Exhibit 10.1
Equity Purchase Agreement
by and
among
Petro, Inc.
(Buyer),
And The Sellers Signatory Hereto,
(Sellers)
dated
July 31, 2001
Sellers' Disclosure Letter............................................................. viii
ARTICLE I DEFINITIONS........................................................ 1
1.1. Definitions........................................................ 1
ARTICLE II SALE AND TRANSFER OF ASSETS; CLOSING............................... 14
2.1. Closing............................................................ 14
2.2. Purchase Price..................................................... 15
2.3. Adjustments to Purchase Price...................................... 15
2.4. Excluded Assets.................................................... 17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PRINCIPAL SELLERS................ 17
3.1. Corporate Organization; Etc........................................ 17
3.2. Capitalization of Companies........................................ 18
3.3. Subsidiaries....................................................... 18
3.4. No Conflict........................................................ 18
3.5. Financial Statements............................................... 19
3.6. No Unknown Liabilities, Etc........................................ 19
3.7. Reserved........................................................... 20
3.8. Absence of Certain Changes......................................... 20
3.9. Title to Properties; Encumbrances.................................. 20
3.10. Property, Plant and Equipment...................................... 20
3.11. Intellectual Property.............................................. 21
3.12. Contracts; No Defaults............................................. 22
3.13. Operating Matters.................................................. 24
3.14. Insurance.......................................................... 27
3.15. Labor Difficulties................................................. 27
3.16. Employee Benefits.................................................. 28
3.17. Legal Proceedings; Orders.......................................... 29
3.18. No Condemnation or Expropriation................................... 30
3.19. Legal Requirements; Governmental Authorizations.................... 30
3.20. Material Consents.................................................. 31
3.21. Environmental Matters.............................................. 31
3.22. No Other Agreements................................................ 34
3.23. Brokers and Finders................................................ 34
3.24. Personnel.......................................................... 34
3.25. Taxes.............................................................. 34
3.26. Relationships With Related Persons................................. 36
ARTICLE IV FURTHER REPRESENTATIONS AND WARRANTIES OF SELLERS.................. 36
4.1. Title.............................................................. 36
4.2. Authority; No Conflict............................................. 36
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...................... 37
5.1. Buyer Organization; Etc...................................... 37
5.2. Authority; No Conflict....................................... 37
5.3. Brokers and Finders.......................................... 38
5.4. Solvency..................................................... 38
5.5. Investigation by Buyer....................................... 39
5.6. Availability of Financing.................................... 39
ARTICLE VI COVENANTS OF BUYER AND SELLERS............................... 39
6.1. Full Access.................................................. 39
6.2. Reasonable Efforts: No Inconsistent Action................... 40
6.3. Employees.................................................... 41
6.4. Releases..................................................... 42
6.5. Section 338(h)(10) Election.................................. 42
6.6. Transfer Taxes............................................... 44
6.7. Buyer Financing.............................................. 44
6.8. Section 754 Election......................................... 44
ARTICLE VII CONDITIONS TO OBLIGATIONS OF SELLERS......................... 44
7.1. Representations and Warranties True.......................... 44
7.2. Performance.................................................. 44
7.3. No Proceeding................................................ 44
7.4. Certificates................................................. 45
7.5. Governmental Consents and Waivers............................ 45
7.6. HSR Act...................................................... 45
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF BUYER........................... 45
8.1. Representations and Warranties True.......................... 45
8.2. Performance.................................................. 45
8.3. No Proceeding................................................ 46
8.4. Receipt of Third Party Consents.............................. 46
8.5. Governmental Consents, Approvals and Waivers................. 46
8.6. Certificates................................................. 46
8.7. Corporate Documents.......................................... 46
8.8. Other Sellers Escrow Agreement............................... 46
8.9. Noncompetition Agreement..................................... 46
8.10. Financing.................................................... 46
8.11. HSR Act...................................................... 47
8.12. Release of Encumbrances...................................... 47
8.13. Dover Escrow Agreement....................................... 47
ARTICLE IX CONDUCT OF THE COMPANIES PENDING CLOSING AND RISK OF LOSS.... 47
9.1. Regular Course of Business................................... 47
9.2. Organization................................................. 47
9.3. Existing Relationships....................................... 47
v
9.4. Contracts....................................................... 47
9.5. Insurance of Property........................................... 48
9.6. No Default...................................................... 48
9.7. Compliance With Laws............................................ 48
9.8. Taxes........................................................... 48
ARTICLE X SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION..... 48
10.1. Survival of Representations and Warranties...................... 48
10.2. Indemnifications................................................ 49
10.3. Limitation on Liability......................................... 52
10.4. Exclusive Remedies.............................................. 53
10.5. Subrogation..................................................... 53
10.6. No Double Recovery; Use of Insurance............................ 54
10.7. Tax Benefits.................................................... 54
10.8. Treatment of Indemnity Payments Between the Parties............. 55
10.9. Mitigation of Loss.............................................. 55
ARTICLE XI TERMINATION AND ABANDONMENT..................................... 55
11.1. Methods of Termination.......................................... 55
11.2. Procedure Upon Termination...................................... 55
11.3. Liquidated Damages.............................................. 56
11.4. Right of First Refusal.......................................... 56
ARTICLE XII MISCELLANEOUS PROVISIONS........................................ 57
12.1. Amendment and Modification...................................... 57
12.2. Waiver of Compliance............................................ 57
12.3. Notices......................................................... 57
12.4. Assignment...................................................... 59
12.5. Dispute Resolution.............................................. 59
12.6. Schedules and Exhibits.......................................... 59
12.7. Sellers' Representatives........................................ 60
12.8. Publicity....................................................... 63
12.9. Governing Law................................................... 63
12.10. Counterparts.................................................... 63
12.11. Headings........................................................ 63
12.12. Entire Agreement................................................ 63
12.13. Third Parties................................................... 63
12.14. Further Cooperation............................................. 64
vi
Exhibits
Exhibit 2.2 Form of Other Sellers Escrow Agreement
Exhibit 5.6 Financing Letters
Exhibit 8.9 Form of Noncompetition Agreement
Exhibit 8.13 Form of Dover Escrow Agreement
vii
Sellers' Disclosure Letter
--------------------------
Section 2.2(a) Sharing Percentage and Indemnity Percentage
Section 3.1 Corporate Organization
Section 3.3 Subsidiaries
Section 3.4(c) Effect of Contemplated Transactions on Applicable Contracts
Section 3.5 Financial Statements
Section 3.8 Certain Changes
Section 3.9(a) Title to Properties
Section 3.9(b) Permitted Encumbrances
Section 3.10(a) Condition of Plant and Equipment
Section 3.10(b) Written Recommendations
Section 3.11(a) Intellectual Property Assets
Section 3.11(b) Marks, Patents or Copyrights
Section 3.12(a) Material Contracts
Section 3.12(b) Exceptions to 3.12(a)
Section 3.12(c) Compliance with Material Contracts
Section 3.13(a)(i) Residential Commercial Customers
Section 3.13(a)(ii) Posted Prices for Operating Divisions
Section 3.13(a)(iii) Propane Customers
Section 3.13(a)(iv) Customers account Gains/Losses
Section 3.13(a)(v) Wholesale Customers
Section 3.13(a)(vi) Bid/COD/Other Customers
Section 3.13(a)(vii) Service Revenues
Section 3.13(b)(i) Home Heating Oil Sales by Gallon
Section 3.13(b)(ii) Home Heating Oil Sales to Fixed Price and Capped Customers
Section 3.13(c) Security Alarm Business
Section 3.13(d) Fixed Price Customers and Capped Price Customers
Schedule 3.13(e) Bid Customer Agreements
Section 3.13(f) Agreements with Cooperatives
Section 3.13(g) Large Customer Purchases
Section 3.13(i) Customer Accommodations
Section 3.13(j) Aging of Accounts Receivable
Section 3.13(k) Acquisitions
Section 3.14(a) Insurance
viii
Section 3.14(b) Adequacy of Insurance
Section 3.14(c) Recommendations
Section 3.15 Labor Matters
Section 3.16(a) Employee Benefits
Section 3.16(b) Defined Benefit Plans
Section 3.16(h) Pending DOL/IRS/PBGC Proceedings
Section 3.16(i) Severance Arrangements
Section 3.17(a) Legal Proceedings
Section 3.17(b) Orders
Section 3.19(a) Legal Requirements
Section 3.19(b) Governmental Authorizations
Section 3.20 Third-Party Consents
Section 3.21 Environmental
Section 3.21(c) Privileged Environmental Materials
Section 3.21(e) Environmental; Disposal of Material, etc.
Section 3.24 Personnel
Section 3.25 Taxes
Section 3.26 Relationship with Affiliates
Section 4.2(c) Sellers Consents and Notices
Section 6.3(a) Certain Employees
Section 9 Conduct of Business
ix
EQUITY PURCHASE AGREEMENT
-------------------------
EQUITY PURCHASE AGREEMENT ("Agreement") dated as of July 30, 2001, by
and among Petro, Inc., a Delaware corporation ("Buyer"), the limited partners of
▇▇▇▇▇▇ Oil Co., L.P., a Delaware limited partnership ("▇▇▇▇▇▇ Oil LP"), the
stockholders of ▇▇▇▇▇▇ Oil Co., Inc., a Delaware corporation ("▇▇▇▇▇▇ Oil Inc.")
and the minority stockholders of Blueray Systems, Inc., a Delaware corporation
("Blueray"). Each such limited partner and stockholder is referred to
individually as a "Seller" and collectively as the "Sellers".
This Agreement sets forth the terms and conditions upon which Sellers
will sell to Buyer, and Buyer will purchase from Sellers, the direct and
indirect equity interests in ▇▇▇▇▇▇ Oil LP, ▇▇▇▇▇▇ Oil Inc. Blueray and Region
Oil Plumbing, Heating and Cooling Inc., a New Jersey corporation ("Region Oil")
(together the "Companies"). As used in this Agreement, capitalized terms have
the meaning ascribed them in Article I of this Agreement or as otherwise set
forth herein.
In consideration of the mutual agreements contained herein, intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
1.1. Definitions. For all purposes of this Agreement, except as
-----------
otherwise expressly provided or unless the context otherwise requires:
(a) "Active Customer" means a Customer who has not terminated,
nor with respect to whom the Principal Sellers have any Knowledge of such
Customer's intention to terminate, its normal business relationship with the
Companies and their Subsidiaries, and with respect to whom the Companies and
their Subsidiaries have not cancelled and, based upon facts known to the
Companies and the Principal Sellers, do not intend to cancel such relationship.
A propane or home heating oil Customer is not active if it has not taken a
delivery of #2 fuel oil or propane since July 1, 2000.
(b) The term "Affiliate" has the meaning prescribed by Rule 12b-2
of the regulations promulgated pursuant to the Exchange Act.
1
(c) "Antitrust Division" has the meaning ascribed such term in
Section 5.9(a).
(d) "Applicable Contract" means any Contract (i) under which the
Companies and their Subsidiaries have any rights, (ii) under which the Companies
and their Subsidiaries have or are subject to any obligation or liability or
(iii) by which the Companies and their Subsidiaries or any of the Assets are
bound, including each amendment, supplement and modification (whether oral or
written) in respect of any of the foregoing.
(e) "Assets" means all of the assets, property, goodwill and
business of every kind, nature and description, real, personal or mixed,
tangible or intangible, wherever situated, whether or not reflected on the
Interim Balance Sheet, owned or leased by the Companies and their Subsidiaries,
including, without limitation, all of the Intellectual Property Assets and all
rights under Applicable Contracts constituting or held or used or useful in
connection with, or related to, the Business.
(f) "Bid" means that the Customer has the right to purchase home
heating oil or propane for a stipulated period at a stated price or based upon a
stated pricing formula, but does not include Fixed Price Customers or Capped
Price Customers.
(g) "Bid/COD/Other Customer" shall mean a Customer described in
Schedule 3.13(a)(vi) of Sellers' Disclosure Letter.
(h) "Blueray" shall have the meaning ascribed such term in the
Preamble.
(i) "Bucks County Division" means all operations of the Companies
and their Subsidiaries from locations situated in Bucks County, Pennsylvania.
(j) "Business" shall mean the business conducted by the Companies
and their Subsidiaries as of the date hereof.
(k) "Capped Price Customers" means any Residential/Commercial
Customer which has purchased heating oil from the Companies and their
Subsidiaries pursuant to an agreement which requires the Companies and their
Subsidiaries to sell either a specified quantity of home heating oil or home
heating oil for a specified period to such Customers at a maximum price.
(l) "Cash Amount" means $118,253,450.
2
(m) "Closing" and "Closing Date" shall have the meaning ascribed
to such term in Section 2.1.
(n) "Code" means the Internal Revenue Code of 1986, as amended,
and any successor thereto.
(o) "Contemplated Transactions" means the transactions
contemplated by this Agreement.
(p) "Contract" means any agreement, contract, lease, license,
sublicense, or other undertaking (whether written or oral and whether express or
implied) that is legally binding.
(q) "Copyrights" means all registered and unregistered copyrights
in both published works and unpublished works (including those in computer
software and databases), that are owned, licensed, used or held for use by the
Companies and their Subsidiaries.
(r) "Customer" means any Person who has been a customer of the
Business since June 30, 2000.
(s) "Damages" means any loss, liability, obligation, cost of
mitigation, claim, damage, expense (including costs of investigation, defense
and settlement and reasonable attorneys' fees), whether or not involving a
third-party claim. In no event shall "Damages" include (i) special, indirect
incidental, consequential or punitive damages of any kind or (ii) lost profits
of Buyer following the Closing, however, this limitation is not intended to
restrict or reduce any claim of Buyer that the Sellers misrepresented the
financial results of the Companies and their Subsidiaries for any period prior
to the Closing or the Buyer's ability to prove the damages resulting from such
misrepresentation to the extent not based on lost profits of Buyer after
Closing.
(t) "Documents" means this Agreement, the Other Sellers Escrow
Agreement, the Dover Escrow Agreement and the Noncompetition Agreements.
(u) "Dover Escrow Agreement" means an escrow agreement
substantially in the form of Exhibit 8.13.
(v) "Dutchess County Division" means all operations of the
Companies and their Subsidiaries from locations situated in Dutchess County, New
York.
3
(w) "Encumbrance" means any charge, claim, community property
interest, condition, equitable interest, mortgage, lien, option, pledge,
security interest, right of first refusal, whether arising by law, by agreement
or otherwise, including (without limitation) in the case of real estate, real
estate covenants, rights of way, easements, activity or use restrictions,
encroachments, building use restrictions, variances, special use permits, or
reservations.
(x) "Environment" means soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins and inland wetlands and water courses), groundwaters, drinking
water supply, stream sediments, ambient air (including indoor air), plant and
animal life, and any other environmental medium or natural resource.
(y) "Environmental Compliance Liability" means any and all
liabilities, costs and expenses arising under, or related to, compliance with
any Environmental Laws applicable to the Facilities or the Business or
operations or assets used in the Business, that would reasonably be expected to
result in claims and/or demands under Environmental Laws and/or liabilities to
third parties, including but not limited to, Governmental Bodies.
(z) "Environmental Conditions" means all conditions with respect
to soil, surface waters, groundwaters, ponds, stream sediment, air and similar
environmental media and building materials, both on-site and off-site of the
property owned and/or operated and/or occupied by the Companies or their
Subsidiaries or any Predecessor at the Facilities, and all improvements thereto
upon or in which the Business is now or was formerly operated that would
reasonably be expected to require remedial action and/or that would reasonably
be expected to result in claims and/or demands by and/or liabilities to third
parties including, but not limited to, Governmental Bodies. This term shall
expressly include on and off-site liabilities asserted under the Comprehensive
Environmental Response Compensation and Liability Act, as amended, ("CERCLA") or
analogous State or foreign statutes.
(aa) "Environmental Laws" means all applicable Legal Requirements
relating to pollution or protection of human health (as relating to Materials of
Environmental Concern) or the Environment, including (without limitation), (i)
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, (ii) the manufacture, generation, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern, (iii) the preservation of the Environment or
mitigation of adverse
4
effects thereon, (iv) health and safety of employees, community right-to-know,
hazard communication and noise concerns or (v) record keeping, notification,
disclosure and reporting requirements respecting Materials of Environmental
Concern.
