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EXHIBIT 10.22
CALIFORNIA WESTERN GAS COMPANY
AGREEMENT AND PLAN OF MERGER
DATED AS OF:
July ___, 2001
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE TRANSACTION.....................................................................................1
1.1 Merger......................................................................................1
1.2 Effects of the Merger.......................................................................2
1.3 Succession..................................................................................2
1.4 Capital Stock of the Company and the Transitory Subsidiary..................................2
1.5 Cancellation of Treasury Stock..............................................................2
1.6 Conversion of Stock.........................................................................2
1.7 Adjustments to Purchase Price Paid to Holders of Common Stock...............................3
1.8 Adjustment Procedure........................................................................4
1.9 Payment of the Closing Estimated Purchase Price.............................................5
1.10 Approval of Company Stockholders............................................................6
1.11 Accounts Receivable.........................................................................6
1.12 Dissenting Shares...........................................................................7
1.13 Escheatment.................................................................................8
ARTICLE II THE CLOSING AND TRANSFER OF STOCK..................................................................8
2.1 Effective Time and Closing..................................................................8
2.2 Deliveries by the Buyer.....................................................................9
2.3 Deliveries by the Company..................................................................10
2.4 Exchange of Certificates; Payment to Company Stockholders..................................11
2.5 Additional Action..........................................................................12
2.6 Certificate of Incorporation...............................................................13
2.7 Bylaws.....................................................................................13
2.8 Directors and Officers.....................................................................13
2.9 No Further Rights..........................................................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................13
3.1 Authority..................................................................................13
3.2 Organization...............................................................................14
3.3 No Conflict................................................................................14
3.4 Capitalization and Stockholders of the Company.............................................14
3.5 Subsidiaries...............................................................................15
3.6 Financial Statements.......................................................................15
3.7 Subsequent Events..........................................................................16
3.8 Absence of Undisclosed Liabilities.........................................................17
3.9 Banking Relationships......................................................................17
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3.10 Insurance..................................................................................17
3.11 Assets; Inventory..........................................................................18
3.12 Real Estate................................................................................18
3.13 Personal Property Leases...................................................................19
3.14 Intellectual Property......................................................................19
3.15 Employees..................................................................................20
3.16 Labor Matters..............................................................................20
3.17 Employee Benefit Plans.....................................................................20
3.18 Licenses and Permits.......................................................................21
3.19 Material Contracts.........................................................................22
3.20 Taxes......................................................................................22
3.21 Product Warranty...........................................................................23
3.22 Legal Proceedings..........................................................................24
3.23 Environmental Matters......................................................................24
3.24 Compliance with Law........................................................................25
3.25 Plant and Equipment........................................................................26
3.26 Capital Expenditures.......................................................................26
3.27 Brokers....................................................................................26
3.28 Transactions with Related Parties..........................................................26
3.29 No Implied Representation..................................................................26
3.30 Disclosure Schedule Supplements............................................................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND TRANSITORY SUBSIDIARY................................27
4.1 Authority..................................................................................27
4.2 Organization...............................................................................27
4.3 No Conflicts...............................................................................28
4.4 Buyer's Business Investigation.............................................................28
4.5 Disputes or Proceedings....................................................................29
4.6 Financing..................................................................................29
4.7 Brokers....................................................................................29
ARTICLE V COVENANTS OF THE COMPANY...........................................................................29
5.1 Creation of Class B Preferred Stock........................................................29
5.2 Interim Conduct of Business................................................................29
5.3 Access; Tank Verification..................................................................31
5.4 Company's Efforts; Majority Stockholders Undertaking.......................................31
5.5 No Shop....................................................................................32
5.6 Approval of Company Stockholders...........................................................32
5.7 Pay Off of Long Term Debt; Purchase of Vehicles; IntraCompany - Payables...................32
5.8 Financial Statement Review.................................................................33
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ARTICLE VI COVENANTS OF BUYER................................................................................33
6.1 Intentionally Omitted......................................................................33
6.2 Records and Documents......................................................................33
6.3 Buyer's Efforts............................................................................34
6.4 Confidentiality............................................................................34
6.5 Employee Matters...........................................................................34
6.6 Insurance..................................................................................35
6.7 Audited Financial Statements...............................................................35
6.8 Post-Closing Tax Matters...................................................................35
6.9 Environmental Site Assessment..............................................................37
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.....................................................37
7.1 Accuracy of Warranties and Performance of Covenants........................................37
7.2 No Pending Action..........................................................................38
7.3 No Adverse Change..........................................................................38
7.4 No Proceeding or Litigation................................................................38
7.5 Escrow Agreement...........................................................................38
7.6 Closing of Related Transactions............................................................38
7.7 Title Insurance............................................................................38
7.8 Ability to Obtain Opinion as to Financial Statements.......................................39
7.9 Non-Competition Agreement..................................................................39
7.10 Dissenters.................................................................................39
7.11 Consents of Company Stockholders...........................................................39
7.12 Western Media Guarantee Release............................................................40
7.13 Termination Agreements.....................................................................40
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY..............................................40
8.1 Accuracy of Warranties and Performance of Covenants........................................40
8.2 No Pending Action..........................................................................40
8.3 No Proceeding or Litigation................................................................41
8.4 Escrow Agreement...........................................................................41
8.5 Non-Competition Agreement..................................................................41
8.6 Closing of Related Transactions............................................................41
ARTICLE IX SURVIVAL AND INDEMNIFICATION......................................................................41
9.1 Survival of Representations and Warranties.................................................41
9.2 Indemnification............................................................................42
9.3 Indemnification of the Company and the Stockholders........................................42
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9.4 Defense of Third Party Claims..............................................................42
9.5 Liability of the Company Indemnifying Parties..............................................43
9.6 Liability of Buyer.........................................................................44
9.7 Exclusivity................................................................................44
9.8 Reduction for Reserves.....................................................................44
9.9 Reduction for Insurance Proceeds and Tax Savings...........................................45
9.10 Subrogation................................................................................45
ARTICLE X TERMINATION BY THE PARTIES.........................................................................45
10.1 Events of Termination......................................................................45
10.2 Action Upon Termination....................................................................45
10.3 Effect of Termination......................................................................46
ARTICLE XI STOCKHOLDER REPRESENTATIVE........................................................................46
11.1 Appointment of Stockholder Representative..................................................46
11.2 Stockholder Representative Escrow..........................................................47
11.3 Successor Stockholder Representative.......................................................47
ARTICLE XII GENERAL PROVISIONS...............................................................................47
12.1 Amendments and Waiver......................................................................47
12.2 Notices....................................................................................47
12.3 Confidentiality............................................................................48
12.4 No Public Announcement.....................................................................49
12.5 Expenses...................................................................................49
12.6 Successors and Assigns.....................................................................49
12.7 Entire Transaction.........................................................................49
12.8 Severability...............................................................................49
12.9 Governing Law and Jurisdiction.............................................................50
12.10 Dispute Resolution.........................................................................50
12.11 Headings...................................................................................51
12.12 Counterparts...............................................................................51
12.13 Construction...............................................................................51
12.14 Further Assurances.........................................................................51
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EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Form of Opinion of Buyers' Counsel
Exhibit D Form of Opinion of the Company's Counsel
Exhibit E Form of Officer and Director Release
Exhibit F Consents
Exhibit G Form of Non-Competition Agreement
Exhibit H Form of Certificate of Incorporation
Exhibit I Class B Preferred Stock
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made
and entered into as of July ___, 2001, by and among California Western Gas
Company, a
Delaware corporation (the "Company"), those stockholders of the
Company listed on the signature page with their shareholdings set forth
underneath their names (the "Majority Stockholders"), Heritage Holdings, Inc., a
Delaware corporation (the "Buyer"), and California Western Merger Corp., a
Delaware corporation ("Transitory Subsidiary"). The Company, the Buyer and the
Transitory Subsidiary are hereinafter collectively referred to herein as the
"Parties" and each as a "Party."
RECITALS
A. Transitory Subsidiary is a wholly owned subsidiary of
Buyer. The parties desire that Buyer and Transitory Subsidiary acquire the
Company in the form of a reverse triangular merger (the "Merger") of Transitory
Subsidiary with and into the Company with the Company being the surviving
corporation in the Merger and becoming a subsidiary of Buyer, all in accordance
with the terms and conditions of this Agreement.
B. The Company is engaged in the business of retail marketing
of propane to residential, commercial, industrial and agricultural customers
(the "Business").
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 Merger. Subject to the terms and conditions of this Agreement and
in accordance with the General Corporation Law of the State of
Delaware as
amended (the "GCL"), at the Effective Time (as defined in Section 2), Transitory
Subsidiary shall be merged with and into the Company with the Company being the
surviving corporation in the Merger ("Surviving Corporation").
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1.2 Effects of the Merger. This Agreement provides for the terms of the
Merger and the manner of carrying it into effect. At the Effective Time, the
Merger shall have the effects set forth in the GCL.
1.3 Succession. As a result of the Merger, at the Effective Time:
(a) The separate existence of Transitory Subsidiary shall
cease;
(b) Surviving Corporation shall become a subsidiary of Buyer;
and
(c) Surviving Corporation shall possess all the rights,
privileges, immunities, powers, franchises, properties and assets of the Company
and Transitory Subsidiary, and shall become liable for all the debts,
liabilities and duties of the Company and Transitory Subsidiary to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by it, all as provided in the GCL.
