TRANSACTION AGREEMENT
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THIS AGREEMENT (the "Agreement") is made this 19/th/ day of December,
2001, by and among INERGY, L. P., a Delaware limited partnership ("MLP"), INERGY
GP, LLC, a Delaware limited liability company and general partner of MLP ("GP"),
INERGY PROPANE, LLC, a Delaware limited liability company of which MLP is the
sole member ("Inergy Propane"), INERGY SALES & SERVICE, INC., a Delaware
corporation that is wholly-owned by Inergy Propane ("Inergy S & S"), INERGY
HOLDINGS, LLC, a Delaware limited liability company ("Inergy Holdings"), IPCH
ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary of Inergy
Holdings ("Acquisition Corp."), and IPCH MERGER CORP., a Delaware corporation
and wholly-owned subsidiary of Acquisition Corp. ("Merger Sub").
WITNESSETH:
WHEREAS, Inergy Holdings, Acquisition Corp., Merger Sub and MLP have
this date entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Independent Propane Company Holdings, a Delaware corporation ("IPCH"), and
certain stockholders of IPCH, pursuant to which, among other things, Merger Sub
will be merged (the "Merger") with and into IPCH, with IPCH being the surviving
corporation of the Merger;
WHEREAS, in the Merger, certain stockholders of IPCH will receive cash
and Common Units of MLP ("MLP Units") and Acquisition Corp. will become the sole
stockholder of IPCH; and
WHEREAS, the purpose of this Agreement is to set forth the
understanding of the parties respecting certain transactions to take place
immediately prior to, concurrently with and immediately after the Merger as
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto do hereby agree as follows:
ARTICLE I.
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TRANSACTIONS TO OCCUR AT THE CLOSING OF THE MERGER
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The parties hereto agree that at the Closing of the Merger:
1.1. Interim Loan. Acquisition Corp. shall enter into a loan agreement
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(the "Interim Loan Agreement") with certain financial institution lenders
providing for the loan to Acquisition Corp. of an aggregate of Twenty-Seven
Million Dollars ($27,000,000), such Interim Loan Agreement to be finalized and
entered into pursuant to the financing commitment, dated December 11, 2001, of
First Union National Bank. Acquisition Corp. shall borrow up to Twenty-Seven
Million Dollars ($27,000,000) pursuant to the Interim Loan Agreement and shall
apply the proceeds thereof in the manner contemplated by Section 1.2 hereof.
1.2. MLP Units and Merger Consideration. MLP shall issue and sell to
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Acquisition Corp., and Acquisition Corp. shall purchase and acquire from MLP,
365,019 MLP
Units, fully paid, non-assessable and free and clear of all liens, claims and
encumbrances of any kind. The aggregate purchase price to be paid by Acquisition
Corp. to MLP for such MLP Units is Nine Million Six Hundred Thousand Dollars
($9,600,000), which amount shall be paid by Acquisition Corp. from the loan
proceeds obtained as contemplated by Section 1.1 hereof. Such MLP Units will be
utilized by Acquisition Corp. to provide a portion of the merger consideration
to be distributed to holders of the Series E Preferred Stock of IPCH upon the
effectiveness of the Merger, as contemplated by Section 2.1(f)(ii) of the Merger
Agreement. MLP shall cause the certificates representing such MLP Units to be
issued in such denominations and in such names as shall be specified by
Acquisition Corp. Up to Seventeen Million Six Hundred Thousand Dollars
($17,600,000) of the loan proceeds obtained as contemplated by Section 1.1
hereof shall be applied by Acquisition Corp. to provide the cash portion of the
merger consideration to be distributed to IPCH stockholders upon the
effectiveness of the Merger.
1.3. Credit Agreement. Inergy Propane shall enter into a credit
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agreement (the "Credit Agreement") with certain financial institution lenders
providing for the loan to Inergy Propane of an aggregate of One Hundred
Ninety-Five Million Dollars ($195,000,000), such Credit Agreement to be
finalized and entered into pursuant to the financing commitment, dated December
11, 2001, of First Union National Bank.
1.4 Capitalization of Acquisition Corp. At or prior to Closing,
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Inergy Holdings will transfer to Acquisition Corp. all of the stock of Xxxxxx
Oil Company of Xxxxxxxx County, Inc. ("Xxxxxx"), which owns all of the stock of
Rolesville Gas and Oil Company, Inc.("Rolesville"), together with debt and
receivables owed by Xxxxxx and Rolesville to Inergy Holdings, all as reflected
on balance sheets of Xxxxxx and Rolesville attached hereto as Exhibit A.
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ARTICLE II.