(bb) "Environmental Notice" means any summons, citation,
directive, order, claim, pleading, proceeding, judgment, request for
information, letter or any other written communication from the United States
Environmental Protection Agency ("USEPA"), or any other federal, state or local
agency or authority, or any other entity or any individual, concerning any
intentional or unintentional act or omission which has resulted in or which
would reasonably be expected to result in the Release of any Materials of
Environmental Concern into the Environment or building material, or other
violation or alleged violation of Environmental Laws.
(cc) "Equity Interests" means, collectively, all of the limited
partnership interests of ▇▇▇▇▇▇ Oil LP, all of the capital stock of ▇▇▇▇▇▇ Oil
Inc. and the capital stock of Blueray held by the Sellers.
(dd) "ERISA" means the Employee Retirement Income Security Act of
1974 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
(ee) "ERISA Affiliate" means any other Person that, together with
Sellers, would be treated as a single employer under (S) 414 of the Code.
(ff) "Estimated Long Term and Bank Debt" shall mean the estimated
amount of Long-Term and Bank Debt as of the Closing Date set forth in a
certificate dated as of the Closing Date from the Principal Sellers, subject to
the approval of the Buyer which shall not be unreasonably withheld.
(gg) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(hh) "Excluded Assets" shall have the meaning ascribed such term
in Section 2.4.
(ii) "Facilities" means the facilities of the Companies and their
Subsidiaries located at the Real Property, or any other real property currently
or formerly owned and/or operated and/or leased by the Companies or their
Subsidiaries or any Predecessor, and all improvements thereon.
5
(jj) "Fixed Price Customer" means any Residential/Commercial
Customer which has purchased or agreed to purchase in the future home heating
oil from the Business pursuant to an agreement which requires the Business to
sell a specified quantity of home heating oil or to sell home heating oil for a
specified period of time, to such Residential/Commercial Customer at a fixed
price and period of time.
(kk) "FTC" shall have the meaning ascribed such term in Section
6.4(a).
(ll) "GAAP" means generally accepted accounting principles as
from time to time in effect.
(mm) "Governmental Authorization" means any approval, consent,
license, permit, order, consent order, consent decree, waiver or other
authorization issued, granted, given or otherwise made available or applied for
by or under the authority of any Governmental Body or pursuant to any Legal
Requirement. As used herein, unless the context otherwise requires, the term
"Governmental Authorization" refers only to Governmental Authorizations held by
the Company or their Subsidiaries or otherwise applicable to the Business or any
Facilities currently owned or operated by the Companies or their Subsidiaries.
(nn) "Governmental Body" means any (i) nation, state, county,
city, town, village, district or other jurisdiction of any nature, (ii) federal,
state, local, municipal, foreign or other government, (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official or entity and any court or other tribunal), (iv)
multi-national organization or body or (v) federal, state, local, municipal,
foreign or other body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
(oo) "Hardware" means any computer, modem, server, processing
unit, communication equipment or connection, embedded chips and any other device
or equipment of any kind and all parts and components thereto used in or on
behalf of the Business that are owned by the Companies and their Subsidiaries,
leased by the Companies and their Subsidiaries and/or used by the Companies and
their Subsidiaries under a license.
(pp) "Hold Back Account" means the bank account to be specified
in writing by the Principal Sellers or any one of them.
6
(qq) "Hold Back Amount" means $2,000,000.
(rr) "HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act, as amended.
(ss) "Indemnity Percentage" means for each Seller, the amount,
shown as a percentage, calculated in accordance with Section 2.2(a) of Sellers'
Disclosure Letter.
(tt) "Intellectual Property Assets" means all Marks, Patents,
Copyrights and Trade Secrets.
(uu) "Interim Balance Sheet" has the meaning set forth in Section
3.5 of this Agreement.
(vv) "Knowledge" means, in the case of an individual, such
Person's actual knowledge, and in the case of the Principal Sellers, actual
knowledge after discussion with the officer or employee of the Companies and
their Subsidiaries who is primarily responsible for the applicable subject and
failing such discussion, the actual knowledge of such officer or employee. A
Person (other than an individual) will be deemed to have the actual knowledge of
any officer, director or general partner of such Person.
(ww) "Legal Requirement" means any federal, state, local,
municipal, foreign, international, multinational or other administrative order,
consent order, judgment, injunction, constitution, law, ordinance, regulation,
statute or treaty. As used herein, unless the context otherwise requires, the
term "Legal Requirement" refers only to any Legal Requirement applicable to the
Companies and their Subsidiaries, the Business and any Facilities currently
owned and operated by the Companies or their Subsidiaries.
(xx) "Long Island Division" means all operations of the Companies
and their Subsidiaries from locations situated in Nassau and Suffolk Counties,
New York.
(yy) "Long-Term and Bank Debt" means long-term indebtedness of
the Companies and their Subsidiaries for borrowed money and, without
duplication, the short-term indebtedness of the Companies and their Subsidiaries
to banking institutions (expressly excluding, in each case, trade payables and
other current liabilities and liabilities with respect to the group pension plan
of ▇▇▇▇▇▇ Oil LP) and other long-term liabilities required to be shown on a
balance sheet in accordance with GAAP.
7
(zz) "Marks" means the name "▇▇▇▇▇▇ Oil" and all fictional
business names, tradenames, registered and unregistered federal and state
trademarks, service marks, slogans, trade dress, logos and all applications to
register the same, domestic and foreign, that are owned, licensed, used or held
for use by the Companies and their Subsidiaries.
(aaa) "Material Adverse Effect" means any occurrence,
circumstance or condition (excluding general economic trends or conditions and
trends or conditions affecting the industry in which the Companies and their
Subsidiaries operate) which individually or in the aggregate, together with all
other occurrences, circumstances and conditions, has resulted in, or is
reasonably likely to result in, a material adverse effect on the results of
operations or financial condition of the Companies and their Subsidiaries taken
as a whole.
(bbb) "Material Contracts" means the Contracts identified or
required to be identified in Section 3.12(a) of Sellers' Disclosure Letter.
(ccc) "Materials of Environmental Concern" means, to the extent
regulated under any Environmental Laws, any petroleum or fraction thereof,
petroleum product, petroleum by-product, fuel oil, waste oil, explosive,
reactive material, ignitable material, corrosive material, hazardous chemical,
hazardous waste, hazardous substance, extremely hazardous substance, toxic
substance, toxic chemical, radioactive material, medical waste, biomedical
waste, infectious material, pollutant, toxic pollutant, herbicide, fungicide,
rodenticide, insecticide, contaminant or pesticide and including, but not
limited to, any other element, compound, mixture, solution or substance which
poses a present or potential hazard to human health or the environment.
(ddd) "▇▇▇▇▇▇ Oil Inc." shall have the meaning ascribed to such
term in the Preamble.
(eee) "▇▇▇▇▇▇ Oil LP" shall have the meaning ascribed to such
term in the Preamble.
(fff) "Net Dollar Sales" means gross sales less all allowances,
rebates, discounts, taxes and other credits, other than oil coupons.
(ggg) "Net Working Capital" means the excess of (i) current
assets excluding intercompany receivables, plus the long term portion of all
outstanding notes receivables, installment receivables and investments held in
escrow related to the acquisition of
8
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Fuel Corp., over (ii) current liabilities excluding
intercompany payables and excluding the short term indebtedness of the Companies
and their Subsidiaries to banking institutions to the extent it is included in
the calculation of Long Term and Bank Debt, (i) and (ii) as calculated in
accordance with GAAP (excluding any assets or liabilities created by the
implementation of SFAS No. 133 as long as all transactions included therein are
entered into in the Ordinary Course of Business).
(hhh) "New Jersey Division" means all operations of the
Companies and their Subsidiaries from locations in the State of New Jersey.
(iii) "Noncompetition Agreement" shall have the meaning ascribed
to such term in Section 8.9.
(jjj) "Operating Divisions" individually refers to each of the
Bucks County Division, the Dutchess County Division, the Long Island Division,
the New Jersey Division, the Orange County Division, the Philadelphia Division
and the Westchester/▇▇▇▇▇▇ Division and collectively to all of them.
(kkk) "Orange County Division" means all operations of the
Companies and their Subsidiaries from locations situated in Orange County, New
York.
(lll) "Order" means any award, decision, decree, injunction,
judgment, order, consent order, ruling, or verdict entered, issued, made or
rendered by any court, administrative agency or other Governmental Body.
(mmm) "Ordinary Course of Business" means an action taken by
a Person only if such action is taken in the ordinary course of the normal
operations of such Person consistent with the past practices of such Person.
(nnn) "Organizational Documents" means each of the following as
currently in effect, as applicable: (i) the charter, memorandum, articles or
certificate of incorporation and the by-laws of a corporation, (ii) the
partnership agreement and any statement of partnership of a general partnership,
(iii) the limited partnership agreement and the certificate of limited
partnership or formation of a limited partnership, (iv) the certificate of
formation or articles of organization and operating agreement of a limited
liability company, (v) any similar document adopted or filed in connection with
the creation, formation or organization of a Person and (vi) any amendment to
any of the foregoing.
9
(ooo) "Other Sellers" means all Sellers other than the Principal
Sellers.
(ppp) "Other Sellers Escrow Agreement" means an escrow agreement
substantially in the form of Exhibit 2.2 hereto.
(qqq) "Other Sellers Escrow Amount" shall have the meaning
ascribed such term in Section 2.2.
(rrr) "Patents" means all patents, patent applications,
provisional patent applications, divisionals, continuations, continuations-in-
part, reissues, reexaminations, extensions, invention registrations, patentable
invention disclosures and inventions and discoveries that may be patentable,
domestic and foreign, that are owned, licensed, used or held for use by the
Companies and their Subsidiaries.
(sss) "Per Diem Adjustment" means an amount equal to the sum of
(1) the product of (x) $55,945 multiplied by (y) the number of days that the
Closing is delayed beyond June 30, 2001 through September 30, 2001 (such
product, the "Delay Payment") and (2) an amount equal to interest on the sum of
-------------
the Cash Amount and the Delay Payment (as calculated from time to time),
accruing daily at a rate per annum of 8% for each day that the Closing is
delayed beyond July 31, 2001.
(ttt) "Permitted Encumbrances" means (i) matters set forth in
Section 3.9(b) of Sellers' Disclosure Letter; (ii) as disclosed in the Financial
Statements described in Section 3.5; (iii) liens for taxes, assessments and
other governmental charges not yet due and payable or, if due, (A) not
delinquent or (B) being contested in good faith by appropriate proceedings; (iv)
mechanics', workmen's, repairmen's, warehousemen's, carriers' or other like
liens arising or incurred in the Ordinary Course of Business if the underlying
obligations are not more than 30 days past due or are being contested in good
faith; (v) liens or title-retention arrangements arising under original purchase
price conditional sales contracts and equipment leases with third parties
entered into in the Ordinary Course of Business; and (vi) with respect to real
property, (A) easements, licenses, covenants, rights-of-way and other similar
restrictions, including, without limitation, any other agreements or
restrictions which would be shown by a current title report or other similar
report or listing, (B) any conditions that may be shown by a current survey,
title report or physical inspection and (C) zoning, building and other similar
restrictions, so long as the matters referred to in (A) or (B) or (C) neither
individually nor in the
10
aggregate, render the title of such real property unmarketable or prevent the
use of such real property substantially as currently used or materially reduce
its value.
(uuu) "Person" means any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union or
other entity or Governmental Body.
(vvv) "Philadelphia Division" means all operations of the
Companies and their Subsidiaries from locations situated in and around
Philadelphia, Pennsylvania.
(www) "Plans" means each (i) deferred compensation, bonus,
incentive compensation, stock purchase, stock option and other equity
compensation plan, program, Contract or arrangement, (ii) severance or
termination pay, medical, surgical, hospitalization, life or group insurance and
other "welfare" plan, fund or program (within the meaning of Section 3(1) of
ERISA), (iii) profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA), (iv) multi-employer plan
(within the meaning of Section 3(37) of ERISA), (v) employment, termination or
severance Contract and (vi) other employee benefit plan, fund, program, Contract
or arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to by any of the Companies and their Subsidiaries or
by any ERISA Affiliate, or to which any of the Companies and their Subsidiaries
or an ERISA Affiliate is party, for the benefit of any employee, former
employee, retiree, consultant, officer or director of any of the Companies and
their Subsidiaries or an ERISA Affiliate (the "Employees").
(xxx) "Predecessor" means any Person which was merged into any
of the Companies and their Subsidiaries or which transferred all or
substantially all of its assets to any of the Companies and their Subsidiaries.
(yyy) "Principal Sellers" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇.
(zzz) "Proceeding" means any action, arbitration, audit,
hearing, investigation, litigation or suit (whether civil, criminal or
administrative) commenced, brought, conducted or heard by or before, or
otherwise involving, any Governmental Body or arbitrator, and any appeal of any
such Proceeding.
11
(aaaa) "Real Property" means the operating locations of the
Business owned by any of the Companies and their Subsidiaries.
(bbbb) "Regional Divisions" shall have the meaning ascribed such
term in Section 3.13(b)(ii).
(cccc) "Region Oil" shall have the meaning ascribed such term in
the Preamble.
(dddd) "Release" means releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, ejecting, escaping, leaching,
disposing, seeping, infiltrating, draining or dumping, or as otherwise defined
under Environmental Laws. This term shall be interpreted to include the
present, past and future tense, as appropriate.
(eeee) "Representative" means, with respect to any Person, any
director, officer, employee, agent, consultant, advisor or other representative
of such Person, including legal counsel, accountants and financial advisors.
(ffff) "Residential/Commercial Customer" shall mean Customers
described in Section 3.13(a)(i) of the Sellers' Disclosure Letter.
(gggg) "Security Alarm Business" means the operations of the
Companies and their Subsidiaries relating to the sale, installation, maintenance
and monitoring of home security systems.
(hhhh) "Sellers' Disclosure Letter" means the disclosure letter
delivered by Sellers to Buyer concurrently with the execution and delivery of
this Agreement, as amended pursuant to Section 12.6(b).
(iiii) "Sharing Percentage" means, for each Seller, the amount,
shown as a percentage, calculated in accordance with Section 2.2(a) of Sellers'
Disclosure Letter.
(jjjj) "Software" means any code, both in source and object
form, including all interfaces, navigational devices, menus, menu structures or
arrangements, icons and other instructions directing Hardware to perform a
function, including computer software programs, databases and all documentation
relating thereto, that are owned by the Companies or their Subsidiaries and/or
used by the Companies or their Subsidiaries.
12
(kkkk) "Subsidiary" means, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person and/or
one or more Subsidiaries of such Person has more than a 50% equity interest at
the time.
(llll) "Tax" means any federal, state, local or foreign income
tax; gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Sec. 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value-added, alternative or add-on
minimum or estimated tax; or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.
(mmmm) "Tax Audit" means any audit or assessment of Taxes or
other examination by any Governmental Body or Proceeding relating to Taxes.
(nnnn) "Tax Return" means any return (including any information
or amended return), report, statement, schedule, notice, form or other document
or information filed with, delivered or submitted to, or required to be filed
with, delivered or submitted to, any Governmental Body or Person in connection
with the determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
(oooo) "Threatened" means, with respect to any claim,
Proceeding, dispute or action threatened against a Person, that a demand has
been made (orally with specificity or in writing) or a notice has been given
(orally with specificity or in writing), in respect thereof, which in any event
would lead a reasonable person to believe that a claim, Proceeding, dispute or
action had been threatened.
(pppp) "Title IV Plan" means each Plan that is subject to
Section 302 or Title IV of ERISA or Section 412 of the Code.
13
(qqqq) "Trade Secrets" means all technology, know-how, trade
secrets, confidential information, proprietary processes and formulas, customer
lists, Software, technical information, data, process technology, plans,
drawings and blue prints owned, used, held for use or licensed by the Companies
and their Subsidiaries as licensees or licensors in or on behalf of the
Business.
