluded Assets"):
(a) all of the current assets of the Company set
forth on the spreadsheet as of April 30, 2001 attached hereto under the column
"Excluded Assets," as the same may increase or decrease in the ordinary course
of business from April 30, 2001 until the Closing Date;
(b) all claims, causes of action, rights of recovery
and rights of set-off of any kind arising out of or relating to the Assets or
the Business to the extent related to the Excluded Liabilities;
(c) prepayments made by the Company (including but
not limited to workers' compensation prepayments), except as specifically
otherwise provided on the spreadsheet attached hereto;
(d) the patronage agreements referred to in the
Interim Balance Sheet; and
(e) California State income and franchise tax
deposits.
3. Assumed Liabilities
The following liabilities and obligations of the Company shall be
assumed by Buyer (the "Assumed Liabilities"):
(a) all of the current liabilities of the Company set
forth on the spreadsheet as of April 30, 2001 attached hereto under the column
"Current Assets and Current Liabilities Being Assumed," as the same may increase
or decrease in the ordinary course of business from April 30, 2001 until the
Closing Date; and
(b) customer deposit obligations.
Appendix - Page 2
58
EXHIBIT A
ALLOCATION OF PURCHASE PRICE
A-1
59
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of
____________, 2001 (the "Closing Date"), by and among WMJB, Inc., a California
corporation (the "Company"), Heritage Operating, L.P., a Delaware limited
partnership (the "Buyer") and _____________________, as escrow agent ("Escrow
Agent").
Buyer and the Company are entering into this Agreement pursuant to the
terms of that certain
Asset Purchase Agreement dated _______, 2001 entered into
by and among Buyer and the Company (the "
Asset Purchase Agreement"). Capitalized
terms used in this Agreement without definition shall have the respective
meanings given to them in the
Asset Purchase Agreement.
The parties, intending to be legally bound, hereby agree as follows:
1. Establishment of Escrow.
(a) Buyer is depositing with Escrow Agent (i) an amount equal to
$__________ in immediately available funds, and (ii) an amount equal to
$__________ in immediately available funds (the "A/R Reserve Escrow") to be
placed in a sub-account and be available solely to satisfy the Accounts
Receivable Deficiency pursuant to Section 1.9 of the
Asset Purchase Agreement.
(Such amounts, as increased by any earnings thereon and as reduced by any
disbursements or losses on investments, are referred to herein as the "Escrow
Fund"). Escrow Agent acknowledges receipt of all of the foregoing amounts.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
2. Investment of Funds.
Except as Buyer and the Company may from time to time jointly instruct
Escrow Agent in writing, the Escrow Fund shall be invested from time to time, to
the extent possible, in United States Treasury Bills having a time remaining
until maturity of 90 days or less and repurchase obligations secured by such
United States Treasury Bills, with any remainder being deposited and maintained
in a money market deposit account with Escrow Agent, until disbursement of the
entire Escrow Fund. Escrow Agent is authorized to liquidate in accordance with
its customary procedures any portion of the Escrow Fund consisting of
investments to provide for payments required to be made under this Agreement.
B-1
60
3. Damages.
If after Buyer has given a Notice of Damages (as defined in Section 4
of this Agreement) to the Company and Escrow Agent, Damages are finally
determined under Section 4 of this Agreement to be owing to Buyer, Escrow Agent
shall pay to Buyer the dollar amount of such Damages from (and only to the
extent of) the Escrow Fund (other than the portion of the Escrow fund
constituting the A/R Reserve Escrow, which can only be used in the manner
provided in Section 6 herein) based upon joint written instructions from Buyer
and the Company or a final nonappealable arbitration award resulting from
arbitration in accordance with Section 11.10 of the
Asset Purchase Agreement.
Escrow Agent shall not inquire into or consider whether the Damages comply with
the requirements of the
Asset Purchase Agreement.
4. Certification of Damages; Payment.
(a) If Buyer is of the opinion that any Damages have or will or may
occur, Buyer shall promptly so notify the Company and the Escrow Agent in
writing, and each such notice (a "Notice of Damages") shall specify in
reasonable detail: (i) an estimate, if practicable, of the amount of Damages
(taking into account the Deductible Amount, the reduction for insurance proceeds
and Tax savings, and the other limitations in Section 9 of the
Asset Purchase
Agreement), and (ii) the circumstances of such asserted Damages.