1.4 Capital Stock of the Company and the Transitory Subsidiary. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any shares of Company Stock or any shares of capital stock of the
Transitory Subsidiary and subject to Section 1.12, each share of Company Stock
issued and outstanding immediately prior to the Effective Time except the shares
of Class B Preferred Stock, which will be, pursuant to Sections 5.1 and 5.6,
owned beneficially and of record by ProFlame, Inc., a Nevada Corporation and by
Growth Properties, a California corporation (collectively, the "Class B
Preferred Stockholders") (the Class B Preferred Stockholders by their execution
hereof having specifically agreed that the Class B Preferred Stock shall remain
outstanding as shares of Class B Preferred Stock of the Surviving Corporation
after the Effective Time and shall not be exchanged or converted and no cash
consideration shall be delivered with respect thereto) shall be canceled and
each outstanding share of common stock of the Transitory Subsidiary shall be
converted into one fully paid non-assessable share of Common Stock of Surviving
Corporation.
1.5 Cancellation of Treasury Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Stock or any shares of capital stock of the Transitory Subsidiary, each
share of Company Stock, if any, issued and held, immediately prior to the
Effective Time, in the Company's treasury, shall automatically be canceled and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
1.6 Conversion of Stock. Subject to Section 1.12 and the provisions
below, at the Effective Time, by virtue of the Merger and without any action by
any person, all of the outstanding shares of capital stock of the Company (the
"Company Stock"), except for the Class B Preferred Stock, shall be converted
into the right to receive an aggregate sum of $21,086,049 in cash (the "Purchase
Price"), as adjusted in the manner provided in Section 1.7 and payable in the
manner described in Section 2.2.
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At the Effective Time and subject to Section 1.12, all Company Stock (except for
the Class B Preferred Stock) shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate which immediately prior to the Effective Time represented
outstanding Company Stock other than the holders of certificates representing
Class B Preferred Stock shall cease to have any rights with respect thereto,
except the right to receive a portion of the Purchase Price as provided herein
and except to the extent provided in Section 1.12. The Purchase Price shall be
allocated among the holders of the Company Stock (other than the holders of the
Class B Preferred Stock) as follows:
(a) Common Stock. Except for Dissenting Shares, each share of
Common Stock of the Company outstanding immediately prior to the Effective Time
shall, by virtue of the Merger, be converted into the right to receive, without
interest, $96.0449 in cash, as adjusted in the manner described in Section 1.7
of this Agreement and payable in the manner described in Section 2.2, and
subject to the provisions of Section 11.2 of this Agreement and the provisions
of the Escrow Agreement;
(b) Preferred Stock. Except for Dissenting Shares, each share
of Preferred Stock of the Company outstanding immediately prior to the Effective
Time will, by virtue of the Merger, be converted into the right to receive,
without interest, the sum of $70 in cash without adjustment and payable in the
manner described in Section 2.2, and subject to the provisions of Section 11.2
of this Agreement and the provisions of the Escrow Agreement.
(c) Class B Preferred Stock. Except for Dissenting Shares,
each share of Class B Preferred Stock of the Company shall remain outstanding,
as a share of Class B Preferred Stock of the Surviving Corporation.
(d) Dissenting Shares. The portion of the Purchase Price
attributable to Dissenting Shares that arises from the exercise of appraisal
rights for (i) Common Stock outstanding immediately prior to the Effective Time
(the "Common Dissenters Proceeds") and (ii) Preferred Stock outstanding
immediately prior to the Effective Time (i.e., $70.00 per share in cash without
adjustment (the "Preferred Dissenters Proceeds") (the Common Dissenters Proceeds
and the Preferred Dissenters Proceeds are collectively referred to as the
"Dissenters Proceeds"), shall be payable in the manner described in Sections 2.2
and 2.4, and such Dissenters Proceeds shall be subject to the provisions of
Section 11.2 of this Agreement and the provisions of the Escrow Agreement.
1.7 Adjustments to Purchase Price Paid to Holders of Common Stock. The
portion of the Purchase Price payable to the holders of Common Stock 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
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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 portion of
the Purchase Price payable to the holders of Common Stock shall be adjusted for
(x) the difference between U.S. $135,796 and the Company's Net Working Capital
(as defined on Schedule 1.7) as of the Closing Date (the "Adjustment Amount"),
and (y) the difference between U.S. $742,661 and the Company's cash and cash
equivalents as of the Closing Date (the "Cash Adjustment Amount"). Net Working
Capital shall be calculated in accordance with the accounting principles set
forth on Schedule 1.7 attached hereto (collectively, the "Accounting
Principles"). The portion of the Purchase Price payable to holders of Preferred
Stock shall not be adjusted, but such portion shall be subject to the provisions
of Section 11.2 of this Agreement and the provisions of the Escrow Agreement.
1.8 Adjustment Procedure.
(a) The Stockholder Representative 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 cash and cash equivalents (the "Final Cash Amount"), Net Working
Capital, Assumed Debt and Benefit Expense Proration as of the Closing Date. The
Stockholder Representative 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 days after the Closing Date. If, within thirty days following
delivery of the Closing Financial Statements, the Buyer has not given the
Stockholder Representative 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 Final Cash Amount and Net Working Capital
and Assumed Debt and Benefit Expense Proration reflected in the Closing
Financial Statements will be used in computing the amount to be paid by Buyer
for the Company's cash and cash equivalents and 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) the Buyer
and the Stockholder Representative each 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 the Stockholder
Representative and the Buyer 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
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delivered to the Stockholder Representative and the Buyer by the Accountants,
will be made within sixty days of submission and will be binding and conclusive
on the Buyer and the Company Stockholders; and (iii) the Buyer and the Company
Stockholders 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 Cash Adjustment Amount, 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 1.9, the Buyer will deposit with the
Exchange Agent the difference 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 Escrow Agent
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
deposit with the Exchange Agent 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. Deposits made with the Exchange Agent shall be
made by wire transfer of immediately available funds and will be allocated to
the holders of Common Stock (and the interest in the Common Stock represented by
Dissenting Shares) as provided in Section 1.6. Payment to the Buyer (other than
under its representative right attributable to Dissenting Shares) shall be made
out of the Escrow Fund (as defined in the Escrow Agreement) pursuant to the
terms of the Escrow Agreement and be debited against the amount otherwise
payable to the holders of Common Stock and the interest in the Common Stock
represented by Dissenting Shares from the Escrow Fund.
1.9 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 $135,796, then the Purchase Price plus (a) the excess
of the Estimated Net Working Capital over $135,796, and (b) the
Estimated Benefit Expense Proration, less the Estimated Assumed Debt;
and
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(ii) if the Estimated Net Working Capital is less
than $135,796, then the Purchase Price plus the Estimated Benefit
Expense Proration, less the excess of $135,796 over the Estimated Net
Working Capital and less the Estimated Assumed Debt.
1.10 Approval of Company Stockholders. The Company shall, as soon as
practicable after the Company's receipt of consents of a majority of the holders
of the Company Stock to the adoption of this Agreement, but in no event later
than five (5) days after the date hereof, distribute a statement (the
"Stockholder Information Statement") and any other such notices as may be
required by Sections 228 and 262 of the GCL to all holders of the Company Stock
(the "Stockholders"). Such Stockholder Information Statement shall give notice
of the Company's receipt of consents of a majority of the holders of the Company
Stock to the adoption of this Agreement and notice of the appraisal rights of
the Stockholders as required by Section 262 of the GCL and request adoption of
this Agreement.
1.11 Accounts Receivable. At the Closing, the accounts receivable of
the Company and its Subsidiaries as of the Closing Date (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 Stockholder
Representative with reasonably satisfactory evidence of the amount of the
Accounts Receivable Deficiency and the components thereof, and subject to the
provisos below, shall cause the Surviving Corporation and its Subsidiaries, or
their successors or assigns, to assign to the Stockholder Representative 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:
(a) (i) Buyer may elect to cause the Surviving Corporation 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 Stockholder
Representative at their book value to determine the Accounts
Receivable Deficiency.
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(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, causes the Surviving Corporation or
its Subsidiaries, or their successors in interest, to convert
a customer to COD basis after Closing, the first payments
received by the Surviving Corporation or its Subsidiaries, or
their 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 the Surviving
Corporation or its Subsidiaries, or their successors in
interest, by any such customer for products sold by the
Surviving Corporation or its Subsidiaries, or their 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 the Surviving Corporation or
its Subsidiaries, or their successors in interest. Buyer
agrees to notify the Stockholder Representative at the time it
causes the Surviving Corporation or its Subsidiaries, or their
successors in interest, to 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 cause the Surviving
Corporation or its Subsidiaries to institute legal action for
any collection.
(d) On or about the date three (3) months after the Closing
Date, Buyer shall provide the Stockholder Representative 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 Stockholder
Representative regarding appropriate steps to be taken to
collect unpaid Accounts Receivable.
Within 25 days after the Stockholder Representative'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 the Stockholder Representative Escrow and Buyer shall so
instruct the Escrow Agent.
1.12 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, Common Stock or Preferred Stock outstanding immediately prior to
the Effective Time and held by a holder of record who has delivered a written
demand for appraisal of such shares in accordance with Section 262 of the GCL
("Dissenting Shares") shall not be converted or otherwise treated as provided in
Section 1.4 hereof, but shall have the rights afforded to such holder under
Section 262 of the GCL, unless
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and until such holder fails to perfect or effectively withdraws or otherwise
loses his right to appraisal and payment under the GCL. If, after the Effective
Time, any such holder fails to perfect or effectively withdraws or otherwise
loses his right to appraisal, such Dissenting Shares shall thereupon be treated
as if they had been converted as of the Effective Time into the right to receive
the merger consideration as provided in Section 1.6(a) or Section 1.6(b) hereof,
as appropriate, and to which such holder is entitled, without interest thereon.