(rrrr) "Transfer Taxes" means all sales (including, without
limitation, bulk sales), use, transfer, stamp, recording, ad valorem and other
similar Taxes and fees.
(ssss) "Unknown Liabilities" means each and every liability or
obligation of the Companies and their Subsidiaries (whether known or unknown and
whether accrued or contingent) arising out of any event, occurrence or condition
prior to the Closing, but only to the extent such liability or obligation (A) is
attributable to the period prior to the Closing Date and (B) is not (i) included
in the Post-Closing Long-Term Debt Calculation or Post-Closing Net Working
Capital Calculation, (ii) disclosed in the representations and warranties of the
Sellers, the Schedules hereto or Sellers' Disclosure Letter, (iii) any
deductibles or self-insured retentions relating to Claims covered by insurance
policies of the Companies and their Subsidiaries in effect immediately prior to
the Closing and (iv) related to Environmental Laws, Environmental Compliance
Liability or Environmental Conditions.
(tttt) "Variable Price Customer" means a Residential/Commercial
Customer which is not a Fixed Price Customer or a Capped Price Customer.
(uuuu) "Westchester/▇▇▇▇▇▇ Division" means all operations of the
Companies and their Subsidiaries from locations situated in Westchester and
▇▇▇▇▇▇ Counties, New York.
(vvvv) "Wholesale Customer" shall mean a Customer described in
Section 3.13(a)(v) of the Sellers' Disclosure Letter.
ARTICLE II
SALE AND TRANSFER OF ASSETS; CLOSING
------------------------------------
2.1. Closing. Subject to the terms and conditions of this Agreement,
-------
the closing of the purchase and sale of the Equity Interests will be held on a
date within five business days after satisfaction or waiver of the conditions to
closing set forth in Articles VII and VIII (the "Closing" or "Closing Date"), at
the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ & Ballon LLP,
14
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at another location mutually
agreed upon by the parties hereto.
2.2. Purchase Price. At the Closing, the Buyer will purchase and
--------------
accept from Sellers, and the Sellers will sell, assign, transfer and deliver,
free and clear of all Encumbrances, the Equity Interests to Buyer. The
aggregate purchase price (the "Purchase Price") for the Equity Interests to be
acquired from Sellers will be the Cash Amount plus the Per Diem Adjustment
(subject to adjustment pursuant to Section 2.3). At Closing, Buyer shall pay:
(i) to the Principal Sellers (to be apportioned amongst such Principal Sellers
pro rata in accordance with each Principal Seller's Sharing Percentage) an
amount of cash equal to the sum of the Principal Sellers' Sharing Percentage of
(A) the Purchase Price, minus (B) the Hold Back Amount, minus (C) the amount of
----- -----
Estimated Long Term and Bank Debt minus (D) $200,000; (ii) to the Other Sellers
-----
(to be apportioned amongst such Other Sellers pro rata in accordance with each
such Other Seller's Sharing Percentage) an amount of cash equal to the sum of
(x) the Other Sellers' Sharing Percentage of (A) the Purchase Price, minus (B)
-----
the Hold Back Amount, minus (C) the amount of Estimated Long Term and Bank Debt,
-----
minus (D) $200,000 less (y) the Other Sellers Escrow Amount (as defined below);
-----
(iii) to the Other Sellers Escrow Agent to be held in escrow, subject to the
terms of this Agreement and the Other Sellers Escrow Agreement, an amount of
cash equal to $4,179,136 (the "Other Sellers Escrow Amount"); (iv) to the Hold
Back Account, the Hold Back Amount; and (v) to the escrow agent under the Dover
Escrow Agreement to be held in escrow, subject to the terms of this Agreement
and the Dover Escrow Agreement, an amount of cash equal to $200,000.
2.3. Adjustments to Purchase Price.
-----------------------------
(a) The Purchase Price for the Equity Interests has been agreed
upon based upon the assumptions (i) that the Net Working Capital of the
Companies and their Subsidiaries as of the Closing Date will be $-0- and (ii)
the Long-Term and Bank Debt as of the Closing Date will be equal to the
Estimated Long Term and Bank Debt.
(b) Sellers shall engage KPMG LLP ("KPMG") to prepare a
calculation of Net Working Capital and the Long-Term and Bank Debt, in each case
as of the Closing Date ("Post-Closing Net Working Capital Calculation" and the
"Post-Closing Long-Term and Bank Debt Calculation," respectively). The cost of
the accountants shall be paid by
15
Sellers for their own account or by the Companies and their Subsidiaries. Buyer
and its Representatives shall be permitted to communicate with KPMG personnel
and observe all aspects of their work with respect to the conduct of their
engagement. In the event the Net Working Capital as of the Closing Date is (i)
less than $-0-, the Purchase Price shall be decreased by $1.00 for each $1.00
the Net Working Capital (as reflected in the Post-Closing Net Working Capital
Calculation) is less than $-0- or (ii) greater than $-0-, the Purchase Price
shall be increased by $1.00 for each $1.00 the Net Working Capital (as reflected
in the Post-Closing Net Working Capital Calculation) is greater than $-0-. In
the event the Long-Term and Bank Debt is (i) greater than the Estimated Long
Term and Bank Debt, the Purchase Price shall be decreased by $1.00 for each
$1.00 the Long-Term and Bank Debt (as reflected in the Post-Closing Long-Term
and Bank Debt Calculation) is greater than the Estimated Long Term and Bank Debt
or (ii) less than the Estimated Long Term and Bank Debt, the Purchase Price
shall be increased by $1.00 for each $1.00 the Long-Term Debt (as reflected in
the Post-Closing Long-Term Debt Calculation) is less than the Estimated Long
Term and Bank Debt.
(c) The engagement letter with KPMG shall provide that such firm
shall deliver to Buyer and Sellers (i) the Post-Closing Net Working Capital
Calculation and the Post-Closing Long-Term Debt Calculation, each of which shall
state that such calculations have been prepared in accordance with the
definitions of Net Working Capital and Long Term and Bank Debt and (ii) a
closing certificate ("Post-Closing Certificate") showing the calculation of the
adjustment to the purchase price ("Post-Closing Adjustment"). A copy of the
Post-Closing Net Working Capital Calculation, Post-Closing Long-Term Debt
Calculation and the Post-Closing Certificate (collectively, "Post-Closing
Documents") shall be delivered to the Buyer and Sellers Representatives each as
soon as practicable after the calculation thereof. Unless Buyer or Sellers
Representatives within ten (10) days after receipt of the copy of the Post-
Closing Documents notifies such other parties of any disagreement with the Post-
Closing Adjustment and such disagreement reflects a difference in excess of
$50,000, the Post-Closing Documents shall be final and shall be accepted by and
be binding upon both Buyer and each of the Sellers. If any party so notifies
such other party of any such disagreement in an amount in excess of $50,000
within such 10-day period and such disagreement cannot be amicably resolved
within an additional period of thirty (30) days, the disagreement as to the
Post-Closing Adjustment shall be submitted for final determination to a big-five
accounting firm selected by the Buyer and Sellers Representatives ("Appeal
Accountants"). Each party shall be bound by the determination of the
16
Appeal Accountants and the cost of such expenses shall be shared equally between
Sellers (to be apportioned pro rata in accordance with each Seller's Sharing
Percentage), on the one hand, and Buyer, on the other. The Appeal Accountants
shall render their final determination with respect to the resolution of such
disputes which shall be binding on the parties and deliver copies thereof to
Buyer and Sellers.
(d) If the Post-Closing Adjustment changes the Purchase Price,
the increase, if any, shall be paid by Buyer or the decrease, if any, shall be
paid by Sellers (to be apportioned pro rata in accordance with each Seller's
Sharing Percentage), within five (5) days after such final agreement or
determination.
(e) The Purchase Price shall be increased by the amount of any
capital expenditures (whether treated as capital or other expense for accounting
purposes) made by the Companies after August 14, 2001 in the Ordinary Course of
Business.
2.4. Excluded Assets. Buyer and the Sellers acknowledge and agree
---------------
that the following assets of the Companies will be transferred or distributed by
the Companies at or prior to Closing (collectively, the "Excluded Assets"):
(a) two Mercedes-Benz E320 sedans;
(b) one chair currently used by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇;
(c) one Dell laptop computer; and
(d) one Acer personal computer.
The assets listed in 2.4 (a) - (d) are collectively referred to as the "Excluded
Assets." The Excluded Assets and any related liabilities shall not be retained
by the Companies and their Subsidiaries and shall be transferred on or before
the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PRINCIPAL SELLERS
---------------------------------------------------
Principal Sellers represent, covenant and warrant to Buyer, jointly
and severally, as follows:
3.1. Corporate Organization; Etc. Each of the Companies is a limited
---------------------------
partnership or corporation, as the case may be, duly formed or organized,
validly existing and in
17
good standing under the laws of its state of formation or organization and has
full corporate or limited partnership power and authority, as applicable, to
carry on its business as it is now being conducted and to own the properties and
assets it now owns. Each of the Companies is duly qualified or licensed to do
business as a foreign corporation or limited partnership in good standing in the
jurisdictions listed in Section 3.1 of Sellers' Disclosure Letter, which are all
the jurisdictions where such qualification is required except where the failure
to be so qualified would not reasonably be expected to have a Material Adverse
Effect. The copies of the Organizational Documents and all amendments thereto of
the Companies and their Subsidiaries heretofore delivered to Buyer are complete
and correct copies of such instruments as presently in effect.
3.2. Capitalization of Companies. Sellers own, either directly or
---------------------------
indirectly, in the aggregate all of the issued and outstanding partnership or
other equity interests of ▇▇▇▇▇▇ Oil LP, ▇▇▇▇▇▇ Oil Inc. and Blueray and 90% of
the equity interests of Region Oil, in each case free and clear of all
Encumbrances, other than Encumbrances which will be extinguished on or prior to
the Closing Date.
3.3. Subsidiaries. Except for the Companies or as set forth in
------------
Section 3.3 of Sellers' Disclosure Letter, the Companies do not have any
Subsidiaries.
3.4. No Conflict. Neither the execution and delivery of this
-----------
Agreement or any of the Documents nor the consummation or performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of, or
give any Person the right to exercise any remedy or obtain any relief under, any
Legal Requirement or any Order to which any of the Companies or any of their
Subsidiaries is subject;
(b) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by any of the Companies and their Subsidiaries;
(c) except as set forth in Section 3.4(c) of Sellers' Disclosure
Letter, contravene, conflict with or result in a violation or breach of any
provision of, or give any Person
18
the right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate or modify, any Material
Contract; or
(d) result in the imposition or creation of any Encumbrance upon
or with respect to any of the Assets, except Permitted Encumbrances; except, in
the case of clauses (a) through (c), for any contravention, violation, conflict,
breach, default, charge or action which would not reasonably be expected to
result, individually or in the aggregate, in a Material Adverse Effect.
3.5. Financial Statements. The Principal Sellers have heretofore
--------------------
delivered to Buyer and attached hereto as Section 3.5 of Sellers' Disclosure
Letter: (i) a consolidated balance sheet of ▇▇▇▇▇▇ Oil LP and its consolidated
Subsidiaries as of June 30, for each of the years 1999 and 2000; and the related
consolidated statements of income (loss) and partners' deficit, as applicable,
and cash flows for each of the years then ended, together with the independent
auditors' report of KPMG, (ii) an unaudited consolidated balance sheet of ▇▇▇▇▇▇
Oil LP and its consolidated Subsidiary as of March 31, 2001 (together with the
balance sheets below in clauses (iii) and (iv), the "Interim Balance Sheet"),
and unaudited statements of income (loss) and partners' deficit and cash flows
for the nine (9) months then ended with comparable statements for the nine (9)
months ended March 31, 2000 (the "Interim Financials"), (iii) an unaudited
balance sheet of ▇▇▇▇▇▇ Oil Inc. as of March 31, 2001, (iv) an unaudited balance
sheet of Blueray as of March 31, 2001 and (v) an unaudited balance sheet of
Region Oil as of March 31, 2001 (all such financial statements, collectively the
"Financial Statements"). Such balance sheets and the notes thereto fairly
present in all material respects the consolidated financial condition of the
Companies and their consolidated Subsidiaries as at the respective dates
thereof, and such statements and accumulated earnings and cash flows 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 (except as
disclosed in Section 3.5 of the Sellers' Disclosure Letter and subject, in the
case of the Interim Financials, to normal year end adjustments).
3.6. No Unknown Liabilities, Etc. As of the date of the Interim
---------------------------
Balance Sheet, ▇▇▇▇▇▇ Oil L.P. and its consolidated Subsidiaries had no
liability or obligation of any nature (absolute, accrued, contingent or
otherwise) not otherwise disclosed herein which is not fully reflected or
reserved against in the Interim Balance Sheet, which, in accordance with GAAP,
should have been shown or reflected in the Interim Balance Sheet ("GAAP
Liabilities"). There
19
has been no material change in the assets (other than cash) or liabilities
(other than tax liabilities calculated in accordance with GAAP) of ▇▇▇▇▇▇ Oil
Inc. or Blueray since March 31, 2001.
3.7. Reserved.
--------
3.8. Absence of Certain Changes. Except as, and to the extent, set
--------------------------
forth in Section 3.8 of Sellers' Disclosure Letter, since March 31, 2001, the
Companies and their Subsidiaries have conducted the Business in the Ordinary
Course of Business and there has not been a Material Adverse Effect on the
Companies and their Subsidiaries, taken as a whole.
3.9. Title to Properties; Encumbrances. Except as set forth in
---------------------------------
Section 3.9(a) of Sellers' Disclosure Letter, each of the Companies and their
Subsidiaries has good title to, or in the case of assets held pursuant to a
lease or a license, valid and binding leasehold interests or licenses in, the
Assets (whether real, personal and mixed, tangible and intangible) which it
purports to own including, without limitation, all the properties and assets
reflected in the Interim Balance Sheet (except for accounts receivable
collected, and properties and assets sold, since the date of the Interim Balance
Sheet in the Ordinary Course of Business) and except as would not reasonably be
expected to result in a Material Adverse Effect. Except as set forth in Section
3.9(b) of Sellers' Disclosure Letter, all such owned Assets are free and clear
of all Encumbrances other than Permitted Encumbrances. The rights, properties
and other Assets presently owned, leased or licensed by the Companies and their
Subsidiaries and described elsewhere in this Agreement include all rights,
properties and other Assets necessary to permit the Companies and their
Subsidiaries to conduct the Business in all material respects in the same manner
as conducted by the Companies and their Subsidiaries prior to the date hereof.
3.10. Property, Plant and Equipment.
-----------------------------
(a) To the Knowledge of the Principal Sellers, except as set
forth in Section 3.10(a) of the Sellers' Disclosure Letter, the property, plant
and equipment of the Companies and their Subsidiaries are in reasonably good
operating condition and repair (normal wear and tear excepted) and are
reasonably adequate for the uses to which they are being put, and none of such
equipment is in need of material maintenance or repairs except for ordinary,
routine maintenance and repairs. Except as set forth in Section 3.10(b) of
Sellers' Disclosure Letter to the actual knowledge of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
20
or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, from July 31, 2000 through the date hereof none of the
Companies and their Subsidiaries has received any written recommendation from
any consultants hired by the Companies or their Subsidiaries relating to
modifications or improvements to, or replacement of, equipment, which
modifications, improvements or replacements would cost more than $100,000.
(b) To the Knowledge of the Principal Sellers, with respect to the
propane tanks, bulk tanks and propane related equipment, contained in the
Assets, (i) all propane tanks at customer locations were installed in compliance
with the then effective edition of NFPA Pamphlet No. 58 in all material
respects; (ii) all propane tanks are in safe and working order and are in
substantial compliance with NFPA Pamphlet No. 58, 1995 Edition; (iii) all
customer bulk storage tanks, including tanks installed on trucks and bulk plant
storage tanks included in the Assets shall include proper data plates or tank
identification (marked in accordance with Pamphlet NO. NFPA 58) and shall be
rated for a working pressure of at least 200 pounds per square inch, determined
in accordance with the standards of the American Society of Mechanical
Engineers; and (iv) all of the cylinders shall be qualified for use in
accordance with applicable state and federal department of transportation
standards and regulatory requirements, except cylinders stored on the Real
Estate not currently in use or awaiting disposal.