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TRANSACTIONS IMMEDIATELY FOLLOWING THE MERGER
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The parties hereto agree that immediately following the Merger:
2.1 Dissolution of IPCH. Acquisition Corp., as the sole stockholder
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of the surviving corporation in the Merger, IPCH, shall take such action as may
be required to dissolve and liquidate IPCH under applicable Delaware law. As a
result of this dissolution and liquidation, Acquisition Corp. will become the
sole stockholder of Independent Propane Company, a Delaware corporation
("Independent Propane").
2.2. Conversion of Independent Propane. Acquisition Corp., as the sole
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stockholder of Independent Propane, shall cause Independent Propane to take such
action as may be required under applicable Delaware law to convert Independent
Propane from a Delaware corporation into a Delaware limited liability company
("Independent Propane, LLC"). As a result of this conversion, Acquisition Corp.
will be the sole member of Independent Propane, LLC and the owner of all
membership interests in Independent Propane, LLC.
2.3. Purchase of Independent Propane, LLC Membership Interests.
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(a) Acquisition Corp. shall sell, assign and transfer to Inergy
Propane, and Inergy Propane shall purchase and acquire from Acquisition
Corp. (i) all rights and
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interests of Acquisition Corp. in, to and under the Merger Agreement (other
than those rights and interests described in the immediately following
sentence), together with Acquisition Corp.'s rights and interests in, to
and under the Escrow Agreement referred to therein (other than those rights
and interests described in the immediately following sentence), and (ii)
all membership interests in Independent Propane, LLC. Notwithstanding the
foregoing, Acquisition Corp. shall retain, and shall not sell, assign and
transfer to Inergy Propane, all rights and interests of Acquisition Corp.
in, to and under (1) the Merger Agreement insofar, and only to the extent
that, they arise with respect to the representations and warranties set
forth in Section 3.14 of the Merger Agreement or the indemnification
provided under the Merger Agreement with respect to any misrepresentation
or breach of such representations and warranties, or (2) the Escrow
Agreement insofar, and only to the extent that, they arise with respect to
the rights and interests referred to in clause (1) of this sentence.
(b) In consideration for the sale, assignment and transfer
contemplated by Section 2.3(a) hereof, MLP shall issue and sell to
Acquisition Corp. 394,601 MLP Units, fully paid, non-assessable and free
and clear of all liens, claims and encumbrances of any kind, and Inergy
Propane shall assume, be responsible for and pay all debts, liabilities and
obligations of Acquisition Corp. as of the effective time of the Merger,
other than the liabilities and obligations of Acquisition Corp. arising
pursuant to the Guaranty; provided, however, that said assumption of debts,
liabilities and obligations shall not (i) increase the obligation of Inergy
Propane with respect to such debts, liabilities and obligations, (ii) waive
any valid defense that was available to Acquisition Corp. with respect to
such debts, liabilities and obligations, or (iii) enlarge any rights or
remedies of any third party under any of such debts, liabilities and
obligations. As of the date of this Agreement, the parties anticipate that
the debts, liabilities and obligations that Acquisition Corp. would assume,
be responsible for and pay will consist of (1) Acquisition Corp.'s
contractual obligations under the Merger Agreement, (2) the Twenty-Seven
Million Dollars ($27,000,000) loan obtained pursuant to the Interim Loan
Agreement, and (3) the debts, liabilities and obligations of IPCH at the
effective time of the Merger. Acquisition Corp. may obtain a loan or loans
from banks, financial institutions or other lenders at any time during the
five year period immediately following the date hereof for the purpose of
paying Acquisition Corp.'s tax liabilities. In the event Acquisition Corp.
obtains any such loan or loans, Inergy Propane shall reimburse Acquisition
Corp. for all out-of-pocket costs and expenses reasonably incurred by
Acquisition Corp. with respect to up to Five Million Dollars ($5,000,000)
in original principal amount of such borrowings, including without
limitation, up-front fees and reasonable attorneys' fees but excluding
interest.
(c) Acquisition Corp. shall remain responsible for and shall pay all
of its debts, liabilities and obligations that are not specifically
contemplated by Section 2.3(b) hereof as being assumed by Inergy Propane.
(d) The parties hereto acknowledge that the MLP Units issued to
Acquisition Corp. hereunder reflect a recognition of certain income tax
liabilities that will be incurred by Acquisition Corp. as a result of
remedial allocations of the MLP's income to Acquisition Corp. under Section
704(c) of the Internal Revenue Code. The related tax
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payable as a result of such allocation is referred to herein as the
"Additional Taxes." A calculation of the present value of the Additional
Taxes is attached hereto as Appendix I. The parties further recognize that
such calculation is based on the assumption that MLP and its subsidiaries
will continue to hold the assets held by Independent Propane, LLC at the
time the membership interest in Independent Propane, LLC is transferred to
MLP under 2.3(a) above for a fifteen year period after such transfer. In
the event that MLP or its subsidiaries disposes of any of such assets prior
to the aforesaid 15-year period and such disposition results in an earlier
allocation of taxable income to Acquisition Corp. than that contemplated by
the calculation set forth in Appendix I hereto, a revised calculation of
the present value of the Additional Taxes shall be made consistent with the
way in which such calculation was made in Appendix I to arrive at a new
present value of the Additional Taxes, such calculation to be made as of
the taxable year end in which the disposition occurs. Such revised
calculation shall become the new Appendix I hereunder. MLP agrees to pay to
Acquisition Corp. cash in an amount equal to the amount by which the
present value of the Additional Taxes in any such new Appendix I exceeds
the present value of the Additional Taxes set forth in the Appendix I that
is replaced with such new Appendix I.