(b) If the Company agrees in writing within 30 days after receipt of a
Notice of Damages that payment is owed under this Section 4 with respect to some
or all of the claimed Damages or amounts set forth in any such Notice of
Damages, or if the Company fails to dispute some or all of the claimed Damages
or amounts set forth in such Notice of Damages by furnishing written notice of
such dispute to Buyer and the Escrow Agent within 30 days after receipt of such
Notice of Damages, the Damages not then in dispute shall be deemed finally
determined under this Section 4.
(c) In the event that the Company furnishes timely written notice to
Buyer, as provided in Section 4(b) hereof, of any dispute as to whether Damages
have occurred or as to the amounts set forth in a Notice of Damages, then all
parties affected by such claim shall promptly use their best efforts to resolve
such dispute. To the extent agreement is thereafter reached in writing by the
Company and Buyer as to the amount of any Damages theretofore in dispute, such
Damages, in the amount agreed upon, shall be deemed finally determined under
this Section 4 and the Buyer and the Company shall jointly furnish a copy of
such written agreement to the Escrow Agent.
(d) In the event that the occurrence or amount of the Damages, or any
part thereof, set forth in a Notice of Damages, remains in dispute for more than
60 days following the giving of such notice (or for such longer period as Buyer
and the
B-2
61
Company have mutually agreed upon in writing), then whether Damages have
occurred and the amount of the Damages still in dispute and all matters relating
thereto shall be arbitrated and finally determined in accordance with Section
11.10 of the Asset Purchase Agreement. Buyer and the Company shall furnish to
the Escrow Agent a copy of the document reflecting the final determination of
such Damages.
5. Net Working Capital Adjustment.
The parties acknowledge that the Escrow Fund may be used as a source of
payment for that amount owing by the Company to Buyer, if any, represented by
the positive difference between the Estimated Purchase Price and the Purchase
Price (the "Purchase Price Adjustment"), pursuant to Sections 1.3 and 1.4 of the
Asset Purchase Agreement, to the extent that the Purchase Price Adjustment
exceeds the Net Working Capital Holdback. Upon final determination of the
Purchase Price Adjustment in accordance with Sections 1.3 and 1.4 of the Asset
Purchase Agreement together with interest thereon as provided in Section 1.4(b)
of the Asset Purchase Agreement, the Company shall have the right to instruct
Escrow Agent in writing (with a copy of such instruction to be provided
concurrently to Buyer) to pay to Buyer from the Escrow Fund an amount equal to
the excess of (i) the Purchase Price Adjustment together with interest thereon
over (ii) the Net Working Capital Holdback, as provided in Section 1.4(b)(i) of
the Asset Purchase Agreement, and Escrow Agent shall comply with such
instruction.
6. Accounts Receivable.
The parties acknowledge that the A/R Reserve Escrow has been placed in
a sub-account of the Escrow as a source of payment for that amount (the
"Accounts Receivable Deficiency") owing by the Company to Buyer, if any,
represented by the difference between the Accounts Receivable of the Company and
its Subsidiaries and the actual collection of such Accounts Receivable at the
expiration of the period ending four (4) months following the Closing, pursuant
to Section 1.9 of the Asset Purchase Agreement. Within 25 days after the
Company's receipt of the Buyer's written notice of the Accounts Receivable
Deficiency, the Company shall instruct the Escrow Agent in writing (with a copy
of such instruction to be provided concurrently to Buyer) to pay Buyer from the
A/R Reserve Escrow the amount of the Accounts Receivable Deficiency together
with interest thereon as provided in Section 1.9 of the Asset Purchase
Agreement, and Escrow Agent shall comply with such instruction. In the event
that the amount of the A/R Reserve Escrow exceeds the Accounts Receivable
Deficiency, or if there is no Accounts Receivable Deficiency or Buyer has not
provided such written notice to the Company within five (5) months following the
Closing Date, the Buyer shall instruct the Escrow Agent in writing (with a copy
of such instruction to be provided concurrently to the Company) to transfer such
excess to the Company and Buyer shall so instruct the Escrow Agent. The A/R
Reserve
B-3
62
Escrow shall be used solely to satisfy any Accounts Receivable Deficiency and
Buyer shall have no claim against the A/R Reserve Escrow for any other purpose
or matter.