3.11. Intellectual Property.
----------------------
(a) Except as set forth in Section 3.11(a) of Sellers' Disclosure
Letter, the Intellectual Property Assets and Software are all those necessary
for the operation of the Business as it is currently conducted or as currently
proposed to be conducted. The Companies and their Subsidiaries own or have the
right to use, all of the material Intellectual Property Assets and Software,
free and clear of all material Encumbrances (except Permitted Encumbrances and
such other Encumbrances that will be extinguished on or prior to the Closing
Date). Except as set forth in Section 3.11(a) of Sellers' Disclosure Letter,
the companies and their Subsidiaries are not obligated to make any material
payment to any Person for the use or exploitation of the material Intellectual
Property Assets and Software.
(b) Section 3.11(b) of Sellers' Disclosure Letter contains a
complete and accurate list of all material registrations and applications within
the Marks, Patents and Copyrights. All such registrations and applications are
currently unexpired and are not subject to any maintenance fees or actions
falling due within ninety (90) days after the date of Closing. Except as
disclosed on Section 3.11(b) of Sellers' Disclosure Letter, to the Knowledge of
the
21
Principal Sellers, (i) no material ▇▇▇▇, Patent or Copyright is being infringed
by a third party, and (ii) no Intellectual Property Assets are alleged to
infringe any proprietary right of any other Person.
(c) The Companies and their Subsidiaries have taken all
commercially reasonable precautions to protect the secrecy of their material
Trade Secrets. To the Knowledge of the Principal Sellers, the material Trade
Secrets currently used by the Companies and their Subsidiaries have not been
disclosed to any third party or misappropriated by any Person in a manner that
would reasonably be expected to result in a Material Adverse Effect.
3.12. Contracts; No Defaults.
----------------------
(a) Section 3.12(a) of Sellers' Disclosure Letter contains a
complete and accurate list of each of the following Contracts which shall be
deemed Material Contracts for purposes of this Agreement:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Companies and their
Subsidiaries in an amount or value in excess of $250,000 per year.
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Companies and their
Subsidiaries in an amount or value in excess of $250,000 per year.
(iii) each Applicable Contract relating to the borrowing of
money other than institutional note placement agreement and credit
agreement of the Companies and their Subsidiaries and other agreements with
the holders of such indebtedness relating thereto;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sales agreement and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold
or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements requiring
expenditures of $25,000 or less for any single item in any year or
aggregate payments of less than $50,000 over the term thereof, and with
terms of less than three (3) years);
22
(v) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a
group of employees;
(vi) each material joint venture, partnership and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs or liabilities by the Companies and their Subsidiaries with any other
Person;
(vii) each Applicable Contract containing covenants that in any
way purport to restrict in any material respect the business activity of
the Companies or their Subsidiaries (or any Affiliate thereof) or limit the
freedom of the Companies and their Subsidiaries (or any Affiliate thereof)
to engage in any line of business or to compete with any Person; and
(viii) each other material Applicable Contract.
(b) Except as set forth in Section 3.12(b) of Sellers' Disclosure
Letter, to the Knowledge of the Principal Sellers, each Material Contract is in
full force and effect and is valid and enforceable in accordance with its terms,
except as may be limited by bankruptcy, moratorium and insolvency laws and other
laws affecting the rights of creditors generally and except as may be limited by
the general principles of equity.
(c) Except as set forth in Section 3.12(c) of Sellers' Disclosure
Letter:
(i) each of the Companies and Subsidiaries is in material
compliance in all material respects with all applicable terms and
requirements of each Material Contract to which it is a party;
(ii) to the Knowledge of the Principal Sellers, each other
Person which is a party to any Material Contract, is in material compliance
with all applicable terms and requirements of such Material Contract;
(iii) no event has occurred and is continuing or circumstance
exists on the part of the Companies and their Subsidiaries or, to the
Knowledge of the Principal Sellers, on the part of any other party to a
Material Contract, that (with or without notice or lapse of time) would
reasonably be expected to contravene, conflict with or result in a material
violation or breach of, or give any of the Companies or their Subsidiaries
or any other Person the right to declare a default or exercise any material
23
remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate or modify, any Material Contract; and
(iv) to the Knowledge of the Principal Sellers, none of
the Companies or their Subsidiaries has given to or received from any other
Person, any notice or other communication (whether orally with specificity
or written) which a reasonable person would understand as asserting any
actual or alleged violation or breach of, or default under, any Material
Contract.
(d) To the Knowledge of the Principal Sellers, the Companies and
their Subsidiaries are not currently renegotiating any material amounts paid or
payable to the Companies or their Subsidiaries under current or completed
Material Contracts with any Person.
(e) The copies of the Material Contracts which have been
delivered to Buyer are, except as redacted, true and correct copies of such
Material Contracts as presently in effect.
3.13. Operating Matters.
-----------------
(a) (i) Section 3.13(a)(i) of the Sellers' Disclosure Letter
sets forth as of March 31, 2001 for each of the Operating Divisions with respect
to Residential/Commercial Customers receiving deliveries of home heating oil,
the number of Active Customers, the number of customers on its automatic
delivery system and the number of Active Customers which are Fixed Price
Customers and Capped Price Customers.
(ii) Section 3.13(a)(ii) of the Sellers' Disclosure Letter
sets forth the posted price for each Operating Division on the first day of each
month for the 12 month period ending March 31, 2001.
(iii) Section 3.13(a)(iii) of the Sellers' Disclosure
Letter sets forth as of March 31, 2001 and for the 12 months then ended for each
of the Operating Divisions, with respect to Customers receiving deliveries of
propane, the total gallons of propane sold, the Net Dollar Sales, the number of
Active Customers and the number of Customers on its automatic delivery system.
(iv) Section 3.13(a)(iv) of the Sellers' Disclosure Letter
sets forth certain information concerning account gain (loss) for the Customers
by Operating Division.
24
(v) Section 3.13(a)(v) of the Sellers' Disclosure Letter
sets forth for each Regional Division the volumes of home heating oil sold by
the Companies and their Subsidiaries to Wholesale Customers in the 12 months
ended March 31, 2001 together with associated Net Dollar Sales and Cost of
Product and the number of Active Wholesale Customers on March 31, 2001.
(vi) Section 3.13(a)(vi) of the Sellers' Disclosure Letter
sets forth for each Regional Division the volumes of home heating oil and other
products sold by the Companies and their Subsidiaries to Bid/COD/Other Customers
in the 12 months ended March 31, 2001 with associated Net Dollar Sales and Cost
of Product and the number of Active Bid/COD/Other Customers on March 31, 2001.
(vii) Section 3.13(a)(vii) of the Sellers' Disclosure
Letter sets forth for each of the Regional Divisions for the 12 months ended
March 31, 2001, its Net Dollar Sales for service contracts, parts and labor and
installations.
(b) (i) Section 3.13(b)(i) of the Sellers' Disclosure Letter
sets forth the total gallons of home heating oil sold by each of the Operating
Divisions for fiscal 1999, fiscal 2000 and for the 12 months period ended March
31, 2001.
(ii) Section 3.13(b)(ii) of the Sellers' Disclosure Letter
sets forth (a) home heating oil volumes and Net Dollar Sales for gallons sold to
Fixed Price Customers and Capped Price Customers (b) the home heating volumes
and Net Dollar Sales for gallons sold to Variable Price Customers and (c) the
Cost of Product, during the 12 month period ended March 31, 2001 for the Bucks
County, Philadelphia and New Jersey Divisions (collectively the "Southern
Division"), and the Dutchess County and Orange County Divisions (collectively
the "Northern Division") and the Westchester/▇▇▇▇▇▇ County and Long Island
Divisions (the "Eastern Division" and, together with the Southern Division and
the Northern Division, the "Regional Divisions" and individually a "Regional
Division").
(c) Section 3.13(c) of the Sellers' Disclosure Letter sets forth
with respect to the Security Alarm Business certain operating data by Regional
Division for the 12 months ended March 31, 2001.
(d) Section 3.13(d) of the Sellers' Disclosure Letter sets forth
for each of the Regional Divisions (i) the number of Fixed Priced Customers as
of July 15, 2001, the
25
number of gallons of home heating oil anticipated to be sold to such Fixed Price
Customers per month and the anticipated weighted average fixed price of such
gallons of home heating oil and (ii) the number of Capped Price Customers as of
July 15, 2001 and the weighted average capped price and the number of gallons
anticipated to be sold to such Customers. The Companies and their Subsidiaries
have certain inventory and futures contracts relating to the gallons to be
delivered to Fixed Price Customers and Capped Price Customers, a complete list
of which, as of the date hereof, including gallons and cost over, is annexed as
Section 3.13(d) of the Sellers' Disclosure Letter.
(e) Schedule 3.13(e) of the Sellers' Disclosure Letter lists all
material agreements with Bid Customers over 50,000 gallons per annum.
(f) Except as disclosed in Section 3.13(f) of Sellers'
Disclosure Letter, the Companies and their Subsidiaries have no material
agreements to sell home heating oil or propane to or through cooperatives,
buying groups or other similar arrangements.
(g) Section 3.13(g) of Sellers' Disclosure Letter, identifies
Customers of the Companies and their Subsidiaries which purchased more than
25,000 gallons of home heating oil or propane during the period from July 1,
2000 to May 24, 2001 and such section sets forth the estimated number of gallons
purchased and the current pricing arrangement.
(h) Reserved.
(i) Section 3.13(i) of Sellers' Disclosure Letter contains
certain information relating to material programs or policies of Companies or
their Subsidiaries pursuant to which they provide discounts, free gallonage,
free service, the extension of credit or other accommodations to customers based
upon volume purchased, prompt payments, participation in budget programs, age
attained or otherwise.
(j) Section 3.13(j) of Sellers' Disclosure Letter contains an
aging of the accounts receivable (totals only) for the Residential/Commercial
Customers, the Bid/COD/Other Customers and the Wholesale Customers and the
Customers of the Security Alarm Business for each of the Operating Divisions as
of December 31, 2000, March 31, 2001 and June 30, 2001.
(k) Section 3.13(k) of the Sellers' Disclosure Letter describes
each of the acquisitions of another business made by the Companies and their
Subsidiaries with respect
26
to the Business since January 1, 1995, including the name of each such
acquisition and the number of Customers acquired.
3.14. Insurance. Section 3.14(a) of Sellers' Disclosure Letter
---------
contains an accurate and complete list of all policies and binders of fire,
liability, workers' compensation, products liability and all material forms of
insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums and a general description of
the type of coverage) entered into since 1990 and currently maintained by the
Companies and their Subsidiaries relating to the Business. All such policies are
in full force and effect, all premiums with respect thereto covering all periods
up to and including the date hereof have been paid or shall be paid in the
Ordinary Course of Business, and no notice of cancellation or termination has
been received with respect to any such policy. Except as set forth in Section
3.14(b) of the Sellers' Disclosure Letter, to the Knowledge of the Principal
Sellers, such policies are reasonably adequate insurance coverage to insure
against risks to which the Companies and their Subsidiaries are normally
exposed, and will remain in full force and effect following the Closing with
respect to pre-Closing occurrences.
To the actual knowledge of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Section 3.14(c) of Sellers'
Disclosure Letter sets forth all written recommendations received by the
Companies and their Subsidiaries in the fifteen months prior to the date hereof
from any insurance carrier regarding the manner in which the Companies and their
Subsidiaries conduct the Business or recommending changes in relation thereto.
3.15. Labor Difficulties. Except to the extent set forth in Section
------------------
3.15 of Sellers' Disclosure Letter, (a) to the Knowledge of the Principal
Sellers, each of the Companies and their Subsidiaries is in compliance in all
material respects with all Legal Requirements respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice; (b) to the Knowledge of
Principal Sellers there is no unfair labor practice complaint against any of the
Companies or their Subsidiaries pending before the National Labor Relations
Board; (c) there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the Knowledge of Principal Sellers, Threatened against or
affecting any of the Companies or their Subsidiaries; (d) no material grievance
proceeding or arbitration proceeding arising out of or under any collective
bargaining agreements to which any Company or Subsidiary is a party is pending
and to the Knowledge of
27
the Principal Sellers, no material claim therefor exists; (e) there is no
collective bargaining agreement binding on Companies or their Subsidiaries; (f)
none of the Companies or their Subsidiaries has experienced any material work
stoppage or other organized labor difficulty or, to the Knowledge of the
Principal Sellers, attempts to organize employees by organized labor in the past
five (5) years and (g) there is no litigation pending between the Companies or
their Subsidiaries and any employees nor to the Knowledge of Principal Sellers
is any such litigation Threatened, except, in each case, such events that would
not individually or in the aggregate reasonably be expected to have a Material
Adverse Effect.
3.16. Employee Benefits.
-----------------
(a) Except as set forth in Section 3.16(a) of Sellers'
Disclosure Letter, neither the Companies nor their Subsidiaries nor any of their
ERISA Affiliates (i) sponsor, maintain or contribute to, or have in the past
sponsored, maintained or contributed to, any material Plan, or (ii) have
promised or are otherwise committed or required to sponsor, maintain, modify or
contribute to any material Plan, except as may be required by applicable law or
any collective bargaining agreement.
(b) Except as set forth in Section 3.16(b) of the Sellers'
Disclosure Letter, no Plan is subject to Section 412 of the Code or Section 302
of ERISA or Title IV of ERISA or is a defined benefit plan.
(c) With respect to each material Plan, the Principal Sellers
have provided the Buyer with, or made available to Buyer, complete and correct
copies of (i) each Plan, including all amendments thereto, (ii) the most recent
summary plan description (if any) and all other documents pursuant to which the
Plans are maintained, (iii) the most recent annual report (Form 5500 series)
filed with the IRS (with attachments) and (iv) all IRS determination letters,
rulings and opinions received by the Companies and their Subsidiaries, in
respect of any applicable Plans.
(d) Except as would not individually or in the aggregate be
reasonably expected to result in a Material Adverse Effect, with respect to each
Plan which is subject to Title I of ERISA, neither the Companies nor their
Subsidiaries nor any of their ERISA Affiliates have failed to comply with any of
the applicable reporting, disclosure or other requirements of, and have been
operated substantially in compliance with, ERISA and the Code. None of the
28
Plans or any trusts relating thereto have engaged in any transaction in
connection with which the Companies or their Subsidiaries or any of their ERISA
Affiliates or any "fiduciaries," as such term is defined in Section 3(21) of
ERISA, of any Plans or related trusts are or would reasonably be expected to be
subject to either a civil penalty or other liability under Section 502(i),
Section 406 or Section 409 of ERISA or a tax imposed by Section 4975 of the
Code.
(e) With respect to each such Plan, a favorable determination
letter has been received from the IRS as to its qualification under Section
401(a) of the Code (including the amendments to the Code made by the Tax Reform
Act of 1986).
(f) Except as otherwise required by Section 4980B of the Code
or Part 6 of Title I of ERISA, no Plans provide medical or life insurance
benefits to current or future retirees or other former employees.
(g) Reserved.
(h) Except as set forth in Section 3.16(h) of Sellers'
Disclosure Letter, there is no pending or, to the Knowledge of the Principal
Sellers, Threatened, Proceeding before the Internal Revenue Service, the
Department of Labor, the Pension Benefit Guaranty Corporation or otherwise,
against or involving any Plan (other than routine claims for benefits) and, to
the Knowledge of Principal Sellers, there is no basis for, and Principal Sellers
have no Knowledge of any facts that would reasonably be expected to give rise
to, any such condition or Proceeding.
(i) Except as set forth in Section 3.16(i) of Sellers'
Disclosure Letter, the consummation of the Contemplated Transactions will not,
either alone or in combination with any other event expressly contemplated
hereby or in the Documents; (i) entitle any current or former employee or
officer of the Companies and their Subsidiaries or any ERISA Affiliate to
severance pay, or any other payment, except as expressly provided in this
Agreement; (ii) accelerate the time of payment or increase the amount of
compensation due any such employee or officer; or (iii) otherwise give rise to a
benefit that is reasonably expected to be treated as a parachute payment under
Section 280G of the Code.