(e) Subject to the terms and conditions set forth in the Registration
Rights Agreement to be entered into between MLP and Acquisition Corp. (in
substantially the form attached hereto as Exhibit B), if MLP proposes for
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any reason to register any MLP Units under the Securities Act (other than
on Form S-4 or Form S-8 promulgated under the Securities Act or any
successor forms thereto), it shall promptly give written notice to
Acquisition Corp. of its intention so to register the MLP Units and, upon
the written request, given within 20 days after delivery of any such notice
by MLP, of Acquisition Corp. to include in such registration the MLP Units
acquired by Acquisition Corp. pursuant to Section 2.3(b) hereof (which
request shall specify the number of MLP Units proposed to be included in
such registration), MLP shall use its best efforts to cause all such MLP
Units owned by Acquisition Corp. to be included in such registration on the
same terms and conditions as the securities otherwise being sold in such
registration; provided, however, that if the managing underwriter, if any,
advises MLP that the inclusion of all such MLP Units owned by Acquisition
Corp. proposed to be included in such registration would interfere with the
successful marketing of MLP Units proposed to be registered by MLP (in
terms of a significant adverse effect on the price, timing or distribution
of such securities), then the number of MLP Units proposed to be included
in such registration shall be included in the following order:
(i) first, the MLP Units proposed to be registered by MLP; and
(ii) second, the MLP Units owned by Acquisition Corp. that are
proposed to be included in such registration.
2.4. Amendment of GP's Limited Liability Company Agreement. Inergy
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Holdings, as the sole member of GP, shall amend the Limited Liability Company
Agreement of GP to provide that Acquisition Corp. shall have the right to
appoint two directors to the board of directors of GP for a period of three
years immediately following the effective time of the Merger.
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2.5. Transfer of Assets to Inergy S & S. Inergy Propane shall
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cause Independent Propane, LLC to assign and transfer to Inergy S & S certain of
the operating assets of Independent Propane, LLC which Inergy Propane determines
may generate non-qualifying income as contemplated by Section 7704 of the
Internal Revenue Code. In effecting such assignment and transfer, Inergy Propane
shall cause Independent Propane, LLC to execute and deliver to Inergy S & S such
assignments, bills of sale, notices, consents, assurances and other instruments
of transfer and conveyance as Inergy S & S shall deem to be necessary or
desirable to vest in Inergy S & S all right, title and interest in and to the
subject assets, free and clear of all liens, claims and encumbrances of any
kind.
2.6. Payment of Interim Loan. Inergy Propane shall borrow up to
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Twenty-Seven Million Dollars ($27,000,000) from certain financial institution
lenders pursuant to the "IPC Acquisition Facility" to be provided for in the
Credit Agreement and shall apply the proceeds thereof to satisfy and discharge
all amounts owing by Acquisition Corp. under the Interim Loan Agreement
(including, without limitation, principal, interest, fees and expenses).
Thereupon, Acquisition Corp. shall cause the Interim Loan Agreement to be
terminated.
2.7. Guaranty. Acquisition Corp. shall enter into a guaranty
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agreement (the "Guaranty") for the benefit of the financial institution lenders
pursuant to which Acquisition Corp. shall guarantee the payment when due,
whether at stated maturity, by acceleration or otherwise, of the obligations of
Inergy Propane under the Credit Agreement (whether for principal, interest,
fees, expenses or otherwise) with respect to the loan of up to Thirty-Five
Million Dollars ($35,000,000). Such Guaranty shall not obligate Acquisition
Corp. with respect to any other loans made pursuant to the Credit Agreement.
ARTICLE III.
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MISCELLANEOUS
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3.1. Order of Transactions. The transactions provided for in
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Articles I and II of this Agreement shall be completed in the following order:
(a) First, the transactions provided for in Article I shall be
completed, with the transactions contemplated by said Article being
completed in the order presented in said Article; and
(b) Second, the transactions provided for in Article II shall
be completed, with the transactions contemplated by said Article being
completed in the order presented in said Article.