The Company shall give Buyer prompt notice of any demands received by the
Company for appraisal of Common Stock or Preferred Stock, and prior to the
Effective Time, Buyer shall have the right to participate in all negotiations
and proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of Buyer, make any
payment with respect to, or offer to settle, any such demands.
1.13 Escheatment. Notwithstanding anything in this Agreement to the
contrary, neither the Exchange Agent nor any Party hereto shall be liable to a
former Stockholder for any cash delivered to a public official pursuant to
applicable escheat or abandonment property laws.
ARTICLE II
THE CLOSING AND TRANSFER OF STOCK
2.1 Effective Time and Closing. The Merger shall become effective at
the time that a Certificate of Merger substantially in the form attached hereto
as Exhibit A (the "Certificate of Merger"), together with any other documents
required by law to effect the Merger (collectively, the "Merger Documents"),
shall have been filed and recorded with the Secretary of State of the State of
Delaware in accordance with the provisions of Section 251 of the GCL and become
effective in accordance with Section 103 of the GCL. As used herein, the term
"Effective Time" shall mean the date and time when the Merger becomes effective.
As used herein, the term "Effective Date" shall mean the day on which the
Effective Time occurs. The Parties agree to execute, deliver and cause to be
filed with the
Delaware Secretary of State the Merger Documents within three (3)
business days after the conditions to Closing have either been fulfilled or
waived, or at such other time as may be mutually agreed upon by the Parties. A
closing (the "Closing") shall take place on the Effective Date at the offices of
Sheppard, Mullin, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such other time and place as the Parties
hereto may mutually agree upon for the Closing to take place. Upon consummation,
the Closing shall be deemed to have taken place as of the close of business on
the Closing Date.
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2.2 Deliveries by the Buyer. At the Closing, the Buyer shall deliver
the following:
(a) By wire transfer of immediately available funds to a bank
or trust company to be designated by the Stockholder Representative at least ten
(10) days prior to the Closing and reasonably satisfactory to the Buyer (the
"Exchange Agent") (a portion of which shall be placed into the Stockholder
Representative Escrow as provided in Section 11.2 herein), an aggregate amount
equal to the Estimated Purchase Price, reduced by (i) an amount (the "Escrow
Amount") equal to twenty percent (20%) of the excess of the Estimated Purchase
Price over $3,194,870 (the "Specified Cash Amount"), to be deposited in the
Escrow (the "Escrow") with the Escrow Agent pursuant to the terms of the Escrow
Agreement, (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 1.11 (such aggregate amount, as so reduced, the "Preliminary
Merger Consideration").
(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 Stockholder Representative (as defined
herein) 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) An opinion of the Buyer's counsel in the form attached as
Exhibit C;
(f) 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;
(g) The Certificate of the Secretary of the Buyer certifying
true and correct copies of the Buyer's board of directors resolutions approving
and authorizing the transactions contemplated hereby;
(h) The Certificate of the Secretary of the Transitory
Subsidiary certifying true and correct copies of the Transitory Subsidiary's
board of directors resolutions approving and authorizing the transactions
contemplated hereby; and
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(i) 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) All Company records including the accounting books and
records, minute books, stock records and bylaws of the Company and the
Subsidiaries together with the stock certificates representing the ownership of
the Subsidiaries by the Company;
(b) The Certificate of Incorporation of the Company (and any
amendments thereto) certified as of a recent date by the Secretary of State of
the State of
Delaware;
(c) The Escrow Agreement, executed by the Stockholder
Representative;
(d) The Non-Competition Agreement executed by ▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇;
(e) An opinion of the Company's counsel in the form attached
as Exhibit D;
(f) 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 such entity's incorporation;
(g) Resignations from all of the Company's directors and
officers;
(h) A Certificate of an executive officer of the Company
reaffirming, and updating as necessary, on behalf of the Company, the Company's
representations and warranties contained in Article III;
(i) UCC lien releases 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;
(j) A release signed by each of the officers and directors of
the Company and its Subsidiaries in the form of Exhibit E;
(k) The consents described on Exhibit F;
(l) A termination agreement terminating on or prior to the
closing the Consulting Agreement dated December 1, 1997 with ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ described in Schedule 3.28 and the Company's obligations thereunder;
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17
(m) A termination agreement terminating on or prior to the
Closing the Workforce Proposal and Agreement dated December, 1996 described in
Schedule 3.28 and the Company's obligations thereunder;
(n) The Certificate of the Secretary of the Company certifying
true and correct copies of (i) the Company's Board of Directors' resolutions
approving and authorizing the transactions contemplated hereby, (ii) the
Stockholder List updated as of Closing, (iii) the consents of the Majority
Stockholders, and that such consents have not been revoked or rescinded and are
in full force and effect, and (iv) the consents to the Merger of the other
Stockholders received by the Company as of the Closing Date, and that to such
officer's knowledge, such consents have not been revoked or rescinded and are in
full force and effect;
(o) The Certificate of Merger duly executed by the President
and the Secretary of the Company; and
(p) Such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated hereby.
2.4 Exchange of Certificates; Payment to Company Stockholders. As
promptly as practicable after the Effective Time (but in no event more than five
business days thereafter), the Buyer shall cause the Exchange Agent to mail to
each holder as reflected on the Stockholder List (other than the holders of the
Class B Preferred Stock) of a certificate or certificates (the "Certificates")
which immediately prior to the Effective Time represented outstanding shares of
the Company Stock (other than canceled shares and Class B Preferred Stock) (i) a
letter of transmittal (which shall be in customary form and shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for cash to which such holder is entitled pursuant to this Agreement.
Upon surrender to the Exchange Agent of a Certificate for cancellation, together
with a letter of transmittal, duly executed and completed in accordance with the
instructions hereto, and such other documents as reasonably may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor a check in an amount equal to the Preliminary
Merger Consideration that such holder has the right to receive pursuant to this
Agreement in respect of the Company Stock formerly represented by the
Certificates tendered by such holder, and the Certificate so surrendered shall
forthwith be canceled. Should the holder of Dissenting Shares deliver his
Certificate(s) for payment to the Exchange Agent within sixty (60) days of the
Effective Time, such holder shall be deemed to have withdrawn his demand for
appraisal and the Exchange Agent shall so notify the Buyer and make payment
therefor from the Common Dissenters Proceeds or the Preferred Dissenters
Proceeds, as the case may be. Should a holder of Dissenting Shares tender his
Certificate(s) for payment to the Exchange Agent more than sixty
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18
(60) days after the Effective Time, the Exchange Agent shall not make payment
therefor unless the Buyer shall have approved such payment. The Exchange Agent
shall report periodically to Buyer and the Stockholder Representative on a
weekly basis as to the status of the payment procedure until all payments have
been made.
The portion of the Preliminary Merger Consideration payable to
the holders of Preferred Stock (other than the Dissenting Shares) shall equal
seventy dollars ($70) per share of Preferred Stock reduced by (x) $14 per share
of Preferred Stock (representing the twenty percent (20%) portion being placed
into the Escrow Fund), (y) an amount equal to such holders' per share portion of
the A/R Reserve Escrow amount being placed into a sub-account in the Escrow (and
for this purpose 3.9790% of the A/R Reserve Escrow shall be deemed to be
attributable to holders of the Preferred Stock) and (z) $0.70 per share of
Preferred Stock (representing such holders' per share portion of the Stockholder
Representative Escrow). The remaining portion of the Preliminary Merger
Consideration shall be payable to the holders of Common Stock and to the Buyer
with respect to the Dissenting Shares in proportion to their respective
interests in such consideration.
In the event of a transfer of ownership of shares of Company
Stock which is not registered in the transfer records of the Company, cash to
which such holder is entitled pursuant to this Agreement may be delivered to a
transferee if the Certificate representing such shares of Company Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.4, each Certificate shall be deemed at all times after the Effective Time to
represent only the right to receive upon such surrender the applicable
consideration described in this Agreement, without interest thereon. From and
after the Effective Time, the holders of Company Stock (other than the Class B
Preferred Stock) outstanding immediately prior to the Effective Time shall cease
to have any rights with respect thereto, except for the right to receive such
cash upon surrender of the Certificates representing Company Stock. The Exchange
Agent shall be authorized to pay the cash attributable to any certificate
theretofore issued which has been lost or destroyed, upon receipt of (i)
satisfactory evidence of ownership of the shares of Company Stock represented
thereby and (ii) in Buyer's reasonable discretion, either an appropriate bond or
appropriate indemnification. The expenses of the Exchange Agent shall be borne
equally by Buyer and the Company, with the Company's portion to be paid or
accrued on the Closing Balance Sheet.
2.5 Additional Action. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either Surviving Corporation or the
Transitory Subsidiary, in order to consummate the transactions contemplated by
this Agreement.
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2.6 Certificate of Incorporation. The Certificate of Incorporation of
the Company shall be amended in the Merger to read in its entirety as set forth
on Exhibit H hereto and, as amended, shall be the Certificate of Incorporation
of the Surviving Corporation until thereafter amended in accordance with the
provisions thereof and hereof and applicable law.