3.17. Legal Proceedings; Orders.
-------------------------
(a) Except as set forth in Section 3.17(a) of Sellers'
Disclosure Letter, there is no pending, or to the Knowledge of the Principal
Sellers, Threatened, Proceeding:
29
(i) that is by or against the Companies or their
Subsidiaries or, to the Knowledge of Principal Sellers, by or against any
third party, that would reasonably be expected to have a Material Adverse
Effect; or
(ii) by or against the Companies or their Subsidiaries that
challenges, or that would have the effect of materially preventing,
delaying, making illegal or otherwise materially interfering with, the
Contemplated Transactions.
(b) Except as set forth in Section 3.17(b) of Sellers'
Disclosure Letter or as would not reasonably be expected to result in a Material
Adverse Effect:
(i) Sellers are not subject to any Order that relates to
the Business or the Assets, taken as a whole;
(ii) To the Knowledge of the Principal Sellers, the
Companies and their Subsidiaries are in full compliance in all material
respects with all of the terms and requirements of each Order to which it
is subject;
(iii) The Companies and their Subsidiaries have not received
any notice or other communication (written or orally with specificity) from
any other Person which a reasonable person would understand as asserting
any actual or alleged material violation of, or material failure to comply
with, any term or requirement of any Order to which Sellers, the Business
or any of the Assets, is subject.
3.18. No Condemnation or Expropriation. Neither the whole nor any
--------------------------------
portion of the Real Property, the leaseholds or any other material assets of the
Companies and their Subsidiaries are subject to any Order to be sold or are
being condemned, expropriated or otherwise taken by any Governmental Body with
or without payment of compensation therefor, nor, to the Knowledge of Principal
Sellers, has any such condemnation, expropriation or taking been Threatened.
3.19. Legal Requirements; Governmental Authorizations.
-----------------------------------------------
(a) Except as set forth in Section 3.19(a) of Sellers'
Disclosure Letter or as would not reasonably be expected to have a Material
Adverse Effect:
30
(i) To the Knowledge of the Principal Sellers, the
Companies and their Subsidiaries are in compliance in all material respects
with all applicable Legal Requirements;
(ii) To the Knowledge of the Principal Sellers, no event
has occurred nor does there exist any circumstance that (with or without
notice or lapse of time) (A) would reasonably be expected to constitute or
result in a material violation by the Companies and their Subsidiaries of,
or a material failure on the part of the Companies and their Subsidiaries
to comply with, any Legal Requirement; and
(iii) The Companies and their Subsidiaries have received no
notice or other communication (whether written or orally with specificity)
from any Person which a reasonable person would understand as asserting any
actual or alleged material violation of, or material failure to comply
with, any Legal Requirement.
(b) The material Governmental Authorizations held by the Company
and their Subsidiaries (the "Designated Governmental Authorizations") constitute
all of the Governmental Authorizations necessary to permit the Companies and
their Subsidiaries to lawfully conduct and operate in all material respects the
Business in the manner they currently conduct and operate the Business. Except
as set forth in Section 3.19(b) of Sellers' Disclosure Letter, to the Knowledge
of the Principal Sellers, the Companies and their Subsidiaries are in compliance
in all material respects with all of the terms and requirements of each
Designated Governmental Authorization and no appeal or action is pending or, to
the Knowledge of the Principal Sellers, Threatened to revoke any such Designated
Governmental Authorization.
3.20. Material Consents. Section 3.20 of Sellers' Disclosure Letter
-----------------
sets forth and identifies all material consents, assignments, releases, waivers
and approvals required of any Person (except to the extent described in Section
4.2(c)), including the name of the party necessary to the consummation of the
Contemplated Transactions by the Sellers.
3.21. Environmental Matters. Except as set forth in Section 3.21 of the
---------------------
Sellers' Disclosure Letter or as would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect:
(a) The Companies and their Subsidiaries are in compliance in
all material respects with all Environmental Laws including, without limitation,
all restrictions,
31
conditions, standards, limitations, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in any
Governmental Authorization.
(b) The Principal Sellers have provided to Buyer all material
assessments, reports, data, results of investigations or audits and other
information that are in the possession of the Companies and their Subsidiaries
or reasonably available to the Principal Sellers regarding environmental matters
pertaining to any Environmental Conditions related to the Facilities or the
Companies and their Subsidiaries, or Environmental Compliance Liability or other
compliance (or noncompliance) by the Companies and their Subsidiaries with
respect to any Environmental Laws; however, certain materials deemed to be
privileged, and that have not been delivered, have been separately identified on
Section 3.21(c) of the Sellers' Disclosure Letter.
(c) There is no Proceeding pending or to the Knowledge of
Principal Sellers Threatened, alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (i)
the presence or Release of any Material of Environmental Concern at any Facility
or (ii) circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law, that in either case is pending or Threatened against
Companies and their Subsidiaries or to the Knowledge of the Principal Sellers
against any Predecessor whose potential liability for any Environmental
Condition or Environmental Compliance Liability the Companies and their
Subsidiaries have retained or assumed either contractually or by operation of
law.
(d) To the Knowledge of Principal Sellers, there are no actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the Release or presence of any Materials of Environmental Concern at
any Facility that would reasonably be expected to result in Environmental
Conditions or form the basis of any Environmental Compliance Liability or any
Proceeding against the Companies and their Subsidiaries or against any
Predecessor.
(e) Without in any way limiting the generality of the foregoing,
to the Knowledge of the Principal Sellers (i) all on-site and off-site locations
where the Companies and their Subsidiaries or any Predecessor have stored,
disposed or arranged for the disposal of
32
Materials of Environmental Concern are identified in Section 3.21(e) of Sellers'
Disclosure Letter; (ii) all underground storage tanks and above ground storage
tanks owned or operated by the Companies and their Subsidiaries, and the
capacity and contents of such tanks, located on any property owned, leased or
operated by the Companies and their Subsidiaries are identified in Section
3.21(e) of Sellers' Disclosure Letter; (iii) except as set forth in Section
3.21(e) of Sellers' Disclosure Letter, there is no friable asbestos contained in
or forming part of any building, building component, structure or office space
owned, leased, operated or controlled by the Companies and their Subsidiaries or
the Business; and (iv) except as set forth in Section 3.21(e) of Sellers'
Disclosure Letter, no PCBs or PCB-containing items are used or stored at any
property owned, leased, operated or controlled by the Companies and their
Subsidiaries.
(f) The Companies and their Subsidiaries have not received any
Environmental Notice that alleges that the Companies and their Subsidiaries or
any Predecessor are in violation of any Environmental Laws and, to the Knowledge
of Principal Sellers, there are no circumstances that would reasonably be
expected to give rise to such violation. The Companies and their Subsidiaries
have not received any Environmental Notice from any Governmental Body or private
or public entity advising it that it is responsible for or potentially
responsible for Damages or Environmental Conditions or Environmental Compliance
Liability with respect to any Facility and no legally binding agreements have
been entered into concerning such Damages or Environmental Conditions or
Environmental Compliance Liability. No Facility is on any federal, state or
local list of hazardous sites, such as the Environmental Protection Agency's
Comprehensive Response, Compensation and Liability Information System List.
(g) The Companies and their Subsidiaries are not subject to any
Environmental Laws requiring (i) the performance of a site assessment for
Materials of Environmental Concern or an audit for any potential Environmental
Compliance Liability, (ii) the removal or remediation of Materials of
Environmental Concern, (iii) the giving of notice to or receiving the approval
of any Governmental Body, (iv) the recording or delivery of any disclosure
document or statement pertaining to environmental matters regarding each of the
foregoing by virtue of the Contemplated Transactions or as a condition to the
effectiveness of any Contemplated Transactions or (v) corrective or other
remedial measures pursuant to Environmental Laws.
33
3.22. No Other Agreements. Other than Permitted Encumbrances and
-------------------
Encumbrances set forth in Section 3.8(a) of Sellers' Disclosure Letter, Sellers
have no commitment or legal obligation, absolute or contingent, to any other
Person or firm to sell or effect a sale of any of the Equity Interests.
3.23. Brokers and Finders. Sellers have employed no brokers in
-------------------
connection with the Contemplated Transactions.
3.24. Personnel. (a) Section 3.24 of Sellers' Disclosure Letter sets
---------
forth separately with respect to each Operating Division a true and complete
list of:
(i) Each office, sales, supervisory and managerial
personnel whose total compensation as reported on his Form W-2 exceeds
$50,000 in 2000 or $25,000 for the six months ended June 30, 2001; and
(ii) subcontractors who were paid more than $25,000 by an
Operating Division during the 12 months ended June 30, 2001 and the amounts
paid and payable to each such subcontractor.
(b) Except as set forth in Section 3.24 of the Sellers'
Disclosure Letter, the Companies and their Subsidiaries have not granted or
committed to make any increase in the compensation of any employees (including
any such increase pursuant to any bonus, profit sharing or other plan or
commitment) or make any bonus, severance, termination or similar payments or to
establish or amend any employee retirement or benefit plan or program.
3.25. Taxes. Except as set forth in Schedule 3.25 of Sellers'
-----
Disclosure Letter:
(a) Each of the Companies and their Subsidiaries has timely
filed or caused to be timely filed all Tax Returns that are or were required to
be filed by it on or prior to the date hereof, either separately or as a member
of a group of entities, pursuant to applicable Legal Requirements. All such Tax
Returns are complete and correct in all material respects.
(b) Each of the Companies and their Subsidiaries has paid or,
where payment is not yet due, has established (or has had established on its
behalf and for its sole benefit and recourse) an adequate accrual in accordance
with GAAP for the payment of all Taxes shown on the Tax Returns required to be
filed prior to or on the date hereof.
34
(c) There are no Encumbrances for Taxes upon any property or
assets of the Companies or their Subsidiaries, except for Permitted Encumbrances
for Taxes not yet due and for which adequate reserves have been established in
accordance with GAAP.
(d) No Tax Audit is pending with regard to any Taxes or Tax
Returns of the Companies or their Subsidiaries as of the date hereof and, to the
Knowledge of Principal Sellers, no Tax Audit is Threatened.
(e) There are no outstanding requests, Contracts, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Companies or their
Subsidiaries as of the date hereof, and no power of attorney granted by the
Companies or their Subsidiaries with respect to any Taxes is currently in force.
(f) The Companies and their Subsidiaries are not bound by nor
are they party to any Contract providing for the allocation, indemnification, or
sharing of Taxes as of the date hereof.
(g) None of the Companies or their Subsidiaries (i) has been a
member of an "affiliated group" (within the meaning of the Code) filing a
consolidated Federal tax return (other than a group the common parent of which
was the Company) or (ii) has any material liability for any Tax of any Person
under Treasury regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor by contract or otherwise.
(h) None of the Companies or any of their Subsidiaries has any
Tax liability relating to any period prior to the date hereof, except those Tax
liabilities included as liabilities on the Interim Balance Sheet and tax
liabilities accrued in the Ordinary Course of Business since the date of the
Interim Balance Sheet.
(i) ▇▇▇▇▇▇ Oil Inc. is and has been a validly electing "S"
corporation within the meaning of Code sections of Sections 1361 and 1362 for
more than ten years.
(j) None of the Companies or their Subsidiaries has in the past
ten years (A) acquired assets from another corporation in a transaction in which
their tax basis for the acquired assets was determined, in whole or in part, by
reference to the tax basis of the acquired assets in the hands of the transferor
or (B) acquired any stock of any corporation which is a qualified subchapter S
subsidiary.
35
3.26. Relationships With Related Persons. Except as set forth in
----------------------------------
Section 3.26 of Sellers' Disclosure Letter, and except through or related to its
ownership, directly or indirectly, of the Equity Interests, neither the
Principal Sellers nor any Affiliate of a Principal Seller (other than the
Companies) has any outstanding Contract with the Companies or their
Subsidiaries.
ARTICLE IV
FURTHER REPRESENTATIONS AND WARRANTIES OF SELLERS
-------------------------------------------------
Each Seller, severally and not jointly, represents and warrants to
Buyer as follows:
4.1. Title. Such Seller owns, either directly or indirectly, (x) the
-----
limited partnership interests of ▇▇▇▇▇▇ Oil LP it purports to transfer hereby
and (y) the capital stock of ▇▇▇▇▇▇ Oil Inc., and/or Blueray, it purports to
transfer hereby, in each case free and clear of all Encumbrances (other than
Encumbrances that will be extinguished on or prior to the Closing Date).
4.2. Authority; No Conflict.
----------------------
(a) This Agreement constitutes the legal, valid and binding
obligation of such Seller, enforceable against it in accordance with its terms,
except as may be limited by bankruptcy, moratorium and insolvency laws and other
laws affecting the rights of creditors generally and except as may be limited by
general principles of equity. Upon the execution and delivery by it of the
Documents to which such Seller is a party and the execution and delivery thereof
by each other party thereto, such Documents will constitute the legal, valid and
binding obligations of such Seller, enforceable in accordance with their
respective terms, except as may be limited by bankruptcy, moratorium and
insolvency laws and other laws affecting the rights of creditors generally and
except as may be limited by general principles of equity. Such Seller has the
power, authority and capacity to execute and deliver this Agreement and the
Documents to which it is a party and to perform its respective obligations under
this Agreement and such Documents.
(b) Neither the execution and delivery of this Agreement or any
of the Documents to which such Seller is a party, nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
36
(i) contravene, conflict with or result in a violation of
any Legal Requirement or any Order to which such Seller is subject; or
(ii) contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by such Seller;
except for any such contravention, conflict or violation which would not
reasonably be expected to make illegal or materially delay or impair the
consummation of the Contemplated Transactions.
(c) Except as set forth in Section 4.2(c) of Sellers' Disclosure
Letter, such Seller is not and will not be required to give any notice to, or
obtain any Consent from, any Person in connection with the execution and
delivery of this Agreement or any of the Documents to which such Seller is a
party or the consummation or performance of any of the Contemplated
Transactions, except where the failure to give any such notice or obtain any
consent would not reasonably be expected to make illegal or materially delay or
impair the consummation of the Contemplated Transactions.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents, warrants and covenants to Sellers as follows:
5.1. Buyer Organization; Etc. 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 carry on its business as it is now being
conducted and to own the properties and assets it now owns. As of the Closing,
the Buyer will be authorized to do business in all jurisdictions where
qualification shall become necessary as a result of the Contemplated
Transactions.
5.2. Authority; No Conflict.
----------------------
(a) This Agreement constitutes the legal, valid and binding
obligation of Buyer, enforceable against it in accordance with its terms, except
as may be limited by bankruptcy, moratorium and insolvency laws and other laws
affecting the rights of creditors
37
generally and except as may be limited by general principles of equity. Upon the
execution and delivery by it of the Documents to which Buyer is a party and the
execution and delivery thereof by each other party thereto, such Documents will
constitute the legal, valid and binding obligations of Buyer, enforceable in
accordance with their respective terms, except as may be limited by bankruptcy,
moratorium and insolvency laws and other laws affecting the rights of creditors
generally and except as may be limited by general principles of equity. Buyer
has the power, authority and capacity to execute and deliver this Agreement and
the Documents to which it is a party and to perform its respective obligations
under this Agreement and such Documents.
(b) Neither the execution and delivery of this Agreement or any
of the Documents, nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with or result in a violation of
any Legal Requirement or any Order to which Buyer is subject; or
(ii) contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by Buyer.
(c) Except for filing under the HSR Act and except consents
required from Buyer's existing lenders in order to consummate the financings
referred to Section 8.13, Buyer is not and will not be required to give any
notice to, or obtain any Consent from, any Person in connection with the
execution and delivery of this Agreement or any of the Documents or the
consummation or performance of any of the Contemplated Transactions.
5.3. Brokers and Finders. Neither Buyer nor any of its Affiliates has
-------------------
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the Contemplated Transactions.