7. Termination of Escrow.
(a) On the date eighteen (18) months from the date of Closing, Escrow
Agent shall pay and distribute fifty percent (50%) of the then existing amount
of the Escrow Fund to the Company, subject to Section 7(c) of this Agreement.
(b) On the date thirty-six (36) months from the Closing, Escrow Agent
shall pay and distribute one hundred percent (100%) of the then existing amount
of the Escrow Fund to the Company, subject to Section 7(c) of this Agreement.
(c) In the event Buyer has given a Notice of Damages as provided in
Section 4 of this Agreement, an amount equal to the aggregate dollar amount of
such Damages specified in such notice shall be retained by Escrow Agent in the
Escrow Fund (and the balance paid to the Company) until it receives joint
written instructions of Buyer and the Company or a copy of a final determination
with respect to such Damages as a result of arbitration in accordance with
Section 11.10 of the Asset Purchase Agreement.
8. Duties of Escrow Agent.
(a) Escrow Agent shall not be liable, except for its own bad faith,
gross negligence or willful misconduct and, except with respect to claims based
upon such bad faith, gross negligence or willful misconduct that are
successfully asserted against Escrow Agent, the Company and Buyer shall jointly
and severally indemnify and hold harmless Escrow Agent (and any successor Escrow
Agent) from and against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorneys' fees and disbursements,
arising out of and in connection with this Agreement. Without limiting the
foregoing, Escrow Agent shall in no event be liable in connection with its
investment or reinvestment of any cash held by it hereunder in good faith, in
accordance with the terms hereof, including, without limitation, any liability
for any delays (not resulting from its bad faith, gross negligence or willful
misconduct) in the investment or reinvestment of the Escrow Fund, or any loss of
interest incident to any such delays.
(b) Escrow Agent shall be entitled to rely upon any arbitration award,
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly
B-4
63
authorized to do so. Escrow Agent may conclusively presume that the undersigned
representative of any party hereto which is an entity other than a natural
person has full power and authority to instruct Escrow Agent on behalf of that
party unless written notice to the contrary is delivered to Escrow Agent.
(c) Escrow Agent may act pursuant to the written advice of counsel with
respect to any matter relating to this Agreement and shall not be liable for any
action taken or omitted by it in good faith in accordance with such advice.
(d) Escrow Agent does not have any interest in the Escrow Fund
deposited hereunder but is serving as escrow holder only and having only
possession thereof. Any payments of income from this Escrow Fund shall be
subject to withholding regulations then in force with respect to United States
taxes. Upon written request of the Escrow Agent, the parties hereto will provide
Escrow Agent with appropriate Internal Revenue Service Forms W-9 for tax
identification number certification, or non-resident alien certifications. This
Section 8(d) and Section 8(a) of this Agreement shall survive notwithstanding
any termination of this Agreement or the resignation of Escrow Agent.
(e) Escrow Agent makes no representation as to the validity, value,
genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(f) Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Escrow Fund to any successor Escrow Agent
jointly designated by the other parties hereto in writing, or to any court of
competent jurisdiction, whereupon Escrow Agent shall be discharged of and from
any and all further obligations arising in connection with this Agreement. The
resignation of Escrow Agent will take effect on the earlier of (a) the
appointment of a successor (including a court of competent jurisdiction) or (b)
the day which is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time Escrow Agent has not
received a designation of a successor Escrow Agent, Escrow Agent's sole
responsibility after that time shall be to retain and safeguard the Escrow Fund
until receipt of a designation of successor Escrow Agent or a joint written
disposition instruction by the other parties hereto or a final non-appealable
order of a court of competent jurisdiction.
(g) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Fund or in the event that Escrow Agent is in doubt as to what action it should
take hereunder, Escrow Agent shall be entitled to retain the Escrow Fund until
Escrow Agent shall have received (i) a final nonappealable arbitration award or
order of a court of competent jurisdiction directing delivery of the Escrow Fund
or (ii) a written agreement executed by all other parties hereto directing
delivery of the Escrow Fund,
B-5
64
in which event Escrow Agent shall disburse the Escrow Fund in accordance with
such order or agreement. Any arbitration award or court order shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to Escrow Agent to the effect that such award or order is final and
non-appealable. Escrow Agent shall act on such arbitration award or court order
and legal opinion without further question.