2.7 Bylaws. The bylaws of the Surviving Corporation shall be the same
as the bylaws of the Transitory Subsidiary immediately prior to the Effective
Time, except that the name of the corporation set forth therein shall be changed
to California Western Gas Company.
2.8 Directors and Officers. The directors of the Transitory Subsidiary
shall become the initial directors of the Surviving Corporation as of the
Effective Time, and the officers of Transitory Subsidiary immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
in each case until their respective successors are duly elected or appointed and
qualify.
2.9 No Further Rights. Except as provided in Section 1.12 herein or by
law (i) from and after the Effective Time, no Company Stock other than the Class
B Preferred Stock shall be deemed to be outstanding, and (ii) except for the
holders of the Class B Preferred Stock, the holders of shares of Company Stock
shall cease to have any rights with respect thereto.
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 adoption of this Agreement by its
Stockholders, the Company has full corporate power and authority and has taken
all corporate action necessary to execute and deliver this Agreement, the Escrow
Agreement and to carry out the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement 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 Stockholders 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. Upon the adoption of this Agreement by the
holders of a majority of (i) the outstanding Common Stock consenting as a class
and (ii) the outstanding Preferred Stock consenting as a class, and (iii) the
Common Stock and the Preferred Stock consenting together, the Certificate of
Merger, when filed with the
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Secretary of State of
Delaware, is legally sufficient to effect the Merger of
the Transitory Subsidiary into the Company as contemplated by the Certificate of
Merger.
3.2 Organization. The Company is a corporation 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. 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.
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 Certificate of Incorporation
or Bylaws 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 and Stockholders of the Company. The authorized
capital stock of the Company consists of 40,000 shares of preferred stock
("Preferred Stock") and 350,000 shares of common stock ("Common Stock"). As of
the date hereof, 30,781 shares of Preferred Stock and 210,808 shares of Common
Stock, respectively, are duly issued, outstanding, fully paid and
non-assessable, and were not issued in violation of any preemptive, subscription
or other right of any Person to acquire securities. As provided in Sections 5.1
and 5.6, prior to the Closing, the Company will create, authorize and issue
18,795 shares of Class B Preferred Stock to ProFlame, Inc., a Nevada
corporation, and Growth Properties, a California corporation, in exchange for
the 18,795 shares of Preferred Stock held by such Stockholders as of the date
hereof. There is no outstanding subscription, option, convertible or
exchangeable security, preemptive right, warrant, call or agreement (other than
this Agreement) relating to the Company Stock or other obligation or commitment
to issue any shares of Company Stock. There are no voting trusts or other
agreements, arrangements or understandings applicable to the exercise of voting
or any other rights with respect to any Company Stock. On or prior to the
Closing, the Company shall deliver to the Buyer a schedule which, to the
Company's Knowledge, shall be a true and correct
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21
listing of each stockholder of the Company, and such stockholder's address,
together with the number and type of shares held by such holder as of the date
thereof, based on the Company's current stockholder records (the "Stockholder
List").
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 are 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, 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 interest held in such entity.) With respect to the shares held by the
Company in ProFlame, Inc. (a Nevada corporation), Coastside Gas Service,
Hesperia Liquid Gas Co., ProFlame Gas Company, ProFlame, Inc. (an Oklahoma
corporation), and San Diego ProFlame, as shown on Schedule 3.5, such shares are
owned by the Company free and clear of any Liens, 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, and there are no options,
warrants or other rights to acquire or sell such shares.
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 the related statement of income for the 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.
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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 material asset or property owned, leased or otherwise used by the Company
or any Subsidiary, whether or not covered by insurance, (iii) declaration,
setting aside or payment of any dividend whether in cash, stock or property with
respect to the Company Stock or any redemption or other acquisition of the
Company Stock by the Company, except for the exchange and conversion of 18,795
shares of Preferred Stock held by ProFlame, Inc. and Growth Properties to Class
B Preferred Stock as described in Section 5.1 hereof, (iv) change by the Company
in accounting methods, practices or principles, or (v) other material
transaction not in the ordinary course of business entered into by the Company
or any Subsidiary. 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 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, 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;
(f) granted any increase in compensation or fringe benefits;
(g) agreed, undertaken, or committed to carry out any
investigation, assessment, remediation or response action regarding the presence
or possible presence of hazardous substances;
(h) except for Material Contracts listed on Schedule 3.19,
entered into any material agreement, contract, license, lease, arrangement or
commitment; or
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(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 individually or in the aggregate would subject the Company or a Subsidiary
to a liability 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, 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 such claim has been accepted by the insurer without
reservations as covered under the applicable policy; and (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.
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3.11 Assets; Inventory.
(a) Except as set forth on Schedule 3.11, the Company and each
Subsidiary has good title to all of its properties, or has possession of all
leased properties, 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 (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 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 of 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
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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 (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 on 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 provides 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 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 and pending applications for any of the foregoing (the "Intellectual
Property"). Schedule 3.14 sets forth a correct and complete list of all 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.
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26
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 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
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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 "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 will begin pursuant to
the terms of such plan.
(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 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
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applicable laws, rules and regulations for the Company to conduct its 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 related to the
Business of the Company and each Subsidiary to which the Company or a Subsidiary
is a party or by which any of its assets are subject or bound and meeting any of
the criteria set forth below (the "Material Contracts"):
(a) Loan agreements, security agreements and promissory notes;
and
(b) Any other contract, commitment, agreement, arrangement or
understanding related to the Business which (i) provides for payment or
performance by any 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 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 (collectively "Taxes" or, individually, a
"Tax") 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
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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 the Company 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.
(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 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
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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). 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 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 the
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
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the Real Estate, or 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 Estate") that would likely give rise to a 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 Estate or Previously
Owned/Leased Real Estate 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 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 governmental 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
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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 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 methods of
operation or relating to changes with respect to any of the Company's
properties, including the Real Estate or the properties leased under the Real
Estate Leases (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 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
Stockholder of the Company or any member of their immediate families.
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,
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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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
AND TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary hereby
represents and warrants to the Company as set forth below:
4.1 Authority. Each of the Buyer and the Transitory Subsidiary has full
right, power and corporate authority and has taken all corporate action,
including obtaining approval and consent of its Board of Directors, necessary to
execute and deliver this Agreement, the Escrow Agreement and any other Merger
Documents and to carry out the transactions contemplated hereby and thereby.
This Agreement has been duly authorized, executed and delivered by the Buyer and
the Transitory Subsidiary and constitutes a valid and legally binding obligation
of the Buyer and the Transitory Subsidiary, enforceable against the Buyer and
the Transitory Subsidiary 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
(a) The Buyer is a corporation 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, and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the nature of the
business conducted by it makes such licensing or qualification necessary and
when failure to be so qualified would either
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individually or in the aggregate, materially adversely affect the financial
ability of Buyer or the Transitory Subsidiary to consummate the Merger.
(b) The Transitory Subsidiary is a wholly-owned subsidiary of
Buyer and has been duly organized and is existing as a corporation in good
standing under the laws of the State of Delaware with full corporate power and
authority to enter into this Agreement, the Escrow Agreement and any other
Merger Documents and to carry out the transactions contemplated hereby and
thereby. Transitory Subsidiary has conducted no business other than in
connection with the consummation of the transactions contemplated by this
Agreement, the Escrow Agreement and any other Merger Documents and has no
liabilities other than liabilities arising under this Agreement.
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 or the Transitory Subsidiary 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 Certificate of Incorporation,
By-Laws or any other organizational documents of the Buyer or the Transitory
Subsidiary, (b) any contract, agreement, permit, license or other instrument to
which the Buyer or the Transitory Subsidiary is a party or by which either 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
or the Transitory Subsidiary. 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 Transitory
Subsidiary or the consummation by the Buyer or the Transitory Subsidiary 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 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
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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 Creation of Class B Preferred Stock. Within five (5) days following
the execution of this Agreement, the Company shall take all steps necessary to
amend its Certificate of Incorporation to provide for the creation,
authorization and issuance of Class B Preferred Stock, with such rights to be
afforded the holders thereof as set forth on Exhibit I (the "Class B Preferred
Stock") and to provide for the exchange of the 18,795 shares of Preferred Stock
held by ProFlame, Inc., a Nevada corporation, and Growth Properties, a
California corporation, for 18,795 shares of Class B Preferred Stock. Each
Majority Stockholder agrees to consent to the creation, authorization and
issuance of Class B Preferred Stock and to the exchange of 18,795 shares of
Preferred Stock held by ProFlame, Inc., a Nevada corporation, and Growth
Properties, a California corporation, for 18,795 shares of Class B Preferred
Stock.
5.2 Interim Conduct of Business. Except as provided in Section 5.1
hereof, 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:
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(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 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) authorize for issuance, issue, sell or deliver any
additional shares of the Company's capital stock of any class or any securities
or obligations convertible into shares of its capital stock or issue or grant
any option, warrant or other right to purchase any shares of its capital stock
of any class;
(f) declare any dividend on, or make any distribution with
respect to, the capital stock of any such company;
(g) establish, modify, amend or terminate any Benefit Plans or
Material Contracts, except as may be required under applicable law;
(h) agree, undertake or commit to make any capital expenditure
in excess of $10,000, except as set forth in Schedule 3.26;
(i) 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;
(j) cause the Company to incur or assume any liabilities for
borrowed money, other than liabilities incurred in the ordinary course of
business consistent with past practices;
(k) mortgage or pledge any Company Stock or create any Liens
thereon;
(l) cancel or waive or modify any claims or rights with a
value to the Company in excess of $10,000;
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37
(m) 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;
(n) defer making payments of any accounts payable or other
obligations of the Company 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;
(o) allow any of the Company's insurance coverage to lapse;
(p) purchase any securities other than investments in money
market funds or similar investments consistent with the Company's past
practices;
(q) enter into or take any action, other than actions required
to be taken pursuant to agreements or arrangements entered into prior to the
date of this Agreement, in connection with ▇▇▇▇▇▇, trades or swaps of any
commodity; or
(r) 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. The Company and the Subsidiaries
shall also furnish the Buyer with all financial and operating data and other
information as to the Company, the Subsidiaries, the Business and their
respective assets, properties, rights and claims, 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 of the Company.