5.4. Solvency. Buyer is solvent and cannot reasonably foresee any
--------
material adverse effect with respect to it that would prevent it from performing
this Agreement in full. Buyer will not become insolvent as a result of
performing obligations under, and consummating the transactions contemplated by,
this Agreement.
38
5.5. Investigation by Buyer. Buyer acknowledges that, except for the
----------------------
representations and warranties of the Sellers contained in Article III and
Article IV of this Agreement, Sellers' Disclosure Letter or in any other
Document or schedules thereto, none of the Sellers or the Companies and their
Subsidiaries or any of their directors, officers, employees, affiliates,
controlling persons, agents, advisors or representatives, makes or shall be
deemed to have made any representation or warranty, either express or implied,
as to the accuracy or completeness of any of the information (including, without
limitation, any estimates, projections, forecasts or other forward-looking
information) provided or otherwise made available to Buyer or any of its
directors, officers, employees, affiliates, controlling persons, agents,
advisors or representatives (including, without limitation, in any management
presentations, information or offering memorandum, supplemental information or
other materials or information with respect to any of the above). With respect
to any such estimate, projection or forecast delivered by or on behalf of the
Companies or any Sellers to Buyer, Buyer acknowledges that (i) there are
uncertainties inherent in attempting to make such projections and forecasts,
(ii) Buyer is aware that actual results may differ materially and (iii) Buyer
shall have no claim against Companies or Sellers with respect to any such
projection or forecast, provided such projection or forecast was prepared and
furnished in good faith.
5.6. Availability of Financing. Attached as Exhibit 5.6 hereto is a
-------------------------
true and correct copy of a letter from financing sources to Buyer or its
ultimate parent relating to a total of $65 million of equity financing, which if
obtained would, together with an anticipated $60 million institutional private
placement of senior secured notes, be all financing necessary for Buyer to
consummate the Contemplated Transactions.
ARTICLE VI
COVENANTS OF BUYER AND SELLERS
------------------------------
The Buyer and Sellers hereby covenant and agree, as applicable, as
follows:
6.1. Full Access. The Principal Sellers shall afford to Buyer, its
-----------
counsel, accountants and other representatives, reasonable access during normal
business hours and upon reasonable notice to the plants, offices, properties,
books and records of the Companies and their Subsidiaries relating to the
Business in order that Buyer may have the opportunity to make such
investigations as it shall desire to make of the affairs of the Business; and
the Principal Sellers will cause the officers and accountants of the Companies
and their Subsidiaries to furnish such
39
additional financial and operating data and other information as Buyer shall
from time to time reasonably request; provided, however, that any such
-------- -------
investigation shall be conducted in such a manner as not to interfere with the
operation of the Business. Buyer's independent investigation of the Business
shall not relieve, release or otherwise constitute a waiver of Sellers'
liability and obligations to Buyer for breach of warranties and representations
of this Agreement.
6.2. Reasonable Efforts: No Inconsistent Action.
------------------------------------------
(a) Sellers on the one hand and the Buyer on the other hand
agree to use reasonable best efforts to obtain all consents to execute all
documents and to take such further actions as may be necessary to satisfy the
conditions precedent to the obligations of the other.
(b) None of Buyer or Sellers shall take any action which is
materially inconsistent with its obligations under this Agreement, that would
cause any representation to be untrue or misleading, that would make it
impossible or impracticable for a condition herein to be satisfied, or that
would materially hinder or delay the consummation of the transactions
contemplated by this Agreement.
(c) Each of the Buyer and the Sellers shall use reasonable best
efforts to take, or cause to be taken, all appropriate action, and do, or cause
to be done, all things necessary, proper or advisable under applicable legal
requirements or otherwise to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable, including, without
limitation, using reasonable best efforts to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Bodies and parties to contracts with the Companies, their Subsidiaries, Sellers
and Buyer as are necessary to consummate the Contemplated Transactions. In case
at any time after the Closing Date any further action is necessary or desirable
to carry out the purposes of this Agreement, each party and the proper officers
and directors of each party to this Agreement shall use reasonable best efforts
to take all such action.
(d) During the period after the date hereof but prior to the
Closing (the "Interim Period"), each of the parties shall promptly notify the
--------------
others in writing of any pending or, to the Knowledge of such party, Threatened
action, Proceeding or investigation by any Governmental Body or any other Person
(i) challenging or seeking damages in connection with
40
the Contemplated Transactions or (ii) seeking to restrain or prohibit the
consummation of the Contemplated Transactions or otherwise limit the right of
Buyer to own or operate all or any portion of the Business.
(e) Buyer and Sellers shall cooperate fully with each other to
the extent reasonable in connection with all of the foregoing provisions of this
Section 6.2.
6.3. Employees.
---------
(a) Comparable Benefits. Subject to Section 6.3(c), effective as
-------------------
of the Closing Date and for one year thereafter, Buyer shall offer at will
employment with such compensation, to the employees of the Companies and their
Subsidiaries other than those identified in Section 6.3(a) of the Sellers'
Disclosure Letter ("Covered Employees"), as is comparable, to the compensation
that is provided to the Covered Employees immediately prior to the Closing Date
and benefits (including, but not limited to, health, welfare, pension, vacation,
and savings benefits) comparable to the benefits provided by the Companies and
their Subsidiaries to the Covered Employees immediately prior to the Closing or
comparable to those offered by the Buyer to similarly situated employees of
Buyer on and after the Closing Date, in each case, at its locations nearest to
those of the Business.
(b) Welfare Plans; Service Credit. With respect to any employee
-----------------------------
benefit plan that is a "welfare benefit plan" (as defined in Section 3(1) of
ERISA, or would be a "welfare benefit plan" if such plan was subject to ERISA)
maintained for the benefit of the Covered Employees on and after the Closing
Date other than a plan maintai ▇▇▇ by the Companies and their Subsidiaries for
the Covered Employees immediately prior to the Closing Date and continued by the
Buyer after the Closing Date, Buyer shall (a) cause there to be waived any pre-
existing condition limitations and (b) give effect, in determining any
deductible and maximum out-of-pocket limitations, to claims incurred and amounts
paid by, and amounts reimbursed to, such Covered Employees with respect to
similar Plans maintained by the Companies and their Subsidiaries immediately
prior to the Closing Date. In addition, with respect to Covered Employees, Buyer
shall recognize all service recognized by the Companies and their Subsidiaries
under the Plans for all purposes, including vacations, under all employee
benefit plans maintained for the benefit of the Covered Employees on and after
the Closing Date.
41
(c) Severance. Buyer shall provide certain Covered Employees who
---------
are retained as employees of the Company on the Closing Date and whose
employment is terminated within six (6) months after the Closing Date (other
than for Cause as determined by Sellers Representatives) with the enhanced
severance benefits provided under the change of control severance plan to be
established by the Companies and their Subsidiaries on or prior to the Closing
Date. "Cause" shall have the meaning set forth in such change of control
severance plan. The Sellers shall reimburse the Companies one dollar for each
one dollar paid out by them pursuant to and in accordance with the change of
control severance plan.
(d) Accrued Vacation. With respect to any accrued but unused
----------------
vacation time to which any Employee is entitled pursuant to the Plans as of the
Closing Date, Sellers have the option to make payment, on the Closing Date, to
each such Employee of all such accrued but unused vacation time.
(e) Annual Incentive Compensation. With respect to the
-----------------------------
Companies' "profit-sharing" plan (the "Bonus Plan"), the Company may pay to each
Covered Employee who, immediately prior to the Closing Date, participates in the
Bonus Plan, an amount equal to the bonus amount to which each such Covered
Employee would be entitled in respect of the fiscal year ended June 30, 2001.
6.4. Releases. The parties agree that as part of the Closing, the
--------
Principal Sellers, on the one hand, and the Companies and their Subsidiaries on
the other hand, will execute and deliver mutual general releases; except that
Principal Sellers shall not be released from any liability of the Principal
Sellers to the extent such liability is reflected as a current asset of the
Companies in the Post-Closing Net Working Capital Calculation.
6.5. Section 338(h)(10) Election.
---------------------------
(a) The parties intend that the purchase of the capital stock of
▇▇▇▇▇▇ Oil Inc. qualify as a "Qualified Stock Purchase" for purposes of Section
338 of the Code and intend to make an election under Section 338(h)(10) of the
Code with respect to the stock purchase.
(b) With respect to the Sellers' sale of the capital stock of
▇▇▇▇▇▇ Oil Inc. to the Buyer, each of the Sellers of such capital stock and the
Buyer shall jointly make timely and irrevocable elections under Section
338(h)(10) of the Code, and, if permissible,
42
similar elections under any applicable state or local income tax laws. The Buyer
and the Sellers shall report and shall cause ▇▇▇▇▇▇ Oil Inc. to report the
Contemplated Transactions consistent with such elections under Section
338(h)(10) of the Code or any similar state or local tax provision (the
"Elections") and agree not to take any action that could cause such Elections to
be invalid, and shall take no position contrary thereto unless required to do so
pursuant to a determination (as defined in Section 1313(a) of the Code) or any
similar state or local tax provision.
(c) To the extent possible, the Buyer and the Sellers selling capital
stock of ▇▇▇▇▇▇ Oil Inc. shall execute and shall cause ▇▇▇▇▇▇ Oil Inc. to
execute at Closing any and all forms necessary to effectuate the Elections
(including, without limitation, Internal Revenue Service Form 8023 and any
similar forms under applicable state and local income tax laws (the "Section 338
Forms")). In the event, however, any Section 338 Forms are not executed at the
Closing, the Buyer and such Sellers shall prepare and complete and shall cause
▇▇▇▇▇▇ Oil Inc. to prepare and complete each such Section 338 Form no later than
15 days prior to the date such Section 338 Form is required to be filed. The
Buyer and such Sellers shall each cause Section 338 Forms (including such form
for ▇▇▇▇▇▇ Oil Inc.) to be duly executed by an authorized person for the Buyer,
such Sellers and, in each case, and shall duly and timely file or cause to be
filed the Section 338 Forms in accordance with applicable tax laws and the terms
of this Agreement.
(d) As soon as practicable after the Closing Date, the Principal
Sellers shall determine an allocation of the Purchase Price among the assets,
the fair market value of the assets of ▇▇▇▇▇▇ Oil Inc., and the allocation of
the deemed sales price of the assets of such corporation resulting from the
Elections (as required pursuant to Section 338(h)(10) of the Code and
regulations promulgated thereunder) among such assets (the "Section 338
Allocation"), subject to the consent of the Buyer (which shall not be
unreasonably withheld). If the Buyer and such Sellers are unable to agree on
the Section 338 Allocation within 90 days after the Closing, they shall request
a big five accounting firm to prepare the Section 338 Allocation (whose fees
shall be shared equally between the Buyer and such Sellers), which shall
constitute an arbitral award that is final and binding. The Buyer and Sellers
shall file and shall cause ▇▇▇▇▇▇ Oil Inc. to file all Tax Returns consistent
with the Section 338 Allocation.
43
6.6. Transfer Taxes. Buyer shall be responsible for the payment of
--------------
all Transfer Taxes, if any, which may be payable with respect to the
consummation of the Contemplated Transaction and, to the extent any exemptions
from such taxes are available, Buyer and Sellers shall cooperate to prepare any
certificates or other documents necessary to claim such exemptions.
6.7. Buyer Financing. Buyer shall use its commercially reasonable
---------------
efforts to obtain any financing required to consummate the transactions
contemplated hereby.
6.8. Section 754 Election. ▇▇▇▇▇▇ Oil LP shall make a valid election
--------------------
under Section 754 of the Code which shall be effective for the taxable year
which includes the Closing Date.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLERS
------------------------------------
Each and every obligation of Sellers to consummate the transactions
contemplated by this Agreement or to be performed on or before the Closing shall
be subject to satisfaction, on or before the Closing, of each of the following
conditions, unless waived in writing by Sellers:
7.1. Representations and Warranties True. The representations and
-----------------------------------
warranties of Buyer contained herein shall be in all material respects true and
accurate as of the date when made and as of the Closing as though such
representations and warranties were made at and as of such date, except for
changes expressly permitted or contemplated by the terms of this Agreement,
except to the extent such representations and warranties speak of an earlier
date (in which case, as of such date).
7.2. Performance. Buyer shall have performed and complied in all
-----------
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by Buyer on or prior to the Closing.
7.3. No Proceeding. No Proceeding shall have been instituted or
-------------
Threatened seeking to enjoin, restrain or prohibit the consummation of, or
having the effect of making illegal or otherwise prohibiting, the Contemplated
Transactions.
44
7.4. Certificates. Buyer shall have furnished Sellers with such
------------
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Sellers, including a certificate to the effect that the conditions set forth in
Section 7.1 and Section 7.2 have been met.
7.5. Governmental Consents and Waivers. Any consents, permits,
---------------------------------
approvals and waivers of any Governmental Body required in order for the parties
to complete the transactions contemplated hereby, including without limitation
any consent or notice of non-applicability required under the New Jersey
Industrial Site Recovery Act, N.J.S.A. 13:1K, shall have been obtained.
7.6. HSR Act. The waiting period required by the HSR Act, and any
-------
extensions thereof obtained by request or other action of the FTC or the
Antitrust Division, shall have expired or been terminated by the FTC or the
Antitrust Division.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
----------------------------------
Each and every obligation of Buyer to consummate the transactions
contemplated by this Agreement or to be performed on or before the Closing shall
be subject to the satisfaction, on or before the Closing, of each of the
following conditions, unless waived in writing by Buyer:
8.1. Representations and Warranties True. The representations and
-----------------------------------
warranties of Sellers contained herein shall be in all material respects true
and accurate as of the date when made and at and as of the Closing Date as
though such representations and warranties were made at and as of such date,
except for changes expressly permitted or contemplated by the terms of this
Agreement, except to the extent such representations and warranties speak of an
earlier date (in which case, as of such date).
8.2. Performance. Sellers shall have performed and complied in all
-----------
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by them on or prior to the Closing.
45
8.3. No Proceeding. No Proceeding shall have been instituted or
-------------
Threatened seeking to enjoin, restrain or prohibit the consummation of, or
having the effect of making illegal or otherwise prohibiting, the Contemplated
Transactions.
8.4. Receipt of Third Party Consents. The Companies and their
-------------------------------
Subsidiaries and Sellers shall have obtained all material required consents,
permits, waivers or other approvals of, or have given any required notice to,
any such third parties as set forth by Section 3.20 of Sellers' Disclosure
Letter.
8.5. Governmental Consents, Approvals and Waivers. The Companies and
--------------------------------------------
their Subsidiaries and/or the Sellers, as applicable, shall have received any
consents, permits, approvals and waivers of any Governmental Body required in
order for them to complete the transactions contemplated hereby, including
without limitation any consent or notice of non-applicability required under the
New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K.
8.6. Certificates. The Principal Sellers shall have furnished Buyer
------------
with such certificates to evidence compliance with the conditions set forth in
this Article VIII as may be reasonably requested by Buyer, including a
certificate to the effect that the conditions set forth in Section 8.1 and
Section 8.2 have been met.
8.7. Corporate Documents. Buyer shall have received from Sellers a
-------------------
certificate of existence of each of the Companies from its respective state of
organization, dated a date not more than ten (10) days prior to the Closing.
8.8. Other Sellers Escrow Agreement. The Other Sellers and the Escrow
------------------------------
Agent shall have entered into the Other Sellers Escrow Agreement substantially
in the form Exhibit 2.2.
8.9. Noncompetition Agreement. Each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. and
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have executed a noncompetition agreement (the
"Noncompetition Agreement") substantially in the form attached hereto as Exhibit
8.9.
8.10. Financing. Star Gas Partners, L.P., Buyer's ultimate parent,
---------
shall have available to it the proceeds of (i) a $60 million institutional
private placement of its debt securities and (ii) a $60 million public equity
offering out of its existing $200,000,000 shelf
46
registration statement on or before the Closing Date, the proceeds of which will
be used to pay the Purchase Price.
8.11. HSR Act. The waiting period required by the HSR Act, and any
-------
extensions thereof obtained by request or other action of the FTC or the
Antitrust Division, shall have expired or been terminated by the FTC or the
Antitrust Division.