(h) Buyer and the Company shall each pay one half (1/2) of the Escrow
Agent's compensation for the services to be rendered by the Escrow Agent
hereunder.
(i) No printed or other matter (including, without limitation,
prospectuses, notices, reports and promotional material) that mentions Escrow
Agent's name or the rights, powers, or duties of Escrow Agent shall be issued by
the other parties hereto or on such parties' behalf unless Escrow Agent shall
first have given its specific written consent thereto.
9. Installment Sale; Tax Treatment of Interest.
The parties hereto acknowledge and agree that the transactions
contemplated by the Asset Purchase Agreement shall be treated by all parties
hereto as an installment sale in accordance with Section 453 of the Internal
Revenue Code of 1986, as amended (the "Code"), and all parties hereto shall make
all necessary tax filings relating to the sale of stock in accordance with
Section 453 of the Code. In particular, without limitation, the parties hereto
acknowledge and agree that Buyer shall be deemed to be the owner of the assets
which comprise the Escrow Fund (including, without limitation, all interest
earned thereon) until such time as said Escrow Fund (or portion thereof) is
distributed to the Company in accordance with the terms of this Agreement. The
parties further acknowledge and agree that any interest income earned with
respect to the Escrow Fund shall be treated for all purposes as taxable income
of the Buyer on form 1099-INT. Upon distribution of all or a portion of the
Escrow fund to the Company, an applicable portion of any such payment shall be
treated for income tax purposes as original issue discount which shall be
taxable as interest income to the Company and which shall be reported as
interest expense by the Buyer pursuant to the terms of Section 1274 of the Code.
10. Limited Responsibility.
This Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. Escrow Agent shall not be bound
by the provisions of any agreement among the other parties hereto except this
Agreement.
11. Company Representative.
(a) The Company has irrevocably appointed ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to act as
the sole and exclusive representative (the "Company Representative") to make all
B-6
65
decisions and determinations on behalf of the Company under this Agreement that
the Company Representative may deem necessary or appropriate. Without limiting
the generality of the immediately preceding sentence, the Company Representative
may, in his sole good faith discretion, object to, settle or compromise any
Notice of Damages made by Buyer under this Agreement or any dispute with respect
to the Adjustment Amount or the Purchase Price Adjustment and authorize payments
to be made with respect thereto. All action taken by the Company Representative
hereunder shall be binding upon the Company and its successors as if expressly
confirmed and ratified in writing by the Company, and the Company shall not have
the right to object, dissent, protest or otherwise contest the same. All
actions, decisions and instructions of the Company Representative shall be
conclusive and binding upon the Company and the Company shall not have any cause
of action against the Company Representative for any action taken, decision made
or instruction given by such Company Representative under or with respect to
this Escrow Agreement or the Asset Purchase Agreement, except for gross
negligence or willful misconduct by such Company Representative.
(b) The Company Representative will be entitled to reimbursement of
reasonable costs and expenses (including reasonable attorneys' fees and
arbitration costs) incurred by him or her in connection with the performance of
his or her services and functions under or relating to this Agreement and/or the
Asset Purchase Agreement (the "Expenses").
(c) The Company Representative, or any successor to him hereafter
appointed, may resign and shall be discharged of his duties hereunder upon the
appointment of a successor Company Representative by the Company. In case of the
resignation or the death or inability to act of the Company Representative
appointed by the Company, or any of his successors, a successor shall be named
by the Company. Each such successor Company Representative shall have the power,
authority, rights and privileges hereby conferred upon the original Company
Representative succeeded by him, and the term "Company Representative" as used
herein shall be deemed to include a successor Company Representative.
12. Notices.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be personally delivered or sent by facsimile
transmission with confirming copy sent by overnight courier (such as Express
Mail, Federal Express, etc.) and a delivery receipt obtained and addressed to
the intended recipient as follows:
B-7
66
If to Company: WMJB, Inc.
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Sheppard, Mullin, ▇▇▇▇▇▇▇ & Hampton LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Short, Esq.