5.4 Company's Efforts; Majority Stockholders Undertaking. 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 Majority
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Stockholder agrees that such Majority Stockholder shall not take any action
inconsistent with such Majority Stockholder's obligations hereunder or which
could hinder or delay the consummation of the transactions contemplated hereby
except as permitted in Section 5.5. Each Majority Stockholder agrees to consent
to the adoption of this Agreement as required under Sections 228 and 251 of the
GCL and deliver to the Company, prior to the distribution of the Stockholder
Information Statement, such Majority Stockholder's form of consent to the
adoption of this Agreement.
5.5 No Shop. The Company and each of the Majority Stockholders 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
Company Stock or to respond to any unsolicited inquiries; provided, however,
that the Company and each of the Majority Stockholders 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
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 Approval of Company Stockholders. Within four (4) business days
following the execution of this Agreement, the Company shall (a) furnish to the
Company's Stockholders the Stockholder Information Statement including, but not
limited to, the notice of the creation, authorization and issuance of 18,795
shares of Class B Preferred Stock, the exchange of 18,795 shares of Preferred
Stock held by ProFlame, Inc., a Nevada corporation, and Growth Properties, a
California corporation, for 18,795 shares of Class B Preferred Stock, the notice
of the Company's receipt of consents of a majority of the holders of the Company
Stock to the adoption of this Agreement, and the notice of stockholder appraisal
rights; (b) take all steps necessary to submit to the Stockholders for adoption
of this Agreement, pursuant to Sections 228 and 251 of the GCL, (c) deliver such
other notices to the Company Stockholders of the Merger as may be required by
Section 262 of the GCL, and (d) cooperate and consult with the Buyer with
respect to the foregoing matter.
5.7 Pay Off of Long Term Debt; Purchase of Vehicles; IntraCompany -
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 Company
and the Subsidiaries that are properly classified as long-term liabilities under
GAAP ("Long Term Debt"), except to the extent that (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
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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 to be deposited with the
Exchange Agent 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 owed by the Company and the Subsidiaries to the Retained Entities and
(ii) collect from the Retained Entities all 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.
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 Stockholder Representative, at his written
request, and at the Stockholders' expense, access to and the right to make
copies of those Company records and documents that relate to any period on or
before the Closing Date and as may be reasonably necessary or useful in
connection with the Stockholder Representative's affairs after the Closing,
including the preparation of Tax returns. The Buyer shall notify the Stockholder
Representative within five (5) business days after receiving notice of any Tax
audits of the Company or any Subsidiary for any period beginning prior to the
Closing Date. Except as provided in Section 6.8, the Buyer shall permit the
Stockholder Representative to control such audits and any related settlements
with respect to periods beginning on or prior to the Closing Date. The Buyer
will cause the Company to promptly forward to the Stockholder Representative all
information and materials regarding Excluded Assets.
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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 cause the Surviving Corporation to continue to employ for a period of
at least two 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 presently being paid by the Company, and while such employment
shall be on an "at will" basis, each such Employee will be 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 Company 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 cause the Company to 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
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shall indemnify and hold those individuals who were officers and directors of
the Company at or prior to the Closing harmless for any inadequacy of such
notice and for any liabilities under or relating to the WARN Act which arise in
connection with actions or omissions occurring after the Closing. In the event
of the termination by the Surviving Corporation of any Employees of Company or
the Subsidiaries during the first twelve (12) months following Closing, the
Buyer hereby agrees to indemnify and hold those individuals who were officers or
directors of the Company at or prior to the Closing 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 or such
individuals to the terminated Employee prior to Closing and not disclosed by the
such individuals 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 such individuals). Except for
accrued vacation and sick time, no other employee benefit plan liability of the
Company or its Subsidiaries is being assumed by the Buyer.
6.6 Insurance. Prior to the Closing, the Company shall use commercially
reasonable efforts to obtain tail coverages for its Officers and Directors
liability policy(s) and for its employment practices policies, each as described
on Schedule 6.6 (the "Tail Coverages"), with the cost thereof to be borne by the
Company and paid or accrued on the Closing Balance Sheet. After the Closing, the
Buyer shall cause the Surviving Corporation not to cancel or amend the Tail
Coverages and to maintain such insurance at least equivalent in coverage amount,
quality of carrier, and covered claims to that for the Company and/or the
Subsidiaries or their successors as is customarily maintained by companies of
the same size in the propane industry for so long as the provisions of Section
9.2 remain effective as to the type of liability covered by such insurance.
6.7 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.
6.8 Post-Closing Tax Matters. Buyer acknowledges and agrees that the
Stockholder Representative shall have the exclusive power and authority (i) at
the expense of the Company, to cause the income tax returns for the last
separate taxable year of the Company ending as a result of the consummation of
the transactions contemplated by this Agreement and the immediate liquidation of
the Surviving Corporation through merger to be prepared and filed in accordance
with historic practices and procedures of the Company and applicable law
(provided, however, the Stockholder Representative shall follow the instructions
of Buyer with respect to determining and reporting the treatment and effects of
such liquidation through merger, which shall be solely the responsibility of the
Buyer), (ii) to control the conduct of the Surviving Corporation in respect of
any tax audit or examination and
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any administrative appeal or litigation relating thereto, to the extent it
relates to any Taxes required to be paid by the Company for periods ending on or
before the Closing Date if such Taxes are payable (the costs of any such audit
or examination shall be borne by the Surviving Corporation until the issuance of
a notice of deficiency, whereas the costs of any administrative appeal or
litigation after the issuance of a notice of deficiency shall be borne by the
Company Stockholders), (iii) subject to the provisions of this Section to
determine whether and to what extent to amend any Tax return filed before the
Closing Date or which is described in the immediately preceding clause (i), and
(iv) whether and to what extent the Surviving Corporation shall extend or waive
any statute of limitations for the assessment of any Tax required to be paid by
the Company for periods ending on or before the Closing Date if such Tax is
payable. Buyer shall have the right to participate in any such amendment,
extension of limitation, tax audit, examination, appeal or litigation
(collectively, a "tax proceeding") at Buyer's sole expense, and, notwithstanding
the immediately preceding sentence, to jointly control with the Stockholder
Representative any such tax proceeding if (i) the amount claimed by the taxing
authority in a notice of deficiency would result in a liability to the Surviving
Corporation or its Subsidiaries that exceeds the amount of Damages for which the
Company Stockholders are liable pursuant to Article IX or (ii) the proposed tax
proceeding would reasonably result in a material tax or expense to any
Controlled Entity. In no event shall the Stockholder Representative settle any
such tax proceeding without Buyer's consent if such settlement would materially
adversely affect the Surviving Corporation or any of its subsidiaries (or a
Buyer Affiliate that is a successor in interest to the Surviving Corporation or
any of its subsidiaries) with respect to any period after the Closing or result
in any material liability on the part of the Surviving Corporation or such
successor in interest which is not required to be paid by the Company
Stockholders pursuant to Section 9.2 of this Agreement or pursuant to the Escrow
Agreement or (ii) any Controlled Entity or a Buyer Affiliate that is the
successor in interest of such Controlled Entity.
For purposes of this Section 6.8, a material effect shall be
deemed to be an expense, charge, loss or adverse change in an amount in excess
of the amount in the Escrow Fund as of the date of determination of such
expense, charge, loss or adverse change. The Buyer shall have the right to file
amended income tax returns for the Company or its Subsidiaries for any period,
provided that the result of such amended return would not affect the liability
of the Stockholders (i) for Damages hereunder or for any other damages, costs,
expenses or obligations of any nature or (ii) for income taxes or other Taxes
for any of the Controlled Entities, in which event the Stockholder
Representative and the Buyer (or a Buyer Affiliate that is a successor in
interest to the Company) or any of its Subsidiaries must consent in writing to
and Stockholder Representative shall jointly control with the Buyer (or its
Affiliate successor in interest to the Company and its Subsidiaries) the filing
of any such amended income tax return and all matters relating thereto.
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The Buyer (or a Buyer Affiliate that is a successor in
interest to the Company) shall afford the Stockholder Representative a
reasonable opportunity to review any proposed form of income Tax Return of the
Company (such as a state income tax return) for any period that begins before
and ends after the Closing Date and shall not file any such Tax Return without
the prior written consent of the Stockholder Representative, which consent shall
not be unreasonably withheld. The Stockholder Representative and the Buyer (or a
Buyer Affiliate that is a successor in interest to the Company) shall jointly
control any tax proceeding with respect to any such income tax return.
6.9 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 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 Stockholder
Representative with at least ten (10) business days notice prior to conducting
any such environmental site assessment and to permit the Stockholder
Representative and/or an independent environmental consultant retained by the
Stockholder Representative 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 Stockholder Representative 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
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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, 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, 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 Stockholder Representative shall have entered
into the Escrow Agreement on behalf of the Stockholders, 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.:
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(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.