8.12. Release of Encumbrances. All Encumbrances on the Equity
-----------------------
Interests shall have been released and removed.
8.13. Dover Escrow Agreement. The Sellers Representatives and an
----------------------
escrow agent shall have entered into the Dover Escrow Agreement.
ARTICLE IX
CONDUCT OF THE COMPANIES
PENDING CLOSING AND RISK OF LOSS
---------------------------------
The Sellers agree that from the date hereof to the Closing Date, and
except as set forth in Section 9 of the Sellers' Disclosure Letter or otherwise
expressly consented to or approved by Buyer in writing (which consent shall not
be unreasonably withheld or delayed):
9.1. Regular Course of Business. Sellers shall cause the Companies
--------------------------
and their Subsidiaries to carry on the Business in the Ordinary Course of
Business.
9.2. Organization. The Sellers shall cause the Companies and their
------------
Subsidiaries to use their reasonable efforts to preserve the corporate or
limited partnership, as applicable, existence of the Companies and their
Subsidiaries and business organization of the Companies and their Subsidiaries
intact.
9.3. Existing Relationships. The Sellers shall cause the Companies
----------------------
and their Subsidiaries to use reasonable efforts to keep reasonably available to
Buyer their officers and key employees, and to preserve for Buyer their ordinary
and customary relationships with licensors, suppliers, distributors, customers
and others having business relations with them.
9.4. Contracts. No Material Contract will be entered into, extended,
---------
materially modified, terminated or renewed except in the Ordinary Course of
Business and no material
47
purchase of raw material and no sale of material assets will be made, by or on
behalf of the Companies and their Subsidiaries, except (a) normal contracts or
commitments for the purchase of, and normal purchases of, inventory, made in the
Ordinary Course of Business; (b) normal contracts or commitments for the sale
of, and normal sales of, inventory in the Ordinary Course of Business; (c)
purchases of assets in accordance with the capital expenditures budget and
emergency capital expenditures; and (d) other contracts, commitments, purchases
or sales in the Ordinary Course of Business not in excess of $250,000 in the
aggregate.
9.5. Insurance of Property. Sellers shall use commercially reasonable
---------------------
efforts to maintain in full force and effect each of the insurance policies
listed in Section 3.14(a) of Sellers' Disclosure Letter.
9.6. No Default. Sellers shall use commercially reasonable efforts to
----------
not permit to occur any act or omission to act which will cause a material
breach by the Companies or their Subsidiaries of any Material Contract.
9.7. Compliance With Laws. Sellers shall cause the Companies to duly
--------------------
comply in all material respects with all Legal Requirements applicable to its
properties, operations, business and employees.
9.8. Taxes.
-----
(a) Seller shall have the sole right, at their cost and expense,
to prepare and file all Tax Returns relating to any period for which Sellers
have the right to control any Tax Audit pursuant to Section 10.2(e)(ii).
(b) ▇▇▇▇▇▇ Oil Inc. shall not take any action inconsistent with
maintaining its status as an "S" corporation within the meaning of Code Sections
1361 and 1362 up to and including the time of the consummation of the
Contemplated Transactions.
ARTICLE X
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
-------------------------------
10.1. Survival of Representations and Warranties. Subject to the
------------------------------------------
following two sentences, the representations, warranties, covenants, agreements
and indemnities of Sellers and
48
the Buyer contained herein shall survive the consummation of the Contemplated
Transactions and the Closing Date, without regard to any investigation made by
any of the parties hereto. All representations and warranties, covenants,
agreements and indemnities and all claims and causes of action with respect
thereto shall terminate on the twelve-month anniversary of the Closing,
provided, however, that the representations and warranties made pursuant to
-------- -------
Sections 3.1, 3.2, 3.25, 4.1, 4.2(a), 5.1 and 5.2(a) shall survive until the
expiration of applicable statutes of limitation. Notwithstanding the foregoing,
none of the Sellers' representations and warranties, covenants, agreements and
indemnities to Buyer relating to Environmental Laws, Environmental Compliance
Liability or Environmental Conditions, including the representations and
warranties included in Section 3.21 hereof, shall survive the consummation of
the Contemplated Transactions and the Closing Date. The termination of the
representations and warranties, covenants, agreements and indemnities provided
herein shall not affect the rights of a party in respect of any Claim (as
hereinafter defined) made by such party in a writing received by the other party
prior to the expiration of the applicable survival period provided herein.
10.2. Indemnifications. Subject to Section 10.6:
----------------
(a) By Sellers. Sellers shall, jointly and severally,
----------
indemnify and save and hold harmless Buyer, its Affiliates and Subsidiaries, and
their respective Representatives, from and against any and all Damages incurred
in connection with, arising out of, resulting from or incident to: (i) any
material breach of any surviving representation or warranty, made by Sellers in
this Agreement (reading such representations and warranties (other than Section
3.8) as if they did not contain any materiality or Material Adverse Effect
qualifiers, but such representatives and warranties shall not be read to exclude
dollar thresholds contained therein), (ii) any breach of any surviving covenant
or agreement made by Sellers in or pursuant to this Agreement, (iii) any third-
party Claim against Buyer arising out of or relating to the Unknown Liabilities
or (iv) the failure of the purchase of the capital stock of ▇▇▇▇▇▇ Oil Inc. to
qualify as a "Qualified Stock Purchase" for purposes of Section 338 of the Code
or failure of ▇▇▇▇▇▇ Oil LP to have made a valid election under Section 754 of
the Code which shall be effective for the taxable year which includes the
Closing Date due solely to any act or omission of any Seller. Notwithstanding
the foregoing, Buyer may not seek indemnification against Sellers for any Claim
in which the Damages are less than $100,000 ("Small Claim") until the aggregate
of all
49
Small Claims for indemnification or any individual Claim exceeds $2,000,000, in
which event indemnification will apply only to Claims in excess of $2,000,000.
(b) By Buyer. Buyer shall indemnify and save and hold harmless
--------
Sellers from and against any and all Damages incurred in connection with,
arising out of, resulting from or incident to (i) any breach of any
representation or warranty or the inaccuracy of any representation made by Buyer
in this Agreement (reading such representations and warranties without regard to
any materiality qualifiers); and (ii) any breach of any covenant or agreement
made by Buyer in or pursuant to this Agreement.
(c) Cooperation. The indemnified party shall reasonably
-----------
cooperate in all respects with the indemnifying party and its attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified party may, at its own
-------- -------
cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
(d) Reserved.
(e) Defense of Claims.
-----------------
(i) Subject to the provisions of subparagraph (e)(ii), if
a claim for Damages (a "Claim") is to be made by a party entitled to
indemnification hereunder against the indemnifying party, the party claiming
such indemnification shall give written notice (a "Claim Notice") to the
indemnifying party as soon as practicable after the party entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section 10.2.
If any lawsuit or enforcement action is filed against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable (and in any event within five (5)
calendar days after the service or the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual prejudice caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to participate in or, if it so elects,
to take control of the defense and
50
investigation of such lawsuit or action; (ii) to employ and engage attorneys of
its own choice to handle and defend the same, at the indemnifying party's cost,
risk and expense unless the named parties to such action or proceeding include
both the indemnifying party and the indemnified party and the indemnified party
has been advised in writing by counsel that a conflict of interest between the
indemnified party and indemnifying party exists, in which event the indemnified
party may in its discretion engage separate counsel to participate in the
Proceedings; and (iii) to compromise or settle such Claim, provided that, if any
--------
such settlement or compromise entails material non-monetary affirmative
obligations on the part of the indemnified party, such compromise or settlement
shall be made only with the written consent of the indemnified party, such
consent not to be unreasonably withheld or delayed. If the indemnifying party
fails to assume the defense of such Claim within forty-five (45) calendar days
after receipt of the Claim Notice, the indemnified party against which such
Claim has been asserted will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying party's
reasonable cost and expense, the defense, compromise or settlement of such Claim
on behalf of and for the account and risk of the indemnifying party; provided,
--------
however, that such Claim shall not be compromised or settled without the written
-------
consent of the indemnifying party. In the event the indemnified party assumes
the defense of the Claim, the indemnified party will keep the indemnifying party
reasonably informed of the progress of, and allow full participation in, any
such defense, compromise or settlement.
(ii) With respect to any Tax Audit relating to tax years
ending on or prior to the Closing Date or with respect to any previous year for
which the Sellers could have an indemnification obligation under Section 10.2
hereof, the Sellers or their designated Representatives shall have the sole
right, at their sole cost and expense, to control and settle any Tax Audit by
any taxing authority and contest and defend against any assessment, notice of
deficiency or other adjustment or proposed adjustment ("Tax Adjustment"),
provided, (i) if the Sellers do not agree in writing to undertake the control of
--------
a Tax Audit within ten (10) business days after they have been afforded the
opportunity in writing in the manner provided by this Agreement for the giving
of notices, Buyer shall have exclusive control of such Tax Audit and (ii) if the
resolution of any issue arising with respect to any Tax Audit or Tax Adjustment
could have a material adverse effect on the amount or timing of the Tax
liability of the Companies or their Subsidiaries in any period ending after the
Closing Date, the Sellers shall promptly notify the Buyer in writing and shall
afford to the Buyer the opportunity to control jointly the conduct
51
and resolution of the portion of such Tax Audit or Tax Adjustment that could
have the effect of increasing or accelerating the tax liabilities of the Company
in any post-2001 period. If the Buyer shall decline to participate in the
contest or conduct of such Tax Audit or Tax Adjustment, the Sellers shall have
the right to control the conduct of such Tax Audit or Tax Adjustment, provided
that the Sellers shall not resolve such Tax Audit or Tax Adjustment without the
Buyer's consent which shall not be unreasonably withheld. In the event of a
dispute between the Sellers and the Buyer regarding the conduct or resolution of
any Tax Audit or Tax Adjustment hereof in which they share joint control of the
conduct and resolution, the parties will consult with each other on, and attempt
to resolve, their dispute. If such dispute cannot be resolved, it shall be
referred to a nationally recognized accounting firm that is designated by the
parties ("Tax Arbitrator"). Each of the Buyer and the Sellers shall present its
position to the Tax Arbitrator which shall decide which position shall be
adopted. The Tax Arbitrator shall not be entitled to adopt any other position,
unless the Sellers and the Buyer so agree in writing. The decision of the Tax
Arbitrator shall be final and binding. The fees and costs of the Tax Arbitrator
shall be paid by the party or parties whose position(s) is not adopted by the
Tax Arbitrator. Each party shall bear its own legal and other advisory expenses
incurred in connection with such procedure.
10.3. Limitation on Liability. Any provision herein to the contrary
-----------------------
notwithstanding:
(a) Each Seller shall be liable in the aggregate for all Claims
up to, but not in an amount exceeding, such Seller's Indemnity Percentage of
$14,000,000 as set forth in Section 2.2(a) of Sellers' Disclosure Letter (with
respect to such Seller, such Seller's "Indemnity Percentage").
(b) The limitations on liability set forth in Section 10.3(a)
shall not apply to any Claim (i) based upon the breach of any representation and
warranty (other than Section 3.25) which pursuant to the provision 10.2(a)(i)
survives the 12-month anniversary of the Closing or (ii) for indemnification
pursuant to Section 10.2(a)(iv); provided, however, that the liability of each
-------- -------
Seller for any Claim described in this subsection (b) shall be limited to such
Seller's Indemnity Percentage of such Claim.
(c) Except for Claims referred to in section 10.3(b), Sellers'
indemnification payment obligations under this Agreement, for Sellers other than
Principal
52
Sellers, shall be satisfied solely out of the Other Sellers Escrow Amount, as
administered in accordance with this Agreement and the Other Sellers Escrow
Agreement.
(d) In no event shall any Seller be liable (including under the
Other Sellers Escrow Account) to Buyer or its affiliates for any Damages with
respect to any Claim for any amount in excess of such Seller's Indemnity
Percentage of the total Damages with respect to such Claim.
(e) Sellers shall have no indemnification obligations of any
kind or nature relating to Environmental Laws, Environmental Compliance
Liability or Environmental Conditions.
10.4. Exclusive Remedies. The remedies provided for in this Article X
------------------
shall be the sole and exclusive remedies of the parties and their respective
Representatives, successors and assigns for any breach of or inaccuracy in any
representation or warranty or any breach, non-fulfillment or default in the
performance of any of the covenants or agreements contained in this Agreement or
the documents provided by the parties at Closing. The parties shall not be
entitled to a rescission of this Agreement or to any further indemnification
rights or claims of any nature whatsoever in respect thereof (whether by
contract, common law, statute, law, regulation or otherwise), all of which the
parties hereby waive, to the extent permitted by applicable law, provided,
--------
however, that nothing herein is intended to waive any claims for fraud. Without
-------
limiting the foregoing, Buyer, and after the Closing, the Companies and their
Subsidiaries, waive any rights or causes of action under or relating to
Environmental Laws that they may have against any Seller arising out of events,
circumstances or conditions occurring or existing before or after the Closing.
10.5. Subrogation. Upon making an indemnity payment pursuant to this
-----------
Agreement, the indemnifying party will, to the extent of such payment, be
subrogated to all rights of the indemnified party against any third party in
respect of the damages to which the payment related. Without limiting the
generality of any other provision hereof, each such indemnified party and
indemnifying party will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above described subrogation and
subordination rights.
53
10.6. No Double Recovery; Use of Insurance. Notwithstanding anything
------------------------------------
herein to the contrary, no party shall be entitled to indemnification or
reimbursement under any provision of this Agreement for any amount to the extent
such party or its Affiliate has been indemnified or reimbursed for such amount
under any other provision of this Agreement, the Exhibits or Schedules attached
hereto, Sellers' Disclosure Letter, or any document executed in connection with
this Agreement or otherwise. Furthermore, in the event any Damages related to a
claim by Buyer are covered by insurance, except insurance obtained by the Buyer
or the Companies and their Subsidiaries after the Closing Date to the extent and
only to the extent it provides coverage or limits not offered by insurance
policies maintained by the Companies and their Subsidiaries immediately prior to
the Closing Date, Buyer agrees to use commercially reasonable efforts to seek
recovery under such insurance and Buyer shall not be entitled to recover from
the Sellers (and shall refund amounts received up to the amount of
indemnification actually received) with respect to such Damages to the extent,
and only to the extent, any of Buyer, the Companies and their Subsidiaries
recovers under any such insurance policy.
10.7. Tax Benefits. If the amount with respect to which any claim is
------------
made under this Article 10 (an "Indemnity Claim") gives rise to a Tax Benefit
---------------
(as defined below) the indemnity payment shall be reduced by the amount of the
Tax Benefit. For the purposes of this Agreement, any Tax Benefit shall be
treated as though it were a reduction in the amount of the initial Indemnity
Claim, and the liabilities of the parties shall be redetermined as though both
occurred at or prior to the time of the indemnity payment. For purposes of this
Section 10.7, a "Tax Benefit" means an amount by which the tax liability of a
party subject to the highest effective marginal combined Federal and state
income tax prescribed for a corporation resident in New York State (but not in
New York City) would be reduced by use of such benefit assuming such benefit
could be fully currently realized (including, without limitation, by deduction,
entitlement to refund, credit or otherwise) plus any related interest received
from the relevant taxing authority; provided, however, that any Tax Benefit that
would result in a reduction of income by virtue of increased tax basis which
must be depreciated or amortized over more than one taxable year shall be equal
to the Present Value of such Tax Benefit. For purposes of the preceding
sentence, "Present Value" shall mean the sum of the deductions generated by a
Tax Benefit; provided that each such deduction will be discounted at the rate of
10% per annum from the year or years in which each such deduction would be
realized using the applicable Company's actual method of depreciation or
amortization to the year of payment. In
54
the event that there should be a determination disallowing the Tax Benefit, the
indemnifying party shall be liable to refund to the indemnified party the amount
of any related reduction previously allowed or payments previously made to the
indemnifying party pursuant to this Section 10.7. The amount of the refunded
reduction or payment shall be deemed a payment under this Section 10.7 and thus
shall be paid subject to any applicable reductions under this Section 10.7.