3.2. Representations and Warranties. Each party hereto
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represents and warrants to each of the other parties hereto as follows:
(a) Such party has the right, power and authority for, and has
taken all necessary corporate and other action to authorize, the
execution, delivery and performance by such party of this Agreement;
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(b) This Agreement has been duly executed and delivered by the
duly authorized officers of such party and constitutes the legal, valid
and binding obligation of such party, enforceable in accordance with its
terms; and
(c) Any assets contemplated to be transferred and assigned by such
party hereunder to another party is owned by such transferring/assigning
party, free and clear of all liens, claims and encumbrances, and upon
such transfer the other party will succeed to all right, title and
ownership in such assets, other than any security interest, mortgage,
lien, claim or encumbrance created pursuant to the Credit Agreement, or
any agreement or instrument contemplated thereby.
THE PARTIES ACKNOWLEDGE AND AGREE THAT, EXCEPT FOR THE FOREGOING
REPRESENTATIONS AND WARRANTIES, ALL ASSETS CONTEMPLATED BY THIS AGREEMENT
TO BE TRANSFERRED AND ASSIGNED WILL BE TRANSFERRED AND ASSIGNED ON AN
AS-IS, WHERE-IS BASIS, AND NO OTHER REPRESENTATIONS OR WARRANTIES SHALL
BE MADE WITH RESPECT TO SUCH ASSETS.
3.3. Costs and Expenses. Inergy Propane shall be responsible for
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and shall pay the fees and expenses incurred by each party hereto in connection
with the transactions contemplated hereby, whether or not such transactions are
consummated, including, without limitation, all sales, use, transfer and similar
taxes arising out of the assignments and transfers contemplated to be made
hereunder, all documentary, filing, recording, transfer, deed, and conveyance
taxes and fees required in connection therewith, and all fees and expenses of
counsel to each party hereto.
3.4. Headings. All section headings in this Agreement are for
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convenience only and shall not be deemed to control or affect the meaning or
construction of any of the provisions hereof.
3.5. Successors and Assigns. The Agreement shall be binding upon
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and inure to the benefit of the parties signatory hereto and their respective
successors and assigns.
3.6. No Third Party Rights. The provisions of this Agreement are
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intended to bind the parties signatory hereto as to each other and are not
intended to and do not create rights in any other person or confer upon any
other person any benefits, rights or remedies and no person is or is intended to
be a third party beneficiary of any of the provisions of this Agreement.
3.7. Counterparts. This Agreement may be executed in any number
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of counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
3.8. Governing Law. This Agreement shall be governed by, and
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construed in accordance with, the laws of the State of Missouri applicable to
contracts made and to be performed wholly within such state without giving
effect to conflict of law principles thereof.
3.9. Severability. If any of the provisions of this Agreement
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are held by any court of competent jurisdiction to contravene, or to be invalid
under, the laws of any political body having jurisdiction over the subject
matter hereof, such contravention or invalidity shall not
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invalidate the entire Agreement. Instead, this Agreement shall be construed as
if it did not contain the particular provision or provisions held to be invalid,
and an equitable adjustment shall be made and necessary provision added so as to
give effect to the intention of the parties as expressed in this Agreement at
the time of execution of this Agreement.
3.10. Amendment or Modification. This Agreement may be amended or
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modified from time to time only by the written agreement of all the parties
hereto.
3.11. Integration. This Agreement supersedes all previous
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understandings or agreements between the parties, whether oral or written, with
respect to its subject matter. This document is an integrated agreement which
contains the entire understanding of the parties. No understanding,
representation, promise or agreement, whether oral or written, is intended to be
or shall be included in or form part of this Agreement unless it is contained in
a written amendment hereto executed by the parties hereto after the date of this
Agreement.
3.12. Further Assurances. Each party hereto agrees to execute and
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deliver such additional instruments, documents and certifications and to take
such other action as is necessary or appropriate to carry out the purpose and
intent of this Agreement and the transactions contemplated herein.
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IN WITNESS WHEREOF, the undersigned have executed the
foregoing Agreement as of the day and year first above written.
INERGY, L. P. INERGY HOLDINGS, LLC
By: Inergy GP, LLC (its General Partner)
By /s/Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx, President
By /s/Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
President of Inergy GP, LLC
INERGY GP, LLC IPCH ACQUISITION CORP.
By /s/Xxxx X. Xxxxxxx By /s/Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx, President Xxxx X. Xxxxxxx, President
INERGY PROPANE, LLC IPCH MERGER CORP.
By /s/Xxxx X. Xxxxxxx By /s/Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx, President Xxxx X. Xxxxxxx, President
INERGY SALES & SERVICE, INC.
By /s/Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx, President
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EXHIBIT A
XXXXXX AND ROLESVILLE BALANCE SHEETS
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
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