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 Dissenters. The statutory 20-day period under the GCL for the
Company's receipt of Stockholders' demands for appraisal shall have expired
following the Company's mailing of the notice contemplated by the GCL and the
Stockholder Information Statement and the number of shares of Company Stock held
by holders of Dissenting Shares shall constitute no more than ten percent (10%)
of the total number of shares of Company Stock outstanding immediately prior to
the Effective Time.
7.11 Consents of Company Stockholders. Written consents to (i) the
creation, authorization and issuance of the Class B Preferred Stock; (ii) the
conversion and exchange of 18,795 shares of Preferred Stock held by ProFlame,
Inc., a Nevada corporation, and Growth Properties, a California corporation, for
18,795 shares of Class B Preferred Stock; (iii) the adoption of this Agreement;
(iv) appointment of the
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Stockholder Representative and approval of the Escrow Agreement and the
transactions contemplated thereby; and (v) the approval of the transactions
contemplated hereby, including without limitation, the indemnification provided
for in Article IX of this Agreement, representing a minimum of 76% of the
outstanding Common Stock and 70% of the outstanding Preferred Stock shall have
been delivered to the Company by the Company Stockholders, and shall be and
remain in full force and effect as of the Closing.
7.12 Western Media Guarantee Release. The Company and its Subsidiaries
shall have been released by Bank of America N.A. from their guaranty of any
indebtedness of Western Media, Inc.
7.13 Termination Agreements. The Buyer shall have received the
Termination Agreement terminating on or prior to Closing the Company's
obligations under (i) the Consulting Agreement with ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
dated December 1, 1997, and (ii) the Workforce Proposal and Agreement dated
December 1996 and the obligations of ProFlame, Inc., an Oklahoma corporation,
under the Propane Gas Supply Contract with WMJB, Inc. dated June 30, 1992.
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 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,
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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 Stockholder
Representative.
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 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.
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 Stockholder Representative by the Buyer
or to the Buyer by the Stockholder Representative, 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
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herein, all claims for damages based on intentional or fraudulent actions, or
intentional misrepresentations, shall survive without limitation.
9.2 Indemnification. Each Stockholder and the Company (but only until
the Effective Time) (collectively, the "Company Indemnifying Parties"), agree
severally, but not jointly, to indemnify and hold harmless the Buyer and its
affiliates and their respective directors, officers, stockholders, agents and
employees and their respective successors and permitted assigns (collectively,
the "Buyer Indemnified Parties") 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") incurred by any Buyer Indemnified Party by reason of or arising out
of: (i) any breach of any representation or warranty of the Company in this
Agreement (including the 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 Company by a current or former
stockholder of the Company, arising out of or in connection with any action,
event or occurrence taking place prior to or at the Closing, other than
appraisal rights claims arising under Section 262 of the GCL made by holders of
Dissenting Shares.
9.3 Indemnification of the Company and the Stockholders. Subject to the
terms and conditions of this Article IX, the Buyer agrees to indemnify and hold
harmless the Company (but only until the Effective Time) and each Stockholder
and its affiliates, and each of its or their respective directors, officers,
stockholders, agents and employees and their respective successors and permitted
assigns (collectively, "Company Indemnified Parties") 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 a Buyer
Indemnified Party or a Company Indemnified Party (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
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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 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 Indemnifying Parties.
(a) The Company Indemnifying Parties 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 difference between (i) the Purchase
Price and (ii) the Specified Cash Amount (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 cumulative liability of the Company Indemnifying Parties
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 Indemnifying
Parties 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 difference
between (i) the Purchase Price and (ii) the Specified Cash Amount, and except as
provided in Section 9.5(c), the Buyer Indemnified Parties' 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. Each
Stockholder's liability to indemnify the Buyer Indemnified Parties for Damages
pursuant to the terms of Section 9.2 hereof shall be limited to such
Stockholder's Proportionate Share of the Damages. For purposes of this Section
9.5, a Stockholder's Proportionate Share of Damages shall be the percentage of
the Damages that is equal to the percentage of the Purchase Price that such
Stockholder is entitled to receive under this Agreement.
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(c) The cumulative liability of the Company Indemnifying
Parties 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
Indemnifying Parties 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 difference between (i) the Purchase Price and (ii) the Specified
Cash Amount, less any amounts paid or required to be paid by the Company
Indemnifying Parties 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
cumulative liability of the Company Indemnifying Parties 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 Indemnifying Parties 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 difference between (i) the
Purchase Price and (ii) the Specified Cash Amount. Any Environmental Liabilities
shall be satisfied first by the Surviving Corporation's insurance if any. To the
extent any Environmental Liability is not satisfied by the Surviving
Corporation's insurance, the recourse of the Buyer Indemnified parties shall
then be against the Escrow Fund, with the Company Indemnifying Parties being
liable only for the amount, up to the Environmental Maximum, not satisfied by
the Surviving Corporation'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
difference between (i) the Purchase Price and (ii) the Specified Cash Amount.
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 or
Indemnitee 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 Reserves. The amount of any claim by the Buyer
Indemnified Parties under Section 9.2(i) shall be reduced by the amount of any
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reserves provided for in the Closing Financial Statements; provided that the
claim relates to the category or class for which the reserve was established.
9.9 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 Buyer 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 Buyer 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).
9.10 Subrogation. Each Indemnifying Party under this Article IX shall
be subrogated to any and all defenses, claims or setoffs which the Indemnitee
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 Stockholder Representative 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.
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
(whether before or after adoption of this Agreement by the Stockholders of the
Company) :
(a) by mutual written consent of the Parties hereto;
(b) at the election of the Stockholder Representative, 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:
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(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 12.3 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.
ARTICLE XI
STOCKHOLDER REPRESENTATIVE
11.1 Appointment of Stockholder Representative. The Company and the
Company Stockholders, by virtue of the adoption of this Agreement, irrevocably
appoint ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to act as their sole and exclusive representative (the
"Stockholder Representative") to receive installments of the Escrow Amount and
the A/R Reserve Escrow amount on the Company Stockholders' behalf and to make
all decisions and determinations under or relating hereto on their behalf that
the Stockholder Representative may deem necessary or appropriate. Without
limiting the generality of the immediately preceding sentence, the Stockholder
Representative may, in his good faith discretion, object to, settle or
compromise any Indemnity Claim made under this Agreement or any dispute with
respect to the Escrow Fund or the A/R Reserve Escrow or any installment thereof,
and authorize payments to be made with respect thereto. All actions taken by the
Stockholder Representative hereunder shall be binding upon the Company
Stockholders and their successors as if expressly confirmed and ratified in
writing by each of them, and no Company Stockholder shall have the right to
object, dissent, protest or otherwise contest the same. All actions, decisions
and instructions of the Stockholder Representative shall be conclusive and
binding upon all of the Company Stockholders and no Company Stockholders shall
have any cause of action against the Stockholder Representative for any action
taken, decision made or instruction given by such Stockholder Representative
under or with respect to this Agreement, except for gross negligence or willful
misconduct by such Stockholder Representative.
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11.2 Stockholder Representative Escrow. As provided in Section 9 of the
Escrow Agreement, at the Closing a sum equal to one percent (1%) of the
Estimated Purchase Price out of the portion of the Purchase Price to be paid by
the Buyer at Closing shall be placed into an interest-bearing escrow account
(the "Stockholder Representative Escrow") established by the Stockholder
Representative. The Stockholder Representative shall have the right to withdraw
funds from the Stockholder Representative Escrow to cover "Expenses" (as defined
in the Escrow Agreement), and the establishment of the Stockholder
Representative Escrow and withdrawals therefrom pursuant to the provisions of
Section 9 of the Escrow Agreement are hereby specifically authorized.
11.3 Successor Stockholder Representative. The Stockholder
Representative, or any successor to him hereafter appointed, may resign and
shall be discharged of his duties hereunder and under the Escrow Agreement upon
the appointment of a successor Stockholder Representative as hereinafter
provided. In case of the resignation or the death or inability to act of the
Stockholder Representative appointed by the Company, or any of his successors, a
successor shall be named by the Company. Each such successor Stockholder
Representative shall have the power, authority, rights and privileges hereby
conferred upon the original Stockholder Representative succeeded by him, and the
term "Stockholder Representative" as used herein and in the Escrow Agreement
shall be deemed to include a successor Stockholder Representative.
ARTICLE XII
GENERAL PROVISIONS
12.1 Amendments and Waiver. This Agreement may be amended at any time
prior to the Effective Time, whether before or after the adoption of this
Agreement by the Company's Stockholders; provided that after adoption of this
Agreement by the Company's Stockholders no amendment shall be made which by law
requires the further approval of such Stockholders without such further
approval. 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.
12.2 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be personally delivered or sent by
facsimile
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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 Holdings, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to: Doerner, Saunders, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇.
(ii) If to the Company: California Western Gas Company
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Sheppard, Mullin, ▇▇▇▇▇▇▇ &
Hampton LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:(▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Short, Esq.
(iii) If to the Majority ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Stockholders or the ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Representative: Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may change its address for receiving notice by
written notice given to the others named above.
12.3 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 12.3 and of the
Confidentiality Agreement referenced in the preceding
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sentence shall remain in force and effect notwithstanding any termination of
this Agreement under Article X hereof.
12.4 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 12.4. 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 of the Company to the Buyer, for release immediately upon
the execution of this Agreement and immediately after the Closing.