If to Buyer: Heritage Operating, L.P.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
With a copy to: Doerner, Saunders, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
If to Escrow Agent:
----------------------------------
----------------------------------
----------------------------------
Fax:
-----------------------------
Attention:
------------------------
13. Arbitration; Jurisdiction.
Any controversy, claim or dispute involving the parties directly or
indirectly concerning this Agreement or the subject matter hereof shall be
finally settled in accordance with Section 11.10 of the Asset Purchase
Agreement, and the parties submit to jurisdiction in the manner provided in
Section 11.9 of the Asset Purchase Agreement in any action or proceeding arising
out of or relating to this Agreement.
B-8
67
14. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original and all of which, when taken together,
will be deemed to constitute one and the same instrument.
15. Headings.
The headings of sections in this Agreement are provided for convenience
only and shall not affect the interpretation of this Agreement.
16. Amendments and Waiver.
No amendment, waiver or consent with respect to any provision of this
Agreement shall in any event be effective, unless the same shall be in writing
and signed by all parties hereto, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. The failure of any party at any time or times to require
performance of any provisions hereof shall in no manner affect that party's
right at a later time to enforce the same. No waiver by any party of the breach
of any term or covenant contained in this Agreement in any one or more instances
shall be deemed to be, or construed as, a further continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
17. Exclusive Agreement and Modification.
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the Buyer, the
Company and the Escrow Agent.
18. Governing Law.
This Agreement shall be governed by the laws of the State of
California, without regard to conflicts of law principles.
B-9
68
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: HERITAGE OPERATING, L.P.
By: Heritage Holdings, Inc.,
Its: General Partner
By:
--------------------------------
Its:
--------------------------------
ESCROW AGENT:
-----------------------------------------
By:
--------------------------------
Its:
--------------------------------
COMPANY: WMJB, INC.
By:
--------------------------------
Its:
--------------------------------
B-10
69
EXHIBIT C
FORM OF OPINION OF
BUYER'S COUNSEL
Unless otherwise defined below, all capitalized terms used
below shall have the meanings ascribed to such terms in the Asset Purchase
Agreement dated as of _______________, 2001 (the "Agreement") by and among Buyer
and the Company.
1. The Buyer has been duly organized and is validly existing
as a _______________ under the laws of the State of ____________________ and has
all requisite [corporate] power and [corporate] authority to enter into the
Agreement and Escrow Agreement and to consummate the transactions contemplated
hereby and thereby.
2. The execution and delivery by Buyer of the Agreement and
the Escrow Agreement, and the consummation by Buyer of the transactions
contemplated by the Agreement and the Escrow Agreement, have been duly
authorized by all necessary [corporate] action on the part of Buyer.
3. The Agreement and the Escrow Agreement have each been duly
executed and delivered by Buyer, and each constitutes a valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
except as such enforceability may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance or other laws relating to or affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
4. The execution, delivery and performance of the Agreement
and the Escrow Agreement by Buyer will not constitute a violation by it of the
terms of its [Articles of Incorporation or bylaws], each as amended to date.
C-1
70
EXHIBIT D
ASSUMPTION AGREEMENT
D-1
71
EXHIBIT E
FORM OF OPINION OF
COMPANY'S COUNSEL
Unless otherwise defined below, all capitalized terms used
below shall have the meanings ascribed to such terms in the Asset Purchase
Agreement dated as of _______________, 2001 (the "Agreement") by and among Buyer
and the Company.
1) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of California and
has all requisite corporate power and corporate authority to enter into the
Agreement and to consummate the transactions contemplated hereby.
2) The execution and delivery by the Company of the Agreement
and the consummation by the Company of the transactions described in the
Agreement have been duly authorized by all necessary action on the part of the
Company.
3) The Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization, fraudulent transfer, fraudulent conveyance or other
laws relating to or affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4) The execution, delivery and performance of the Agreement by
the Company will not constitute a violation by it of the terms of its
organizational documents.
▇-▇
▇▇
▇▇▇▇▇▇▇ ▇
CONSENTS
F-1
73
EXHIBIT G
FORM OF NON-COMPETITION AGREEMENT
G-1
74
EXHIBIT H
FORM OF ▇▇▇▇▇▇▇ AND ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
NON-COMPETITION AGREEMENT
H-1