10.8. Treatment of Indemnity Payments Between the Parties. All
---------------------------------------------------
indemnification payments shall constitute adjustments to the Purchase Price for
all tax purposes, and no party shall take any position inconsistent with such
characterization.
10.9. Mitigation of Loss. Subject to Section 10.2(b) each indemnified
------------------
party shall mitigate, to the extent required by applicable law, the amount of
any Damages, for which it is entitled to seek indemnification hereunder.
ARTICLE XI
TERMINATION AND ABANDONMENT
---------------------------
11.1. Methods of Termination. The transactions contemplated herein
----------------------
may be terminated and/or abandoned at any time but not later than the Closing:
(a) By mutual written consent of Buyer and Sellers;
(b) By Buyer on or after September 30, 2001 if any of the
conditions provided for in Article VIII of this Agreement shall not have been
met or waived in writing by Buyer prior to such date, so long as Buyer is not in
material breach hereunder;
(c) By Sellers on or after September 30, 2001 if any of the
conditions provided for in Article VII of this Agreement shall not have been met
or waived in writing by Sellers prior to such date, so long as Sellers are not
in material breach hereunder; or
(d) By Buyer as provided in Section 12.6.
11.2. Procedure Upon Termination. In the event of termination and
--------------------------
abandonment by Buyer or Sellers, or both, pursuant to Section 11.1 hereof,
written notice thereof shall forthwith be given to the other party and the
transactions contemplated by this Agreement shall be terminated and/or abandoned
without further action by Buyer or by Sellers. If the
55
transactions contemplated by this Agreement are terminated and/or abandoned as
provided herein:
(a) Each party will redeliver all documents, work papers and
other material of any other party relating to the Contemplated Transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same;
(b) All confidential information received by any party hereto
with respect to the business of any other party or its Subsidiaries shall be
treated in accordance with the confidentiality provisions of the Confidentiality
Letter (the "Confidentiality Letter") dated May 9, 2001 between an Affiliate of
the Buyer and ▇▇▇▇▇▇ Oil Inc.; and
(c) No party hereto shall have any liability or further
obligation to any other party to this Agreement, and neither party shall make
any claim, including any action for equitable relief or specific performance,
against the other party nor be liable for the costs, expenses or damages that
may result to the other in the event of the other's withdrawal prior to Closing;
provided, however, that (i) termination will not relieve a breaching party from
-------- -------
liability for any breach of this Agreement giving rise to such termination and
(ii) the obligations of Buyer and Sellers under Section 11.2 shall continue in
full force and effect.
11.3. Liquidated Damages. Notwithstanding the foregoing if all of
------------------
the conditions precedent to Buyer's obligation to close as set forth in Article
VIII have been satisfied, other than the condition set forth in Section 8.11,
then Buyer shall pay to Sellers (in proportion to each Sellers Sharing
Percentage) the sum of (i) $2,500,000 plus (ii) an amount equal to the actual
out-of-pocket expenses of Sellers relating to the Contemplated Transactions, and
such payment shall be in lieu of, and in full release and satisfaction of, all
---
claims of any nature and description, of the Sellers and the Companies and their
Subsidiaries against the Buyer, its officers, directors, agents and employees
arising out of or relating to the failure of Buyer to consummate the
Contemplated Transactions.
11.4. Right of First Refusal. If this Agreement has been terminated
----------------------
by Sellers pursuant to Section 11.1(c) and if Buyer has paid to Sellers at least
the amount of $2,500,000 pursuant to Section 11.3 (without prejudice to Sellers
right to recover additional amounts provided in Section 11.3), then if prior to
December 31, 2001 Sellers receive an offer to purchase all or substantially all
of the Equity Interests or all or substantially all of the assets of the
56
Companies and their Subsidiaries ("Proposed Transaction") and Sellers desire to
accept such offer, Sellers shall not accept such offer unless and until they
have provided Buyer with all of the material details of such offer, in which
event, Buyer shall have the first refusal right ("First Refusal Right") to
consummate the Proposed Transaction on the same terms and conditions in
accordance with this section. Buyer may exercise the First Refusal Right by
written notice to Sellers within 5 business days after receipt of such offer by
Buyer ("Exercise Period"). If Buyer fails to exercise the First Refusal Right
during the Exercise Period, the First Refusal Right shall lapse. If Buyer shall
exercise the First Refusal Right during the Exercise Period, the parties shall
proceed in good faith to consummate the Proposed Transaction. If Buyer has
failed to consummate the Proposed Transaction within 30 days after exercising
the First Refusal Right, the First Refusal Right shall lapse and this Section
11.4 shall terminate.
ARTICLE XII
MISCELLANEOUS PROVISIONS
------------------------
12.1. Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified and supplemented by written agreement of
Buyer and Sellers any time prior to the Closing with respect to any terms
contained herein.
12.2. Waiver of Compliance. Any failure of Sellers, on the one hand,
--------------------
or Buyer, on the other, to comply with any obligation, covenant, agreement or
condition herein may be expressly waived in writing by the President or a Vice
President of any such party, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
12.3. Notices. All notices or other communications required or
-------
permitted to be given pursuant to this Agreement shall be in writing and shall
be considered as duly given on (a) the date of delivery, if delivered in person
or if sent by telecopier and also as provided in clause (b), or (b) two days
after mailing, if sent by Federal Express or other similar overnight delivery
service, or (c) three days after mailing if mailed from within the continental
Untied States by registered or certified mail, return receipt requested, to the
party entitled to receive the same, at the address provided in this Section
12.3.
57
Any party hereto may change its address by giving notice to the other
stating its new address, all in the manner provided herein. Such newly
designated address shall thereafter be such party's address for the purpose of
all notices or other communications required or permitted to be given pursuant
to this Agreement.
(a) If to Sellers or Sellers Representatives, to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Yorktown Energy Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇,
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇.
(b) If to Buyer, to:
Petro, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Fax: ▇▇▇-▇▇▇-▇▇▇▇,
58
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ & Ballon LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇.
12.4. Assignment. This Agreement and all of the provisions hereof
----------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
12.5. Dispute Resolution. In the event that there shall be a dispute
------------------
between the parties after the Closing Date arising out of or relating to this
Agreement, including, without limitation, the indemnities provided in Article X
or the breach thereof, the parties agree that such dispute shall be resolved by
final and binding arbitration in the State of New York administered by the
American Arbitration Association (the "AAA"), in accordance with the AAA's rules
of practice then in effect or such other procedures as the parties may agree.
Unless the parties agree otherwise, the arbitration shall be conducted by a
single arbitrator appointed by the AAA, which arbitrator shall be a partner at
an internationally-recognized accounting firm. Any award issued as a result of
such arbitration shall be final and binding between the parties thereto, and
shall be enforceable by any court having jurisdiction over the party against
whom enforcement is sought. The arbitrator shall have the authority in his or
her discretion to award to the prevailing party the fees and expenses of such
arbitration (including reasonable attorneys' fees) or any action to enforce an
arbitration award. For the purposes of an action to enforce an arbitration
award under this Section 12.5, Sellers and Buyer each agree to consent to the
jurisdiction of the Supreme Court of the State of New York, or if such court
declines the exercise of jurisdiction, the jurisdiction of the courts of the
United States of America located in the Southern District of New York, and the
service of process therein.
12.6. Schedules and Exhibits.
----------------------
(a) All exhibits and schedules hereto and Sellers' Disclosure
Letter are hereby incorporated by reference and made a part of this Agreement.
Any fact or item disclosed
59
on any Schedule or Exhibit or Section of Sellers' Disclosure Letter hereto shall
not by reason only of such inclusion be deemed to be material and shall not be
employed as a point of reference in determining any standard of materiality
under this Agreement.
(b) During the Interim Period the Sellers shall be entitled
to update modify, alter or otherwise change the Sellers' Disclosure Letter to
the extent information contained therein becomes untrue or incomplete or
inaccurate after the date hereof due to events occurring after the date hereof
other than as a result of a breach by the Sellers of the covenants contained
herein or therein; provided, however, if such updates, modifications,
-------- -------
alterations and changes to the Sellers' Disclosure Letter, individually or in
the aggregate, would cause the representations and warranties of the Sellers to
be materially and adversely untrue as of the Closing Date (absent such
updating), the Buyer shall have the right to terminate the transactions
contemplated herein pursuant to Section 11.1(d).
12.7. Sellers' Representatives.
------------------------
(a) By the execution and delivery of this Agreement, including
counterparts hereof, each Seller hereby irrevocably constitutes and appoints
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as the true and
lawful agents and attorneys-in-fact (the "Sellers Representatives") of such
-----------------------
Seller with full powers of substitution to act in the name, place and stead of
such Seller with respect to the performance on behalf of such Seller under the
terms and provisions of this Agreement, as the same may be from time to time
amended, and to do or refrain from doing all such further acts and things, and
to execute all such documents on such Seller's behalf, as the Sellers
Representatives shall deem necessary or appropriate in connection with any of
the transactions contemplated under this Agreement, including:
(i) to receive on behalf of the Sellers all payments
made by the Buyer to the Sellers under this Agreement;
(ii) to agree upon or compromise any matter related to
the calculation of any adjustments to the Purchase Price pursuant to
Section 2.3 or otherwise or other payments to be made;
(iii) to act for the Sellers with respect to all
indemnification matters referred to in this Agreement, including the right
to compromise on behalf of the Sellers any indemnification claim made by or
against the Sellers;
60
(iv) to terminate, amend, or waive any provision of this
Agreement; provided that any such action, if material to the rights and
--------
obligations of the Sellers in the reasonable judgment of the Sellers
Representatives, shall be taken in the same manner with respect to all
Sellers, unless otherwise agreed by each Seller who is subject to any
disparate treatment of a potentially adverse nature;
(v) to employ and obtain the advice of legal counsel,
accountants and other professional advisors as the Sellers Representatives,
in their sole discretion, deems necessary or advisable in the performance
of their duties as Sellers Representatives and to rely on their advice and
counsel;
(vi) to incur and pay out of the Purchase Price expenses,
including fees of brokers, attorneys and accountants incurred pursuant to
the transactions contemplated hereby, and any other fees and expenses
allocable or in any way relating to such transaction or any indemnification
claim, whether incurred prior or subsequent to Closing;
(vii) to administer and disburse funds from, and execute and
deliver on behalf of such Seller, agreements related to, the Hold Back
Account or otherwise pursuant to the change of control severance plan as
set forth in Section 6.3(c);
(viii) to administer and disburse funds from, and execute and
deliver on behalf of such Seller agreements related to, the escrow account
created by the Dover Escrow Agreement;
(ix) to retain a portion of the Purchase Price, including
without limitation the Hold Back Amount and any amounts under the Dover
Escrow Agreement, as a reserve against the payment of adjustments to the
Purchase Price, the costs described in clauses (ii), (vi) and (vii) hereof
and reasonable expenses incurred in their capacity as Sellers
Representatives; and
(x) to do or refrain from doing any further act or deed on
behalf of the Sellers which the Sellers Representatives deem necessary or
appropriate in their sole discretion relating to the subject matter of this
Agreement as fully and completely as any of the Sellers could do if
personally present and acting.
61
(b) The appointment of the Sellers Representatives shall be
deemed coupled with an interest and shall be irrevocable, and any other person
may conclusively and absolutely rely, without inquiry, upon any actions of the
Sellers Representatives as the acts of the Sellers in all matters referred to in
this Agreement. Each of the Sellers hereby ratifies and confirms all that the
Sellers Representatives shall do or cause to be done by virtue of such Sellers
Representatives' appointment as Sellers Representatives of such Seller. The
Sellers Representatives shall act for the Sellers on all of the matters set
forth in this Agreement in the manner the Sellers Representatives believes to be
in the best interest of the Sellers, but the Sellers Representatives shall not
be responsible to any Sellers for any loss or damage any Sellers may suffer by
reason of the performance by the Sellers Representatives of such Sellers
Representatives' duties under this Agreement, other than loss or damage arising
from willful misconduct in the performance of such Sellers Representatives'
duties under this Agreement.
(c) Each of the Sellers hereby expressly acknowledges and agrees
that the Sellers Representatives is authorized to act on behalf of such Seller
notwithstanding any dispute or disagreement among the Sellers, and that any
person shall be entitled to rely on any and all action taken by the Sellers
Representatives under this Agreement without liability to, or obligation to
inquire of, any of the Sellers. If any Sellers Representative resigns or ceases
to function in such capacity for any reason whatsoever, then the successor
Sellers Representative shall be the person which the Sellers with a majority of
the Sharing Percentages appoint; provided, however, that if for any reason no
-------- -------
successor has been appointed within thirty (30) days, then any Seller shall have
the right to petition a court of competent jurisdiction for appointment of a
successor Sellers Representative. The Sellers do hereby jointly and severally
agree to indemnify and hold the Sellers Representatives harmless from and
against any and all liability, loss, cost, damage or expense (including without
limitation attorneys' fees) reasonably incurred or suffered as a result of the
performance of such Sellers Representative's duties under this Agreement except
for any such liability arising out of the willful misconduct of such Sellers
Representative.
(d) In each event where action, decision or approval of the
Sellers Representatives is required, unless otherwise specified any such action,
decision or approval shall require action, decision or approval by any two of
the three of the Sellers Representatives.
62
12.8. Publicity. Prior to the Closing Date, none of the parties
---------
hereto shall make or issue, or cause to be made or issued, any announcement or
written statement concerning this Agreement or the Contemplated Transactions for
dissemination to the general public without the prior written consent of the
other party. This provision shall not apply, however, to any announcement or
written statement which on the advice of counsel is required to be made by law
or the regulations of any federal or state governmental agency, except that the
party required to make such announcement shall, whenever practicable, consult
with the other party concerning the timing and content of such announcement
before such announcement is made.
12.9. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
12.10. Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Facsimiles of
any such counterpart shall have the same force and effect as an original
signature.
12.11. Headings. The headings of the Sections and Articles of this
--------
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
12.12. Entire Agreement. This Agreement, including the Exhibits and
----------------
Sellers' Disclosure Letter hereto, and all documents required to be delivered
hereunder and any other documents and certificates delivered pursuant to the
terms hereof or thereof, set forth the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and supersede
all prior negotiations, understandings, discussions, agreements (other than the
confidentiality provisions of the Confidentiality Letter), promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto whether
written or oral.
12.13. Third Parties. Except as specifically set forth or referred to
-------------
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
63
12.14. Further Cooperation.
-------------------
(i) The parties hereto agree that they will, at the
expense of the requesting party, from time to time execute and deliver any and
all additional and supplemental instruments, and do such other reasonable acts
and things which may be necessary or desirable to effect the purpose of this
Agreement, and the consummation of the transactions contemplated hereby.
(ii) Buyer, Companies and their Subsidiaries, and
Sellers shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns and any audit,
litigation or, other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other. proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Buyer, Companies and their Subsidiaries and Sellers
agree (A) to retain all books and records with respect to Tax matters pertinent
to Companies and their Subsidiaries relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Buyer or Sellers, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, Companies and their
Subsidiaries or Sellers, as the case may be, shall allow the other party to take
possession of such books and records. Buyer and Sellers further agree, upon
request, to use their reasonable best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby).
[Signature Page Follows]
64
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be affixed hereto, all
as of the day and year first above written.
Buyer:
PETRO, INC.
By: ________________________
Name:
Title:
Sellers:
__________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇.
___________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
__________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
__________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
__________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
__________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, III
__________________________________
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇
__________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
YORKTOWN PARTNERS LLC, as agent
for the entities listed on Exhibit A hereto
By: _______________________________
Title:
YORKTOWN ENERGY PARTNERS III, L.P.
By: Yorktown III Company LLC, its General
Partner
By: _______________________________
Title:
UBS WARBURG LLC, as agent
By: _______________________________
Title:
By: _______________________________
Title:
___________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
__________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
___________________________________
▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇
__________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
__________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
__________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
___________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
__________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT A
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Persons and entities represented by Yorktown Partners LLC:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Trust
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇, III
▇▇▇▇▇▇▇ Family Partnership LP
William ▇. ▇. ▇▇▇▇▇▇▇ III
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