12.5 Expenses. Except as otherwise expressly provided herein, and
except to the extent the same are paid by the Company from its cash or cash
equivalents or are accrued on the Closing Balance Sheet, the Company and the
Buyer shall bear their own costs and expenses in connection with the
transactions contemplated hereby. Should the Buyer desire to liquidate the
Company after the Closing, whether through a merger or otherwise, the Buyer may
do so at its own expense. The provisions of this Section 12.5 shall survive any
termination of this Agreement.
12.6 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.
12.7 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.
12.8 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.
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12.9 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 Delaware 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 Delaware. Subject to the
provisions of Section 12.10, 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 12.10, 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.
12.10 Dispute Resolution. Except for disputes as to the Adjustment
Amount, which shall be resolved in the manner provided in Section 1.8, 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 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.
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No later than ten (10) calendar days after appointment of the
Arbitrator pursuant to the terms of this Section 12.10, 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.
12.11 Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.
12.12 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.
12.13 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 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."
12.14 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.
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[The remainder of this page is intentionally left blank.]
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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:
CALIFORNIA WESTERN GAS COMPANY HERITAGE HOLDINGS, INC.
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
MAJORITY STOCKHOLDERS: TRANSITORY SUBSIDIARY:
GROWTH PROPERTIES CALIFORNIA WESTERN MERGER CORP.
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
Number and class of shares:
330 Preferred Stock
PROFLAME, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Number and Class of Shares:
18,465 Preferred Stock
60
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee,
The ▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Revocable Trust
Number and Class of Shares:
1,264.75 Preferred Stock;
29,070.05 Common Stock.
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee,
The ▇▇▇▇▇▇▇ Revocable Trust dated
08/02/96
Number and Class of Shares:
1,264.75 Preferred Stock;
50,200.91 Common Stock
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee, The ▇▇▇▇▇
Family Trust
Number and Class of Shares:
1,264.75 Preferred Stock;
50,200.91 Common Stock
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of the ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Trust
Number and Class of Shares:
350.75 Preferred Stock;
23,249.49 Common Stock
61
APPENDIX
DEFINITIONS
"ACCOUNTANTS" - As defined in Section 1.6(a).
"ACCOUNTING PRINCIPLES" - As defined in Section 1.7
"ACCOUNTS RECEIVABLE" - As defined in Section 1.11.
"ACCOUNTS RECEIVABLE DEFICIENCY" - As defined in Section 1.11.
"ADJUSTMENT AMOUNT" - As defined in Section 1.7.
"ARBITRATOR" - As defined in Section 12.10.
"A/R RESERVE ESCROW" - As defined in Section 1.11.
"ASSUMED DEBT" - As defined in Section 5.7.
"BENEFIT EXPENSE PRORATION" - As defined in Section 1.7
"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 INDEMNIFIED PARTIES" - As defined in Section 9.2(a).
"BUYER'S ENVIRONMENTAL CONSULTANTS" - As defined in Section 6.9.
"CASH ADJUSTMENT AMOUNT" - As defined in Section 1.7.
"CERCLA" - As defined in Section 3.23(a).
"CERTIFICATE OF MERGER" - As defined in Section 2.1.
"CERTIFICATES" - As defined in Section 2.4.
"CLASS B PREFERRED STOCK" - As defined in Section 1.4.
"CLASS B PREFERRED STOCKHOLDERS" - As defined in Section 1.4.
"CLOSING" - As defined in Section 2.1.
APPENDIX - PAGE 1
62
"CLOSING DATE" - The date and time as of which the Closing actually takes place.
"CLOSING FINANCIAL STATEMENTS" - As defined in Section 1.8(a).
"COLLECTION PERIOD" - As defined in Section 1.11.
"COMMON DISSENTERS PROCEEDS" - As defined in Section 1.6(d).
"COMMON STOCK" - As defined in Section 3.4.
"COMPANY" - As defined in the Recitals of this Agreement.
"COMPANY STOCK" - As defined in Section 1.6.
"COMPANY INDEMNIFIED PARTIES" - As defined in Section 9.3.
"COMPANY INDEMNIFYING PARTIES" - As defined in Section 9.2(a).
"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 the Stockholder Representative (if other than one of
such individuals), 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.
"CONTROLLED ENTITY" - As defined in Schedule 1.7.
"DAMAGES" - As defined in Section 9.2(a).
"DEDUCTIBLE AMOUNT" - As defined in Section 9.5.
"DISCLOSURE SCHEDULE" - As defined in the introduction to the Schedules to this
Agreement.
"DIS PERMITS" - As defined in Section 3.18.
"DISSENTERS" - As defined in Section 2.10.
"DISSENTERS PROCEEDS" - As defined in Section 1.6(d).
"DISSENTERS' RIGHTS" - As defined in Section 2.10.
"DOUBTFUL ACCOUNTS RESERVE" - As defined in Section 1.11.
"EFFECTIVE DATE" - As defined in Section 2.1.
APPENDIX - PAGE 2
63
"EFFECTIVE TIME" - As defined in Section 2.1.
"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 1.9.
"ESTIMATED BENEFIT EXPENSE PRORATION" - As defined in Section 1.9.
"ESTIMATED NET WORKING CAPITAL" - As defined in Section 1.9.
"ESTIMATED PURCHASE PRICE" - As defined in Section 1.9.
"EXCHANGE AGENT" - As defined in Section 2.2(a).
"EXCLUDED ASSETS" - As defined in Section 1.10.
"FINAL CASH AMOUNT" - As defined in Section 1.8(a).
"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.
"GCL" - As defined in Section 1.1.
"GOVERNMENTAL ENTITY" - Any:
(a) nation, state, county, city, town, district or other
jurisdiction;
APPENDIX - PAGE 3
▇▇
(▇) ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, 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) with respect to property other than the Company Stock, relating
to any Taxes or other governmental charges or liabilities that are not yet due
or payable; (iii) with respect to property other than the Company Stock, 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.
"LONG TERM DEBT" - As defined in Section 5.7.
"MAJORITY STOCKHOLDERS " - As defined in the recitals of this Agreement.
"MATERIAL CONTRACTS" - As defined in Section 3.19.
"MERGER " - As defined in Recital A.
"MERGER DOCUMENTS" - As defined in Section 2.1.
"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.
APPENDIX - PAGE 4
65
"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.
"PREFERRED DISSENTERS PROCEEDS - As defined in Section 1.6(d).
"PREFERRED STOCK" - As defined in Section 3.4.
"PRELIMINARY MERGER CONSIDERATION" - As defined in Section 2.2(a).
"PREVIOUSLY OWNED/LEASED REAL ESTATE" - As defined in Section 3.23(b).
"PURCHASE PRICE" - As defined in Section 1.6.
"PURCHASE PRICE SHORTFALL" - As defined in Section 1.8(b).
"REAL ESTATE" - As defined in Section 3.12(a).
"REAL ESTATE LEASES" - As defined in Section 3.12(d).
"RELATED AGREEMENTS" - As defined in Section 12.9.
"RELATED TRANSACTIONS" - As defined in Section 7.6.
"RETAINED ENTITIES" - As defined in Section 5.7.
"SPECIFIED CASH AMOUNT" - As defined in Section 2.2(a).
"SSB" - ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney, Inc.
"STOCKHOLDER INFORMATION STATEMENT" - As defined in Section 1.10.
"STOCKHOLDER REPRESENTATIVE" - As defined in Section 11.1.
APPENDIX - PAGE 5
66
"STOCKHOLDER REPRESENTATIVE ESCROW"- As defined in Section 11.2.
"STOCKHOLDERS" - As defined in Section 1.10.
"SUBSIDIARY" - The corporations (if any) listed on Schedule 3.5.
"SURVIVING CORPORATION" - As defined in Section 1.1.
"TAX OR TAXES" - As defined in Section 3.20(a).
"TRANSITORY SUBSIDIARY" - As defined in the Recitals of this Agreement.
"WARN ACT" - The Workers Adjustment Restraining and Notification Act (Title 29
U.S.C., Chapter 23, Section 2101 et seq.
"1933 ACT" - The Securities Act of 1933, as Amended.
APPENDIX - PAGE 6
67
EXHIBIT A
CERTIFICATE OF MERGER
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68
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of
____________, 2001 (the "Closing Date"), by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the
"Stockholder Representative"), Heritage Holdings, Inc., a Delaware corporation
(the "Buyer"), and _____________________, as escrow agent ("Escrow Agent").
Buyer and Stockholder Representative are entering into this Agreement
pursuant to the terms of that certain Agreement and Plan of Merger dated
_______, 2001 entered into by and among Buyer, the Company, the Majority
Stockholders and the Transitory Subsidiary (the "
Merger Agreement"). Capitalized
terms used in this Agreement without definition shall have the respective
meanings given to them in the
Merger 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 1.11 of the
Merger 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"). Buyer is also depositing into a sub-account of the Escrow Fund with the
Escrow Agent an amount equal to $_______________ in immediately available funds
representing the "Stockholder Representative Escrow" as described herein and in
the
Merger Agreement, to be available only to the Stockholder Representative.
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 Stockholder Representative 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
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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.
3. Damages.
If after Buyer has given a Notice of Damages (as defined in Section 4
of this Agreement) to the Stockholder Representative 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 Stockholder Representative or a final non-appealable arbitration award
resulting from arbitration in accordance with Section 12.10 of the
Merger
Agreement. Escrow Agent shall not inquire into or consider whether the Damages
comply with the requirements of the
Merger 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 Stockholder Representative 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
Merger
Agreement), and (ii) the circumstances of such asserted Damages.
(b) If the Stockholder Representative 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 Stockholder Representative 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 Stockholder Representative 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 Stockholder Representative 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
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this Section 4 and the Buyer and the Stockholder Representative 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 Stockholder Representative 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 12.10 of the
Merger Agreement. Buyer and the Stockholder
Representative shall furnish to the Escrow Agent a copy of the document
reflecting the final determination of such Damages.
5. Net Working Capital Adjustment; Cash Adjustment Amount.
The parties acknowledge that the Escrow Fund may be used as a source of
payment for that amount owing by the Stockholders 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 1.7 and 1.8 of the
Merger 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 1.7 and 1.8 of the
Merger Agreement
together with interest thereon as provided in Section 1.8(b) of the Merger
Agreement, the Stockholder Representative 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 1.8(b)(i) of
the Merger 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 Stockholders 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 1.11 of the Merger Agreement. Within 25 days after the Stockholder
Representative's receipt of the Buyer's written notice of the Accounts
Receivable Deficiency, the Stockholder Representative 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 1.11
of the Merger Agreement, and Escrow Agent shall
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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
Stockholder Representative 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 Stockholder Representative) to
transfer such excess to the Stockholder Representative Escrow and Buyer shall so
instruct the Escrow Agent. The A/R Reserve 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 Stockholders in the proportions set forth in Section 8
of this Agreement, subject to Section 7(c) of this Agreement.
(b) On the date thirty-six (36) months from the date of Closing, Escrow
Agent shall pay and distribute one hundred percent (100%) of the then existing
amount of the Escrow Fund to the Stockholders in the proportions set forth in
Section 8 of this Agreement, 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 Stockholders) until it receives joint
written instructions of Buyer and the Stockholder Representative or a copy of a
final determination with respect to such Damages as a result of arbitration in
accordance with Section 12.10 of the Merger Agreement.
8. Allocation of Distributions to Stockholders.
All payments and distributions to the Stockholders by the Escrow Agent
or the Stockholder Representative pursuant to this Agreement (the
"Distributions") shall be allocated and paid in the following manner and
priority:
(a) Distributions shall first be allocated ratably to holders of the
Preferred Stock (other than Dissenting Shares and Class B Preferred Stock) until
each such holder of the Preferred Stock (except for holders of the Class B
Preferred Stock) has received, together with the Preliminary Merger
Consideration received by such holder in connection with the Closing, an amount
equal to $70 in cash per share of Preferred Stock that such holder exchanged
pursuant to the Merger Agreement, plus interest
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earned in the Escrow on the amount in the Escrow Fund attributable to such
holder (collectively, the "Preferred Stockholder Amount").
(b) In the event that each holder of the Preferred Stock (other than
Dissenting Shares and Class B Preferred Stock) has received the Preferred
Stockholder Amount pursuant to Section 8(a) of this Agreement, then: (i) such
holder of Preferred Stock shall be entitled to no further Distributions under
this Agreement and (ii) the holders of the Common Stock and the Dissenting
Shares in proportion to their respective interests in such consideration shall
be entitled to all further Distributions under this Agreement, without
limitation. Payments to the Stockholders shall be made by the Escrow Agent at
the addresses furnished to the Exchange Agent, provided that payments in respect
of Dissenting Shares shall be made to the Buyer. To the extent that a
Stockholder holding Preferred Stock has given notice such that such
Stockholder's shares have become Dissenting Shares, the rights to payment for
those Dissenting Shares shall be limited to the Preferred Stockholder Amount.
9. Installment Sale; Tax Treatment of Interest.
The parties hereto acknowledge and agree that the Merger 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 Merger in a
manner that is consistent with an installment sale 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 Stockholders 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 Stockholders, 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 recipient Stockholder(s) and which shall be
reported as interest expense by the Buyer pursuant to the terms of Section 1274
of the Code.
10. 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, Stockholders 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
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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 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 10(d) and Section 10(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
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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 non-appealable 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, 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 Stockholder Representative (on behalf of the Stockholders
and from the Stockholder Representative Escrow) shall each pay one half (1/2) of
the Escrow Agent's compensation for the services to be rendered by 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.
11. 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.
12. Stockholder Representative.
(a) The Stockholders have irrevocably appointed ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to
act as the sole and exclusive representative (the "Stockholder Representative")
to make all decisions and determinations on behalf of the Stockholders under
this Agreement that the Stockholder Representative may deem necessary or
appropriate. Without limiting the generality of the immediately preceding
sentence, the Stockholder Representative
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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 final Cash Amount, the Adjustment Amount, the Purchase Price Adjustment
or the Accounts Receivable Deficiency, and authorize payments to be made with
respect thereto. All action taken by the Stockholder Representative hereunder
shall be binding upon the Stockholders and their successors as if expressly
confirmed and ratified in writing by each of them, and no Stockholder shall have
the right to object, dissent, protest or otherwise contest the same. All
actions, decisions and instructions of the Stockholder Representative shall be
conclusive and binding upon all of the Stockholders and no Stockholder shall
have any cause of action against the Stockholder Representative for any action
taken, decision made or instruction given by such Stockholder Representative
under or with respect to this Agreement or the Merger Agreement, except for
gross negligence or willful misconduct by such Stockholder Representative.
(b) The Stockholder 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
Merger Agreement (the "Expenses"). At the Closing, a sum equal to one percent
(1%) of the Estimated Purchase Price shall be placed into an interest-bearing
escrow account (the "Stockholder Representative Escrow") established by the
Stockholder Representative from which the Stockholder Representative shall have
the right to withdraw the Expenses, from time to time, in his discretion and
without any consent or approval of Buyer or any other party. When all Escrow
Funds have been disbursed as provided in this Agreement and the Expenses have
been paid, the Stockholder Representative shall disburse any balance remaining
in the Stockholder Representative Escrow as additional Purchase Price to the
Stockholders, in the manner set forth in Section 8 of this Agreement; provided,
however, that if the Stockholder Representative believes, in his discretion,
that he may incur additional Expenses subsequent to such time in connection with
any potential claims that may be asserted against the Stockholder Representative
or otherwise, the Stockholder Representative shall have the right to retain such
portion of the remaining balance in the Stockholder Representative Escrow for
such period of time as he deems necessary, in his discretion, to cover such
Expenses. Upon determination by the Stockholder Representative that no further
Expenses will be incurred, the Stockholder Representative shall thereafter
disburse any balance remaining in the Stockholder Representative Escrow as
provided above.
(c) The Stockholder Representative, or any successor to him hereafter
appointed, may resign and shall be discharged of his duties hereunder upon the
appointment of a successor Stockholder Representative as hereinafter provided.
In case of the resignation or the death or inability to act of the Stockholder
Representative appointed by the Stockholders, or any of his successors, a
successor shall be named by
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the vote of a majority in interest of the Stockholders. Each such successor
Stockholder Representative shall have the power, authority, rights and
privileges hereby conferred upon the original Stockholder Representative
succeeded by him, and the term "Stockholder Representative" as used herein shall
be deemed to include a successor Stockholder Representative.
13. 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:
If to Stockholder Representative: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Sheppard, Mullin, ▇▇▇▇▇▇▇ & Hampton LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Short, Esq.
If to Buyer: Heritage Holdings, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
With a copy to: Doerner, Saunders, ▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
If to Escrow Agent:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Fax:
-------------------------------------
Attention:
-------------------------------
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14. 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 12.10 of the Merger Agreement, and
the parties submit to jurisdiction in the manner provided in Section 12.9 of the
Merger Agreement in any action or proceeding arising out of or relating to this
Agreement.
15. 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.
16. Headings.
The headings of sections in this Agreement are provided for convenience
only and shall not affect the interpretation of this Agreement.
17. 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.
18. 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
Stockholder Representative and the Escrow Agent.
▇-▇▇
▇▇
▇▇. Governing Law.
This Agreement shall be governed by the laws of the State of
California, without regard to conflicts of law principles.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: HERITAGE HOLDINGS, INC.
By:
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Its:
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STOCKHOLDER REPRESENTATIVE:
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
ESCROW AGENT:
-----------------------------------------
By:
--------------------------------------
Its:
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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 Agreement of Plan of
Merger dated as of _______________, 2001 (the "Agreement") by and among Buyer
and the Sellers.
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 [Certificate of Incorporation or bylaws], each as amended to date.
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EXHIBIT D
FORM OF OPINION OF SELLERS' COUNSEL
Unless otherwise defined below, all capitalized terms used
below shall have the meanings ascribed to such terms in the Agreement and Plan
of Merger dated as of _______________, 2001 (the "Agreement") by and among Buyer
and the Sellers.
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 Sellers of the Agreement and the
consummation by the Sellers of the transactions described in the Agreement have
been duly authorized by all necessary action on the part of Sellers.
3) The Agreement has been duly executed and delivered by the Sellers
and constitutes a valid and binding obligation of the Sellers enforceable
against them 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) In the case of any Seller that is not an individual, the execution,
delivery and performance of the Agreement by such Seller will not constitute a
violation by it of the terms of its organizational documents.
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EXHIBIT E
FORM OF OFFICER AND DIRECTOR RELEASE
E-1
83
EXHIBIT F
CONSENTS
F-1
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EXHIBIT G
FORM OF NON-COMPETITION AGREEMENT
G-1
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EXHIBIT H
FORM OF CERTIFICATE OF INCORPORATION
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EXHIBIT I
CLASS B PREFERRED STOCK
I-1